Displaying items by tag: Buzzi
Italy’s cement sector continues to consolidate
21 June 2017Buzzi Unicem strengthened its position in Italy this week with a deal to buy Cementizillo. The agreement included Zillo Group’s two integrated cement plants at Fanna and Este in the northeast with a combined production capacity of 1.4Mt/yr. The sale price appeared to be low at a maximum of Euro104m plus 450,000 shares in Buzzi. However, the interesting part of this transaction is a variable portion of zero to Euro21m based on the average price of cement achieved by Buzzi in Italy between 2017 and 2020.
Buzzi hammered home the point in its acquisition statement that the local cement sector suffers from, “…significant surplus of production capacity coupled with permanently reduced sales volumes.” No doubt this was a prominent part of the deal negotiations given that, with a rough calculation of Euro10m for the shares, Buzzi has picked up the new cement production capacity at about Euro80/t or US$91/t. In July 2016 this column commented that Cementir’s purchase of Compagnie des Ciments Belges’ assets for Euro125/t seemed fairly low globally. Yet even this seemed high when Cementir picked up Sacci’s cement business, including five cement plants, for Euro125m or Euro38/t. Although it should be noted that Sacci was bankrupt at the time and being run by its liquidators.
As ever all these transactions were complicated by assets other than clinker production lines but the problems facing the Italian cement industry are clear. Following on from last week’s column about changing patterns of cement consumption in southern Europe, the cement intensity of the construction sectors in Italy and Spain has dropped significantly since 2000 suggesting that the mode of construction has moved from new projects to patching up old ones. Throw in the financial crash in 2007 and, strikingly, cement production in Italy fell from 49Mt in 2006 to 21Mt in 2015. Anecdotally, looking through the Global Cement Directory 2017, 13 of the country’s 56 integrated cement plants were listed as idled, mothballed or closed at the start of the year. Cembureau, the European Cement Association, reckons that consumption fell year-on-year by 4.7% in 2016 with a further drop of 3% forecast for 2017. Surprisingly though estimates from the Associazione Italiana Tecnico Economica Cemento (AITEC) suggest that cement exports have not increased dramatically since 2007. Since hitting a low of 1.6Mt in 2011 they rose to 2.5Mt, a similar figure to that of before the crash.
This kind of environment suggests consolidation and that’s exactly what has happened with Buzzi buying Cementizillo this week, Germany’s HeidelbergCement’s purchase of Italcementi in 2016 and Cementir’s purchase of Sacci in the same year. Earlier in 2014 Austria's Wietersdorfer & Peggauer picked up a plant in Cadola from Buzzi.
Financially, the story is in line with what the declining production and consumption figures suggest. Buzzi reported that its net sales in Italy fell by 16% to Euro375m in 2016 and Cementir said that its sales would have fallen by 14% had it not benefitted from the new revenue from Sacci.
HeidelbergCement presented Italy as a territory ripe for ‘substantial’ recovery potential at a shareholders event in the autumn of 2016. It highlighted opportunities in further rationalisation of the industry, recovery in cement consumption from a low base and optimisation of the country’s distribution and depot network. It probably will not be publicly released but if Buzzi Unicem pays out the full amount of its variable payment to Cementizillo then the industry may be picking up again. Until then expect more acquisitions.
Buzzi Unicem buys Zillo group
19 June 2017Italy: Buzzi Unicem has agreed to buy Cementizillo for Euro60m plus 450,000 shares in Buzzi Unicem. The agreement also foresees a variable payment of up to Euro21m, payable to majority shareholders in Cementizillo, depending on the average price of Buzzi Unicem cement in Italy from 2017 to 2020. Buzzi Unicem has purchased 47.9% of the share capital of Cementizillo directly from the minority shareholders. The remaining 52.1% is expected to be acquired in early July 2017, following the prior settlement of some non-core assets that do not lie in the interest of Buzzi Unicem.
Zillo Group operates two integrated cement plants at Fanna and Este and about 40 concrete batching plants in northeast Italy. It reported cement and clinker sales volumes of around 1.1Mt and ready-mix concrete sales of 440,000m3 in 2016. Its net sales was Euro90m and its earnings before interest, taxation, depreciation and amortisation (EBITDA) were Euro10m. However, it reported a net debt of Euro46m in December 2016.
Rising sales for Buzzi Unicem
15 May 2017Italy: Buzzi Unicem’s first quarter sales rose by 8.9% year-on-year during the first quarter of 2017 to Euro588.5m. Cement sales volumes rose by 4.5%. Favourable currency impacts lifted Buzzi Unicem's top line by Euro16.8m, while like-for-like sales were up by 5.8%.
Sales were up in all geographical areas the group is present in, with the exception of Russia, in which sales were down by 1.3% in local currency terms. Buzzi Unicem said that its net debt rose to Euro979.9m at the end of the first quarter from Euro941.6m at the end of 2016.
PCA names leaders in safety and sustainability
10 May 2017US: The Portland Cement Association (PCA) has announced the winners of its Chairman’s Safety Performance, Safety Innovation and Energy and Environment Awards. The awards recognise outstanding safety performance in the manufacturing of Portland cement, creative safety-enhancing projects in the cement industry and outstanding environmental and community relations respectively.
“The facilities recognised today are to be congratulated for their safety achievements,” said Allen Hamblen, PCA chairman and president and chief executive officer of CalPortland, in relation to the Safety Performance Awards.
Winners of the 2017 PCA Chairman’s Safety Performance Awards:
Category: Less than 226,000 hours
Buzzi Unicem USA – Chattanooga, Tennessee
LafargeHolcim US – Morgan, Utah
Lehigh Hanson, Inc. – Tehachapi, California
Category: 226,001 - 289,000 hours
Ash Grove Cement – Foreman, Arkansas
GCC Permian – Odessa, Texas
Lehigh Hanson, Inc. – Leeds, Alabama
Category: 289,001 - 563,000 hours
Cemex USA – Brooksville, Florida
Cemex USA – New Braunfels, Texas
Martin Marietta Materials – New Braunfels, Texas
Winners of the 2017 Safety Innovation Awards:
Milling/Grinding
Ash Grove Cement, Montana City, Montana
Pyroprocessing
Cemex USA, Balcones, Texas
Distribution
CalPortland Cement Terminal, Portland, Oregon
LafargeHolcim US, Corporate Program, Chicago
Winners of the 2017 Energy and Environment Awards:
Energy Efficiency
Cemex USA Construction Materials, Pacific, LLC, Victorville, California
Environmental Performance
Cemex USA Construction Materials, Pacific, LLC, Victorville, California
Land Stewardship
Continental Cement Company/Green America Recycling, Hannibal, Missouri
Outreach Winner
Mitsubishi Cement Corporation, Lucerne Valley, California
2016 for the cement multinationals
08 March 2017The publication of LafargeHolcim’s annual financial results for 2016 this week starts to give us a review of the year as a whole for the multinational cement producers. Of the larger producers, CNBM, Anhui Conch and Votorantim are expected to make their releases in April 2016, so we’ll focus here on the available data from LafargeHolcim, HeidelbergCement, Cemex and BuzziUnicem, with UltraTech Cement included for some regional variety.
Graph 1: Sales revenue from multinational cement producers in 2015 and 2016 (Euro millions). Source: Company financial reports.
As can be seen in Graph 1 currency exchange effects have caused problems for producers’ sales revenues, with LafargeHolcim, HeidelbergCement and Cemex all reporting falling sales on a direct comparison. Subsequently like-for-like adjustments have cropped up repeatedly on balance sheets to try and present a more investor-friendly picture, although even this has still seen LafargeHolcim and HeidelbergCement report small declines. In this sense it’s a little unfair to include India’s UtraTech Cement, given that the bulk of its business is in just one country. Operating in just one country though has its own risks, one of which we’ll discuss below.
Unsurprisingly, given the poor sales, the focus for the multinationals has generally been on earnings measures such as operating earnings before interest, taxation, depreciation and amortisation (EBITDA). Here, LafargeHolcim and Cemex have done far better as they have streamlined their businesses. For example, LafargeHolcim’s operating EBITDA rose by 12.9% year-on-year to Euro4.895bn in 2016.
Graph 2: Cement sales volumes from multinational cement producers in 2015 and 2016 (Mt). Source: Company financial reports.
Graph 2 looks at cement sales volumes. Most of the producers have made small gains or losses in 2016 with the stark exception of LafargeHolcim. Its cement sales fell by 12.9% to 233Mt in 2016. More alarmingly, for the fourth quarter of 2016 LafargeHolcim blamed an increased rate of declining cement sales volumes on demonetisation in India, tough trading conditions in Indonesia and a unusually good year (in 2015) to compare itself against in the US.
On that point about India, UltraTech may not have released any sales volumes figures but other larger Indian producers have experienced problems with the government’s decision to remove certain banknotes from circulation in November 2016. A report by HDFC Securities this week suggests that cement volumes fell by 13% year-on-year in January 2017 following a 9% decline in December 2016. The country may be facing its first decline in cement sales volumes since 2001. This is squarely down to government policy.
On a regional basis probably the most worrying theme has been an apparent slowdown in the US towards the end of the year. As mentioned above LafargeHolcim has blamed it on a good previous year and Cemex concurred. Buzzi Unicem also reported the same trend but didn’t attribute it to anything in paticular. President Donald Trump’s push for US$1tr investment on infrastructure in the US should help to reverse this along with anything that happens with his Mexican border wall plans.
The other area to pay attention to is Indonesia. Both LafargeHolcim and HeidelbergCement reported tough trading here prompted by production overcapacity. Locally, Semen Indonesia said this week that its sales revenue fell by 3% to US$1.95bn in 2016 and it still has new cement plants to be commissioned in 2017.
The overall picture for 2016 from these cement producers appears to be one of companies treading water and making savings as their sales were battered. As mentioned previously (The global cement industry in 2016, Global Cement Magazine, December 2016) the geographic spread of assets the multinationals own doesn’t seem to be protecting them from world events as well as they once did. On the plus side northern Europe seemed to pick up or at least hold steady in 2016 but various political shocks such as the UK departure from the European Union and elections in France and Germany may scupper this. In a similar vein India remains one of the key markets but government policy has potentially dented its growth this year. In the US cement volumes may be slowing but Donald Trump is riding to the rescue! With this continued high level of potentially disruptive events cement producers are probably hoping for a quiet year in 2017.
Italy: A recovery in sales volumes in Central and Eastern Europe has helped Buzzi Unicem maintain stable sales in 2016. Its net sales rose slightly to Euro2.67bn in 2016 from Euro2.66bn in 2015. Cement and clinker sales volumes remained flat at 25.6Mt. It also reduced its net debt to Euro942m from Euro1.03bn. The cement producer reported slowing sales growth in the US, a decline in Russia and a continued ‘marked’ fall in sales in Italy.
By region, the cement producer said that cement and clinker sales volumes fell by 6.2% year-on-year due to a reduction in exports. Volumes rose in Germany by 3.4% despite low prices and oil well cement demand picked up in the last quarter of the year. Poland reported a 11.9% boost in volumes, driven by the second half of the year, despite lower prices compared to 2015. In Russia sales volumes started to improve in the second half of the year hitting an overall decline of 1% as a decline in construction industry investment started to soften. Also of note, sales of oil well cement started to recovery towards the end of the year.
Cement sales volumes in the US started to decline throughout the year, eventually falling by 1.7%, with a notable weakness in demand in Texas, particularly in the Houston area. Again, oil well cement products declined over the year as a whole but showed signs of recovery in the final months of the period. Finally, Buzzi Unicem’s associate company Corporación Moctezuma saw its cement sales volumes rise slightly compared to 2015, supported by rising prices.
Buzzi Unicem plants receive Energy Star certification
16 January 2017US: The Environmental Protection Agency (EPA) has awarded its Energy Star certification to four of Buzzi Unicem’s cement plants. Plants at Chattanooga in Tennessee, Festus in Missouri, Maryneal in Texas and San Antonio in Texas have all received the certification. It is awarded to cement plants that score 75 or above on the Energy Performance Indicator (EPI), used by the EPA to measure energy efficiency. In addition, the plant must have a three-year history of environmental compliance. The Chattanooga, Festus, and Maryneal plants have received the certification eight consecutive years in a row.
Buzzi Unicem sees cement sales rise slightly so far in 2016
11 November 2016Italy: Buzzi Unicem’s cement sales have risen by 1.2% year-on-year to 19.5Mt for the first nine months of 2016 from 19.3Mt in the same period of 2015. Its total net sales rose slightly to Euro2bn and its earnings before interest, taxation depreciation and amortisation (EBITDA) rose by 18.3% to Euro416m from Euro352m. It reported improved demand in Central Europe, Poland and Ukraine but that the US was affected by poor weather. Elsewhere, it said that the recession in Russia has lessened although its sales have continued to decline.
Half-year roundup for European cement multinationals
10 August 2016LafargeHolcim was the last major European cement producer to release its second quarter financial results last week. The collective picture is confused. Cement sales volumes have risen but sales revenue have fallen.
Most of the producers have blamed negative currency effects for their falls in revenue during the first half of 2016. Holding a mixed geographical portfolio of building materials production assets has kept these companies afloat over the last decade but this has come with a price. The recent appreciation of the Euro versus currencies in various key markets, such as in Egypt, has hit balance sheets, since the majority of these firms are based in Europe and mostly use the Euro for their accounting. Meanwhile, sales volumes of cement have mostly risen for the companies we have examined making currency effects a major contributor.
Graph 1 - Changes in cement sales volumes for major non-Chinese cement producers in the first half of 2016 compared to the first half of 2015 (%). Data labels are the volumes reported in 2016. Source: Company reports.
As can be seen in Graph 1, sales volumes have risen for most of the producers, with the exception of LafargeHolcim. Despite blaming shortages of gas in Nigeria for hitting its operating income, LafargeHolcim actually saw its biggest drop in sales volumes in Latin America by 13.2% year-on-year to 11.8Mt. The other surprise here was that its North American region reported a 2.7% fall to 8.8Mt with Canada the likely cause. Vicat deserves mention here for its giant boost in sales volumes due to recovery in France and good performance in Egypt and the US, amongst other territories.
Graph 2 - Changes in sales revenue for major non-Chinese cement producers in the first half of 2016 compared to the first half of 2015 (%). Data labels are the sales reported in 2016. Source: Company reports.
Overall sales revenue for these companies presents a gloomier scenario with the majority of them losing revenue in the first half of the year, with most of them blaming negative currency effects for this. Titan is included in this graph to show that it’s not all bad news. Its growth in revenue was supported by good performance in the US and Egypt. Likewise, good performance in Eastern Europe and the US helped Buzzi Unicem turn in a positive increase in its sales revenue. They remain, however, the exception.
Looking at sales revenue generated from cement offers one way to disentangle currency effects from performance. Unfortunately, only about half of the companies looked at here actually published this for the reporting period. Of these, LafargeHolcim reported a massive rise that was probably due to the accounting coping with the merger process that finalised in 2015. Of the rest - HeidelbergCement, Italcementi and Vicat – the sales revenue from each company’s cement businesses fell at a faster rate than overall sales. Like-for-like figures here would help clarify this situation.
Meanwhile, a mixed global patchwork of cement demand is focusing multinational attention on key countries with growing economies like Egypt and Nigeria. Both of these countries have undergone currency devaluation versus the Euro and are facing energy shortages for various reasons. The exposure of the multinational cement producers to such places may become clearer in the second half of the year.
Fatality at Kosmos Cement plant
10 August 2016US: A person has died at the Kosmos Cement plant in Louisville, Kentucky. Local police told the WDRB local television station that the male victim was aged in his 30s or 40s and was pronounced dead on the scene. Officials say the death was a workplace accident involving a pulley system.