INFLUENCE OF ENVIRONMENTAL VARIABLES ON PRODUCTION CAPACITY OF BUSINESS ORGANISATIONS: (A STUDY OF DANGOTE AND LAFARGE CEMENT COMPANIES)

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ABSTRACT

This research work focused on influence of environmental variables on the production capacity of business organizations: A study of DANGOTE (Ibesie Plant) and LAFARGE (Ewokoro and Sagamu Plants) companies in Ogun state, Nigeria. Beyond the broad objectives, the study sought out specifically to identify the strategies used by the companies with their level of impact on the company’s production capacity, examine the application of cost control techniques in the production system of the business organizations, analyze the impact of capital related cost on production capacity for Dangote and Lafarge cement and determine the environmental factors affecting the production capacity of the business organizations. Both primary and secondary data were used for this study. The primary data was collected using copies of questionnaires while the secondary data were sources from the annual reports of the companies from 2007-2016. The data gotten from the annual reports included cost of labor, salaries, wage, fuel, raw materials, board size, number of board meetings, committee meetings etc. A total population of 1200 staff of both companies was used and Taro Yamen formula employed to narrow the sample size to 300 and copies of questionnaires issued to them. A cross – sectional survey design with an exploratory and descriptive design was used as the research design. The statistical tools of analysis were frequency, tables, percentage, likert scale, multiple regression analysis and panel regression analysis. Control of production cost and inventory control were the most adopted cost control techniques while the establishment of performance budgets was least utilized (r = 0.634 p > 0.5). Also, capital related cost on production capacity showed that current liabilities and debt were statistically significant firm specific environmental factors at 1% respectively. More also, the companies employed several strategies such as marketing mix policies and environmental scanning and the multiple regression model showed that environmental factors such as competition, government policy, technological advancement and weather were negatively related while resource availability and road availability were positively related. Cost control techniques such as inventory control, control of production cost were the most relevant to production capacity (r = 0.156 > 0.5). Financial and inadequate infrastructural facilities were major hindrances to production capacity. It was recommended that government should provide infrastructural facilities and businesses should design proactive and strategic plans to deal with environmental factors. The management of the organizations should properly implore cost management techniques to increase production and enhance their decision making abilities for improved production capacity.





TABLE OF CONTENTS

Title                                                                                                                                        i

Declaration                                                                                                                             ii

Dedication                                                                                                                              iii

Certification                                                                                                                           iv

Acknowledgements                                                                                                                v

List of Tables                                                                                                                         vi

List of Figures                                                                                                                         viii

Abstract                                                                                                                                   ix

CHAPTER 1

1.0      INTRODUCTION                                                                                                       1

1.1        Background of the Study                                                                                      1

1.2       Statement of the Problem                                                                                           7

1.3       Objectives of the Study                                                                                              9

1.4       Research Questions                                                                                                    9

1.5       Research Hypotheses                                                                                                  10

1.6       Significance of the Study                                                                                           10

1.7       Scope of Study                                                                                                            11

1.8       Limitations of the Study                                                                                             12

1.9       Operational definition of terms                                                                                  12

1.10     Brief history of the selected organizations                                                                 13       

CHAPTER 2

2.0       REVIEW OF RELATED LITERATURE                                                                  16

2.1       Conceptual Framework                                                                                              16

2.1.1    Concept of strategy and environment                                                                         16

2.1.2    Sources of strategies                                                                                                   17

2.1.3    Types of strategies                                                                                                      18

2.1.4    Importance of strategy                                                                                                20

2.1.5    Criteria for effective strategy                                                                                     20

2.1.6    Business strategy and environment                                                                            22

2.1.7    Characteristics of the environment                                                                             22

2.1.8    Environment and business organization profitability                                                 23

2.1.9    Environment and strategic planning                                                                           28

2.1.10 Environment strategic analytical tool                                                                         29

2.1.11  Response to business environment                                                                             30

2.1.12 Characterising cement production in Nigeria                                                             31

2.1.13  Industry challenges                                                                                                     34

2.1.14  Understanding the concept of cost control techniques

on production delivery                                                                                               36

2.1.15  Problems associated with production processes and

delivery                                                                                                                       38

2.1.16  Production Capacity Concept                                                                                     39

2.1.17  Difference Between Capacity Level                                                                           40

2.1.18  How the flow of manufacturing cost works                                                               40

2.2       Theoretical Framework                                                                                              40

2.3       Empirical Review                                                                                                       47                                                                                 

2.4       Summary of literature                                                                                                 57


CHAPTER 3

3.0       METHODOLOGY                                                                                                     58

3.1       Research design                                                                                                          58

3.2       Sources of data                                                                                                           58

3.3      Population of the study                                                                                                58

3.4       Sample size determination                                                                                         59

3.5       Sampling technique                                                                                                    60

3.6       Description of research instrument                                                                            61

3.7       Validity of the instrument                                                                                          61

3.8       Reliability of instrument                                                                                            62

3.9       Method of data analysis                                                                                              62

3.10     Decision rule                                                                                                               62

CHAPTER 4

4.0       RESULTS AND DISCUSSIONS                                                                              65

4.1       Socio-economic characteristics of the respondents                                                    65

4.1.1    Gender distribution of the respondents                                                                      65

4.1.2    Marital status of the respondents                                                                                66

4.1.3    Educational background of the respondents                                                               66

4.1.4    Income level of respondents                                                                                       67

4.1.5    Level of the respondents                                                                                             68

4.1.6    Business experience of the respondents                                                                     68

4.2.      Strategies used by the companies with their level of

impact on the company’s                                                                                            69

4.3       Application of cost control techniques in the production

            system of the business organizations                                                                         70

4.4       The impact of capital related cost on production capacity

for dangote and lafarge cement                                                                                  74

4.5       Environmental factors affecting the production

capacity of the business organizations                                                                       76

4.7       Hypotheses testing                                                                                                      83

CHAPTER 5

5.0       SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATION          88

5.1       Summary of findings                                                                                                  88

5.2       Conclusion                                                                                                                  89

5.3       Recommendations                                                                                                      90

5.4       Suggestions for further research                                                                                 91

References

APPENDICES

 




 

LIST OF TABLES

3.5       Variables                                                                                                                     59

4.1       Gender distribution of the respondents                                                                      65

4.2       Marital status distribution of the respondents                                                            66

4.3       Educational background of the respondents                                                               66

4.4       Income level of respondents                                                                                       67

4.5       Area distribution of the respondents                                                                          68

4.6       level of experience distribution of respondents                                                          68

 

4.7       Distribution of strategies used by the company with

their level of impact on the company’s productivity                                                 69

4.8       Application of cost control techniques                                                                       70

 

4.7       Impact of capital related cost on production capacity for

dangote and lafarge cement                                                                                        74

4.8       Environmental factors affecting the production

capacity of the business organizations                                                                       76

4.9       Effect of application of cost control techniques

on firms’ production capacity                                                                                     83

 

4.10     Effect of capital related cost on firms’ production

capacity                                                                                                                       84

 

4.11     Effect of external environmental factors on firms’

production capacity                                                                                                    85

 

4.12     Chi-square analysis on the effect of marketing mix

policies on firms’ production capacity                                                                       86

 

4.13     Chi-square analysis of the effect of environmental

screening and its influence on production capacity                                                   87

 

 

  


 

CHAPTER 1

INTRODUCTION

1.1        BACKGROUND OF THE STUDY

Understanding the concept of business environment can never be over emphasized. This is because no business organization just like a human being can thrive and exists on its own. To business organizations, the environment is a major concern and offers the most heightened uncertainties in both design and structure of the organization Asika (2003). Therefore, without a thorough analysis of the environment, a manager finds it almost impossible to make important operational decisions in his organization, which are vital in the attainment of various business objectives. Hence no business organization can operate successfully in isolation, it has to exist and operate within an environment where there is complex interplay between human resources, material resources and other system. This creates the opportunities, threats and problems for the management.

Asika (2003), said we ought to realize that an organization is an integral part of its environment and that they are mutually interdependent in that the environment plays the role of providing the resources and opportunities to organization for its existence, and the organization in turn, offers its goods and services to the people living in its environment for survival and enlightenment.                                                          

Any organization that wish to start a new business in a new country, whether to acquire another company and whether to launch an innovative product, should first take into consideration the environmental conditions. Understanding the environment that surrounds an organization is important to the managers in charge of the organizations, in the sense that an organization cannot survive without the support of its environment because the environment is the source of its opportunities and threats of the organization. Opportunities are events and trends that create chances to improve an organization’s performance and operational level. Threats are events and trends that may undermine an organization’s performance, operations and business productivity. Hence, it becomes needful that organizations should plan.                                                          

Imaga (2000), said that of all the basic functions of management such as planning, organizing, commanding, coordinating and controlling, planning is the most important and yet the most difficult responsibilities of management.  This is because when goals and objectives have been determined, the next step is to choose the methods, approaches and or strategies of attaining them.  All when and how this is to be done is for the planner.

However, plans alone are never sufficient enough for organizational success to thrive; this is because the environment an organization exists in has a critical role to play towards survival, growth, productivity and successful performance of the organization.

Ukaegbu (2004) observed that the most important sole influence on organizational policy and strategy is the environment, both within and outside the organization.  The more complex, turbulent and dynamic an environment becomes, the greater the impact on human attitudes, organizational structure and process. Therefore, since the environment is very complex, all organizations should direct its attention to their environment when formulating their strategic management policies, to facilitate their survival. Business strategy is an essential aspect of starting and running a business. Without a clear strategy, it is difficult to set meaningful goals and objectives. In determining your business strategy, a logical analysis of the environment in which an organization operates, will both inform and influence the outcome. Therefore, for any business to grow and prosper, managers of businesses must be able to anticipate, recognize and deal with changes in internal and external environments. Absolutely, is inevitable to avoid change. This however, implies that business managers and owners should be well positioned to anticipate change emergent issues so as to make best use of it. This is a process referred as strategic planning.                     

In order words, firms' productive capacity and productivity varies, even when using   equal inputs and production technology. Several earlier studies (for example, Soderbom, 2004; Zheng, 1998; and Srinivasan, 1992) attempted to identify influencing inter-firm variation in productive capacity in different countries. Although the identification of these factors is critical for industrial formulation and industrial growth particularly for the cement industry in Nigeria, studies on this issue are very much limited. Using the firm level cross section data Salim (1999) showed that the productive capacity of cement firms varied largely due to the firm-specific heterogeneity, production environment, and government policies.  Intuitively, producers cannot be equally efficient in production, because information, structural rigidities (for example, pattern of ownership) technology, differential incentive systems, organizational factors and human capital related variables all affect firms' production. Given these factors, a firm’s production capacity at any given time will depend on available inputs and existing technology.

Having a good understanding of the cement industry is key to survival and growth. Cement production is as a result of intense mixture of several materials. This process involves burning a mixture of crushed limestone and clay in a tube shaped kilns. There is an enormous conservation of raw materials available and this contributes less to total production costs as production is capital intensive. Cement production is among the most energy intensive industries using huge quantities of coal to fire the kilns and large amounts of electricity to power grinding, blending, and pollution control equipment. Energy makes up the largest part of variable costs. Cement has a high bulk to value ratio and is expensive to ship, so overlapping regional markets have developed.

The cement industry is closely connected with the volatile construction sector and demand varies regionally, seasonally, and secularly. The cement industry in Nigeria, has often struggled to have the right amount of capacity in the right places at the right times. Both overcapacity and under capacity are costly conditions but the costs are born differentially. When there is under capacity, prices rise, shortages occur, and construction projects may be delayed - all costly to contractors and consumers. When overcapacity exists, utilization rates decline, competition increases, and margins, prices, and returns fall. With demand varying temporally and spatially and cement plants representing long-term fixed assets, balancing supply and demand has proven largely beyond the sum of individual producer's decisions.

Overcapacity is often a condition that represents huge dangers and concerns for industries with high fixed costs and relatively low variable costs (Best, 1990). Cement plants run much more efficient at high utilization rates and marginal production costs rise rapidly when plants are run at suboptimal levels. Producers struggling to maintain output levels in declining markets know that because the demand for cement is price-inelastic, lowering prices will only redistribute rather than increase demand. Other producers will match the price cuts and little, if any advantage would be gained. Price-cutting is dangerous in high fixed cost industries because prices can fall a long way before variable costs are reached. If prices are reduced to the level of variable costs through intense competition the industry will quickly destroy its capital base. Knowing this, but faced with volatile markets, producers in high fixed-costs industries almost always seek to avoid engaging in price competition when inevitable market declines occur. The means with which cement producers have sought to limit price competition, stabilize volatile markets, and protect their capital base has often drawn the attention from state and federal anti-trust regulators.

In recent years, economists and public policy stakeholders have voiced increasing concern about the growth rate of productivity in the cement industry in Nigeria. Much speculation has taken place as to the cause of a slow- down from the much higher rates of the 1950s and 1960s and not much empirical investigations have been carried out. However, a predictable effect of slowing of capital investment, unfavorable demographic changes, slowed application of new technology, and aging equipment are often the microeconomic constraining variables to production capacity in the cement industry (Albinu and Jagboro, 2002). Most productivity studies are based upon a production function that relates output to several factor inputs. Capital and labour are usually included as factors of production and occasionally materials and energy are added. Land is often used in agricultural studies but is usually not considered a major input for cement industry studies. However, an important input to the production process would seem to be excluded from these investigations. That input is management which determines how the other factors of production will be combined and how efficiently they will be utilized. This deficiency in productivity research apparently results more from the difficulty of measuring management input than from a belief that management is un- important to productivity. Yet, there is substantial research evidence that indicates management contributes to efficiency differences.

Historically, cement production in Nigeria is traceable to the Pre and immediate Post-independence era which witnessed the introduction of development plans and import substitution policy and which had impacted on the cement requirement for development of civil infrastructure of the nation. The basic inputs into cement manufacture are Limestone, Red alluvium, Shale and Gypsum. With the exception of gypsum, which occurs in Nigeria only in thin vein layers? Nigeria is abundantly endowed with all the other inputs. Limestone, the major input occurs in all the six geopolitical zones of the country. Apart from the basic raw material inputs, the other major requirement for cement production is fuel. Nigeria, as a nation, is rich in all sources of energy: oil, gas, coal and even other alternative fuel (waste). The demand for cement is derived from the demand for residential and non-residential construction. Of these two, the latter is predominantly due to government and business activity. Non-residential construction is therefore highly vulnerable to cut-backs in government spending and to forces of depression in the private business sector. Residential housing is by far the largest segment of cement consumption. The crucial forces on the demand for residential housing are population pressure and the rent level. It is also noted that the pressure from these sources is so critical as to make housing an essential commodity. As such the demand for cement arising from this sector is in turn so critical and it would remain strong even in the face of government policy on population control and general austerity. It would appear however that with respect to income (especially above a certain middle-class level) the demand for cement would be inelastic. It is suspected however, that such inelasticity would bear a relationship with real income and with the level of housing rent (WAPCO, 1990).

Among the top five major markets in Africa (South Africa, Egypt, Algeria, Morocco and Nigeria), Nigeria offers the highest growth opportunity in the cement sector. Using cement consumption patterns, Nigeria’s cement consumption per capita significantly lags that of the remaining top four markets. Egypt has the highest cement production capacity on the continent (as at 2008). Owing to the impact of the rapid development of the Middle East region on North Africa, the sub-region generally leads in cement consumption pattern on the continent. Average cement consumption per capita for North Africa is slightly above 300 kg, the highest on the continent. Given Nigeria’s heavy cement supply deficit and historically low local production capacity, Nigeria’s cement consumption level is significantly lower at about 105 kg per capita. The dynamics of Nigerian cement production is however changing tremendously since the entrant of key players like Dangote and Lafarge Cement.

1.2       STATEMENT OF THE PROBLEM

The Nigeria business environment in the last decade had witnessed unsatisfactory progress circulating into retarded growth rate, high rate of unemployment, low industrial output, coupled with poor demand in term of services and tangible products. Energy crisis continued unabated forcing majority of the organizations to depend on wholly generator as a constant source of generating electricity, supply of petroleum product is epileptic in addition to frequent changes in pump price resulting into increase in the general price level of all products without any exception. In the face of all these challenges, how effectively a business organization respond to its basic operational functions of survival and profit maximization becomes expedient. This makes it needful to examine the business environmental factors of manufacturing firms and to map out strategies which will enable a business organization operate successfully in its ever-changing environment.

Times are changing for African cement producers as they struggle to grow earnings under a weight of debt and slowing demand in developed economies. The focus of Nigerian Cement producers on minimizing costs and debt exposure, and slowing down on expansion and investment may make them lose out on the growth prospects expected in frontier markets in sub-Saharan Africa. Makoju (2010) wrote that Nigeria with its population of over 150 million people presents a huge market for any good product, cement inclusive. Considering our level of development, demand for cement has a huge growth potential. These suggest that our absorptive capacity for cement is potentially high if and when the economy is right. Thus, producing at optimum capacity for cement companies becomes paramount.

However, optimum productive capacity is determined by so many factors; macroeconomic, microeconomic, social, cultural, spatial and even demographic factors go a long way in determining optimum capacity at a given time. Though no determining factor can be said to be more important than the other, cement companies must have faced a compendium of complex factors and dynamics in making production decisions. Unfortunately, depth is lacking in literature that elicits the impacts of these determinants on productive capacity in the case of cement companies in Nigeria. It can therefore be argued that despite the strategic importance of cement to the Nigerian economy, comprehensive and up-to-date information about the influence of environmental variables on a firm level basis is lacking. Most of the studies are primarily descriptive without in-depth analysis of the statistical significance of impacts to production capacity.

To address this gap, this research will focus on the environmental variables that determine the cement company’s productive capacity. This will justify the need for an empirical study that highlights on the influence of environmental variables on the productive capacity of cement companies in Nigeria. Specifically, the research will emphasize on core specific internal variables and external environmental variables influencing productive capacity of DANGOTE Cement PLC and LAFARGE Cement PLC in Ogun state, Nigeria.

1.3       OBJECTIVES OF THE STUDY

The broad objective of this study is to determine the influence of environmental variables on production capacity of business organizations. The specific objectives are to:

1.     Determine the application of cost control techniques and managerial decision on the production system of the business organizations;

2.     Ascertain the impact of capital related cost on production capacity for Dangote and Lafarge cement;

3.     Determine the effect of external environmental factors (competition, government policy, technological evolution, resource availability, ecological factors and road condition) on the production capacity of the business organizations;

4.     Ascertain the environmental management strategies used by the companies with their level of impact on the company’s production capacity;


1.4           RESEARCH QUESTIONS

 

The following research questions were raised in line with the specific objectives.

1.     What cost control techniques and managerial decisions are applied in the production system of the business organizations?

2.     What is the impact of capital related cost on production capacity for Dangote and Lafarge cement?

3.     What are the environmental factors affecting the production capacity of the business organizations?

4.     Are there environmental management strategies used by the companies to impact on the company’s production capacity?


1.5       RESEARCH HYPOTHESES

In this study, the hypotheses below shall be tested: -

H01:    Application of cost control techniques and managerial decision does not significantly affect the production capacity of the business organizations;

H02:    Capital related cost does not significantly affect the production capacity of the business organizations;

H03:    Competition, government policy, technological evolution, resource availability, ecological factors, road condition and the production capacity of the business organizations do not significantly relate;

H04:    Marketing mix policies and environmental screening do not significantly affect the company’s production capacity.

1.6       SIGNIFICANCE OF THE STUDY

This study is relevant for several reasons. First it will be relevant in the sense that it grants us more fresh ideas on environmental variables as they affect the cement industry in Nigeria. Also, from an environmental perspective, this study will provide valued information, conventional intuitive conclusions concerning the impacts of these business variables. This becomes very useful for decision making with respect to hiring of labor, changing of plant size to meet demand and economics of scale benefits. Finally, the study will add more knowledge to the existing one on the effect of environmental variables on production capacity of manufacturing sector in Nigeria, thus increasing the reservoir of knowledge on the topic. The information attained through this study will serve as a basis for further research to be embarked on by potential researchers in the field of business administration, who may desire to carry out further research on the topic “influence of environmental variables on production capacity of cement companies in Nigeria” in order to identify salient points the researcher was unable to identify due to unease of collecting data sets.

1.7       SCOPE OF STUDY

As regards geographical scope of this work, the work was centered on - Dangote cement (ibese plant) and Lafarge cement (ewekoro and sagamu plants) all in Ogun state, Nigeria. Ogun state is a state in south western Nigeria created in 1976. Abeokuta is the capital and largest city in the state. The 2006 census recorded a total population of 3,751.140 residents and is estimated according to times magazine, 2016 to be over 4.3 million people. The state is notable for having a high concentration of industrial estates and being a major manufacturing hub in Nigeria. Major factories in Ogun state includes: Dangote cement factory in ibese, Nestle, Lafarge cement factory in ewekoro, Coleman cables in Sagamu and Areopo, Procter and Gamble in Abgara, amongst others. Thus, the state serves as a good choice of environment for the study

Also, the period of study will be restricted to annual data collected from 2007 to 2016 and the population of study captures all the administrative units of the organizations excluding field staff. Though there are various internal and external environmental variables that also affect productive capacity in the cement companies of scope, the research will focus on those core variables as outlined in the objectives due to ease of collecting the data, credibility and availability of the data sets. Copies of questionnaires were also used to elicit more useful information

1.8       LIMITATIONS OF THE STUDY

The fact that no exact work had been done on the influence of environmental variables on production capacity of business organizations as regards to the two cement factories under study poised a great challenge on data collection and usage. Also, the willingness of respondents in releasing information of immense value was another difficulty encountered during this research.

However, all these were surmounted to a great extent due to the researcher’s knowledge gained from being a part of Lafarge cement business for about three years now and also from wide consultations from academicians on business field over years. 

1.9       OPERATIONAL DEFINITION OF TERMS

Key terms which formed the basis of this work are defined below:

1.     Business environmental variables: These are environmental factors and forces that affect a firm's ability to successfully operate in an environment. These environmental factors or forces could be micro (internal) and macro (external) (Nehlett, 2007).

2.     Production capacity: Production capacity is the maximum or total output that can be produced by a business organization with limited available resources at their disposal (Ogini, 2012). It could also mean the volume of products that can be generated by a production plant or enterprise in a given period by using current resources.

3.     Environmental strategies: These are policies formulated and implemented by business organization to address or absorbs changes that may be necessitated by operating in a dynamic business environment (Opeifa and Ogundele, 2004).

4.     Cost and cost control techniques: Cost and cost control techniques, also known as cost management or cost containment, is a broad set of cost accounting methods and control techniques with the common goal of improving business cost-efficiency by reducing costs, or at least restricting their rate of growth (Porter, 2004).

1.10 BRIEF HISTORY OF THE SELECTED ORGANISATIONS

With a 19.25mtpa installed capacity and about 62% market share, DANGCEM is Nigeria’s largest cement producer and the clear industry leader. Furthermore, the company has highlighted plans to expand its access in Africa, with a proposed 35.3mtpa capacity in integrated plants by 2016 across Nigeria, Senegal, and Congo, 6mtpa grinding plants in Cote d’Ivoire, Ghana, and Cameroon by 2015 and export terminals in Lagos and Onne expected to be operational in 2014. With this, DANGCEM is on the path to become the biggest cement producer in Africa by 2016. Plants Obajana Plant Situated in Kogi State, North Central Nigeria, the Obajana Plant, with a capacity of 10.25mtpa is the distinct largest cement plant in Africa. Given the location of this plant, DANGCEM enjoys ease of movement of cement into the fast growing Abuja Market and also upcountry. In contrast to other players - Ashaka, CCNN, and Lafarge WAPCO, Obajana Cement Plant is the closest to Abuja market. Average Capacity utilization rate at the plant has stayed strong, at 80%, despite the recent commissioning of a new 3 mtpa line and enhancements to the existing line which brought total capacity of the plant to 10.25mtpa. Splitting the bean, the older lines at the Obajana plant (line 1and 2) commissioned in 2007, actually has a significantly higher capacity utilization around 95%. With the gas supply challenges persisting in H1’13, the plant had increase LPFO usage to about 17% of fuel mix.

DANGCEM has interests in 13 countries, either for integrated cement plants, grinding plants or import terminals, most of which are ongoing or already contracted projects with construction expected to commence soon. The African projects are progressing steadily and with a more comprehensive outline of strategy in each country and figures communicated by management, we have factored growth in these areas into our model. Optimistically, on the medium to long-term prospects of the company on the back of its aggressive Pan-African expansion drive, as according to management DANGCEM has already embarked on the construction of cement plants in Senegal, Zambia, Tanzania, and Ethiopia.

Lafarge Cement Nigeria Plc is the second largest cement manufacturer in Nigeria by market value, with a combined production capacity of about 10.5million MT from its six plants – Ewekoro (I & II), Sagamu, Mfamosing (1& 11) and Funakaye. LAFARGE has five main product lines, Elephant Classic, Elephant Supaset, Elephant Powermax, Ashaka and Unicem Cement which are sold in the domestic market. The company’s principal market is the South-West region of Nigeria. Lafarge S.A France became the majority shareholder in WAPCO in 2001 following its acquisition of Blue Circle Industries Plc UK, the erstwhile core investor in West African Portland Cement. At the moment, WAPCO has investments in the following companies: Lafarge Ready Mix Nigeria Limited (wholly-owned subsidiary), Nigerian Kraft Bags (56% stake), and Nigerian Foundries Limited (11.25%). WAPCO has existing industrial franchise and Service agreements with Lafarge S.A, which bestows on the company the right to use technical research and development information relating to production and distribution of cement products by the latter. Plant Ewekoro is located in Ewekoro, Ogun State; the plant was originally commissioned as a 200,000 tonnes per annum wet kiln plant. However, the plant was re commissioned in 2003, as a modern state of the art plant to replace the obsolete and aged plant. The new plant has a capacity of 1.1 million tonnes per annum. Ewekoro II: In 2011, WAPCO commissioned a new cement plant, Ewekoro II which has a capacity of 2.5 mtpa, securing WAPCO’s position as Nigeria’s second largest cement producer. While the older Ewekoro plant operates at near optimal capacity, Ewekoro II is yet to fully ramp up, with capacity utilization at an estimated 65% as at H1’13. The plants have dual firing kilns and mostly operate on gas, which is the less expensive fuel option for Nigerian manufacturers; its gas-LPFO usage is currently estimated at 80-20%. The new Ewekoro II kiln is designed to use coal as well as gas as a primary fuel in pyre-processing.


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