Cement firms on a roll despite delayed merger

Dar es Salaam. Investors have maintained a bullish outlook for Tanga Cement Company Limited and Twiga Cement despite delays in the cement manufacturers’ merger plan, available data shows.

An analysis of the two firms’ performance at the Dar es Salaam Stock Exchange (DSE) shows that the two firms, which performed well during the first half of the year, have maintained that positive trend throughout the first three weeks of July.

Tanga Cement shares closed at Sh1,460 during the last day of trading in June but had since jumped to Sh1,680 as of Friday, July 22, 2022.

On the other hand, the share price of Twiga Cement – which trades as Tanzania Portland Cement Company Ltd (TPCC) – rose to Sh3,900 last week, from Sh3,720.

Analysts say with infrastructure improvement remaining a top priority for the government, investors remain optimistic that even if the merger fails, the two firms will continue to do well in the market.

“The way we see it is that Twiga Cement is already a mature company and it needs a room to breathe/expand going forward. Availability of quality limestone is a critical part in cement manufacturing and Tanga acquisition decision could not be more appropriate,” said the capital markets manager from Vertex International Securities Ltd, Mr Ahmed Nganya.

During the year ending December 2021, Twiga recorded a net profit of Sh88.48 billion while Tanga Cement reported an annual net profit of Sh3.7 billion. That was an encouraging comeback from a Sh2.1 billion annual loss it incurred in 2020.

The acquisition deal was announced last year where Scancem International DA (Scancem), a subsidiary of Heidelberg Cement AG, which owns Twiga Cement, and AfriSam Mauritius Investment Holdings Limited, owner of Tanga Cement, announced that they had finalized the terms upon which the former would acquire 68.33 percent of shareholding in Tanga Cement.

However since then the deal – which was slated to be finalised by the end of second quarter – has been delayed due to some regulatory issues.

“Twiga Cement is one of the perennial performers in terms of earnings and price momentum. Acquisition of Tanga would provide room for expansion due to Tanga’s vast and quality limestone resources. Currently, the acquisition has been delayed due to some regulatory hurdles but that is nothing to bother investors,” said Mr Nganya.

Last week, Twiga emerged as the top market mover at the DSE, accounting for nearly 70 percent of the week’s turnover of Sh1.85 billion.