BUILDING: The Readymix Ravages
Recent Western Cape Business News
THE readymix concrete market in the Western Cape looks like its in a world of pain with major projects like the 2010 Soccer Stadium starting to wind down.
Afrimat, one of the major building supplies groups in the province, told its shareholders at a recent AGM that the Cape Town readymix market was under severe pressure.
Earlier Megamix, the Strand-based readymix producer owned by Argent Industrial, hinted at things to come when it reported “slightly reduced margins” for the year to end March 2009.
Afrimat CEO Andries van Heerden said the weak Cape Town market had put its readymix margins under pressure throughout the group. He said Afrimat’s readymix concrete sales were down significantly in the Western Cape between April and July, forcing them to move capacity out of the Western Cape to the Eastern Cape and the Freestate.
Van Heerden noted, though, that Afrimat was fortunate in seeing firm demand for readymix concrete in other regions – most notably KwaZulu-Natal as well as experiencing a significant improvement in its higher margin aggregates business.
Van Heerden suggested that one of the major issues affecting the local readymix market was that producers with major exposures to the Greenpoint soccer stadium contracts – including the large readymix supplier, Lafarge - were now looking for replacement business.
Afrimat’s readymix business is headquartered in Table View with batch plants in Somerset West, Killarney Gardens, Paarl, Malmesbury, Retreat, Botrivier, Hermanus, Worcester, Roberston, Stellenbosch and Gansbaai.
Van Heerden did not give an indication of when the Cape Town market – which is traditionally depressed during the wet winter months – would recover.
He did, however, highlight Afrimat’s advantage in having geographic and product diversity. “When one segment or area of our business falls off, we tend to see another area picking up. And our plants are mobile, so we can get to areas where business is stronger.”
Last month CBN noted that the low barriers to entry have made readymix concrete supply a very competitive and, consequently, a low margin business.
The publication quoted Grant Neser, an executive from AfriSam (formerly Holcim), who reckoned there was currently a surplus of capacity over demand.
Neser said a negative impact occurred because there were low barriers to entry in the readymix market and when opportunists realised that there was a demand (and additional capacity was introduced). “This means that the market is currently oversupplied, the penetration is not growing and the demand for readymix is declining in line with the decline in the demand for cement,” Neser says.
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