Rwanda's new airport not a game changer for East African cement suppliers

Earlier this week, the Government of Rwanda and Qatar Airways signed an agreement to build a new international airport c25km southeast of the capital Kigali. Qatar Airways has agreed to take a 60% stake in the US$1.3bn airport. The first phase of the project will take five years to complete and serve 7mn passengers every year. The second phase, which aims to serve 14mn passengers, is expected to be completed by 2032. The project will use local materials and is expected to become the single largest employer in the country. We estimate it will require 85-100 kilotonnes per annum (ktpa) of cement (c19-22% of Rwanda’s consumption).

Kenya’s Bamburi Cement (BMBC KN), one of the few cement suppliers in Rwanda, could benefit from this project if the Rwanda-Uganda border crossing reopens (after being closed since February 2019 amid political tensions between the two countries). Bamburi has a 70% stake in Hima Cement, which operates two 0.85mn tonnes per annum (mtpa) grinding units in Uganda; one of the two facilities is located in Kasese, 365km from the project site. Although thinly traded, it is the only liquid exposure to the East African cement space. The stock trades at a trailing PE of 30.7x and P/BV of 1.0x versus five-year midpoints of 13.0x and 2.0x, respectively.

If, however, the Rwanda-Uganda border crossing remains closed, PPC (PPC SJ) could be the prime beneficiary. The company has a 51% stake in Cimerwa Cement, which operates a 0.6mtpa integrated plant (5% of PPC’s 11.5mtpa pan-African capacity) in the southwest region of Rwanda, 321km from the new airport site. Tanzanian cement companies could also benefit despite being more than 1,300km away. According to Rwanda Today, imports from Tanzania have doubled to fill the gap created by the embargo on Ugandan imports.