Great discussion on Prima Plastic.
I would like to understand the sustainability of the super normal margins in Africa a bit better.
As per this note,
According to industry reports, during the past six years the use of plastics in Africa has grown by an astounding 150%, at a compound average growth rate (CAGR) of approximately 8.7 per cent. Imports of plastic hangersplastics into Africa have grown between 23% and 41% during this time. In a recent conference presentation, analysts predicted that the use of plastics in East Africa alone is expected to treble in the next five years. And there is potential for much more growth. Plastics consumption per capita in Kenya, for instance was just 10 kg in 2004 and it is expected to increase to 30 kg by 2020, which is still very low compared to many other countries in other parts of Africa.
The article goes on to provide inputs on key markets like Kenya, Uganda, Ethiopia, Mozambique.
Why is Cameroon the chose country for Prima in Africa ? What distinct advantages does it have compared to other African countries ? What stops a Nilkamal or Supreme to set up a plant in Cameroon ?
Another strong plastics player based out of Africa is "Arkay Plastics" which is rapidly expanding. Link
1997 – Started Arkay Plastics Ltd in Blantyre, Malawi
2005 - Started Arkay Plastics Ltd in Maputo, Mozambique
2008 - Started PET plant at Makata, Blantyre
2011 - Started Arkay Plastics Zimbabwe Ltd
2013 - Started Arkay Plastics Zambia Ltd
This company has a comprehensive product portfolio. What stops such local players to venture to Cameroon and eat into Prima's market share ?
This link has the details of import and export of most African countries.
Exports: $4.816 billion (2008 est.)
Exports - commodities: crude oil and petroleum products, lumber, cocoa beans, aluminum, coffee, cotton
Exports - partners: Spain 18.7%, Italy 12.7%, US 10%, South Korea 9.3%, France 7.7%, Netherlands 7.6%, China 5.3% (2008)
Imports: $4.303 billion (2008 est.)
Imports - commodities: machinery, electrical equipment, transport equipment, fuel, food
Imports - partners: France 21.6%, Nigeria 14.2%, China 9.2%, Belgium 6.2% (2008)
Does easy availability of crude derivatives in Cameroon gives the Prima JV the low cost advantage from low RM prices ? Again if it is only country specific, any other major company too can exploit that.