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Wednesday, 11 March 2020

Suez Cement to offload stake in Kuwait’s Hilal Cement after reporting EGP 1.2 bn loss

M&A WATCH- Suez Cement to offload stake in Kuwait’s Hilal Cement after reporting EGP 1.2 bn loss: Cement producer Suez Cement is looking to offload its 51% stake in Kuwait’s Hilal Cement, according to a regulatory filing (pdf). Hilal Cement is the third largest producer in Kuwait and operates two cement import terminals. Suez Cement has been the majority shareholder in the company since 2007.

The decision to sell the stake as the industry continues to struggle. Suez saw its Tourah plant suspend production amid a sustained supply glut and a race-to-the-bottom price war. Annual financial statements released yesterday (pdf) showed the company remains in the red, turning in a net less of EGP 1.2 bn, on par with last year, “mainly due to additional restructuring one-off expenses and impairment due to the closure of Tourah plant.” Revenues fell 13% to EGP 6.5 bn during the year due to the intensifying supply gap in the market.

“2019 was perhaps the worst year the cement industry has witnessed in its recent years, deepening the downturn of Egypt’s cement sector as excessive oversupply and very intense competition, coupled with a continuous slowdown in demand for cement during the last three years have put the industry into an official recession,” CEO Jose Maria Magrina said. “We expect the market to remain challenging in 2020 as the new capacities added to the market in the past two years continues to put downward pressure on an already uneconomical cement sector.”

The company’s board also approved a three-year USD 125 mn loan from parent company HeidelbergCement at a 6.5% interest rate. The loan will be used to offset the current local overdue payments denominated in EGP.

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