One of the ironies of the on-going Eurozone crisis is that several of the affected multinational cement producers hold a presence in Egypt. Egypt, which has a population of over 80m and growing demand for cement, should be hauling these balance sheets out of a hole. Instead it teeters on the edge of one. The country, one of the few well-performing countries in Titan's 2012 results this week, came with a sting in its tail.
According to Titan, cement consumption in Egypt reached 'new highs' in 2012 justifying the group's new capacity. Although Titan declined to publish actual figures, it stated that turnover declined only slightly despite the greater total supply of cement in the market. Overall, Titan's Eastern Mediterranean region, which includes Egypt, saw turnover increase by 7% to Euro296m. Yet Titan's operating margins in Egypt were impacted by increases in energy costs. In addition the country's political and economic instability negatively affected the group's outlook there for 2013.
Italcementi commented too in its annual results about how much cement consumption grew in 2012. The Italian-based multinational stated that it grew by 5% from 2011 supported by the residential sector. Revenue grew in Egypt by 2% to Euro564m despite domestic sales volumes falling as much as 15%. As a whole, operating results were slightly lower than in 2011, partly due to the strong increase in the cost of energy factors, notably gas.
Titan and Italcementi are clearly both trying to play up their achievements in Egypt in otherwise dismal annual reports. Other players have no such compunctions.
Cemex encountered a 10% decline in sales volumes for 2012, half its Mediterranean region average of 19%. Lafarge reported that its sales were down by 5% in 2012 and its domestic volumes were down by 12%. It pointedly mentioned the impact of new cement production capacity on its sales. Cimpor in its third quarter results to September 2012 reported a 2% fall in sales volumes and a rise in turnover of 8% to Euro138m.
Looking back at Egyptian cement industry news stories on GlobalCement.com reveals two regular issues echoed by the annual reports: fuel concerns and labour unrest. This week is no exception, with the Egyptian government reacting to price rises related to energy input issues.
A question occurs. How much better would the Italcementi and Titan balance sheets be without the problems in Egypt? It's almost impossible to tell, but one solution would be to tackle energy supply issues by increasing the use of alternative fuels. This is covered by the Global CemFuels Conference & Exhibition that takes place on 11-14 March 2013 in Istanbul, Turkey. For more information and to register visit: www.cemfuels.com.