Displaying items by tag: Cemex
Croatia: The proposed acquisition of Cemex Croatia by HeidelbergCement and Schwenk is set to be blocked by the European Commission according to sources quoted by Reuters. The commission started investing the deal in October 2016 following plans by HeidelbergCement and Schwenk to buy Cemex Croatia via their jointly owned subsidiary Duna Drava Cement (DDC). The deal would see the largest producer in the area merged with the largest importer. However, a final decision on the transaction has not been made yet and the European Competition Commissioner Margrethe Vestager could still rule in favour of it. The commission is expected to make a final decision by 18 April 2017.
Brazil: Camargo Corrêa is conducting talks to sell its cement business InterCement for US$6.5bn. Two bids, including one by Mexico’s Cemex, have already been made according to the O Globo newspaper. The Brazilian conglomerate was reportedly selling a minority stake in InterCement in mid-2015 and in late-2015 its chief executive officer Vitor Hallack said it was prepared to sell its assets to cut its debts.
InterCement is the second largest cement producer in Brazil with a production capacity of 15Mt/yr and 12 integrated cement plants. The country as a whole saw its domestic sales of cement fell by 11.7% year-on-year to 57.2Mt in 2016 according to data from the Brazilian National Union of Cement Industry.
Mexico: Cemex has retained a 9.5% stake in Grupo Cementos de Chihuahua (GCC) following a sale of some of shares in the Mexican cement producer. Cemex said that the underwriters did not exercise their over-allotment option to acquire shares in GCC. Originally Cemex said in late 2016 that it intended to sell its full 23% minority stake in GCC.
Switzerland/US: French politicians have cautioned construction-materials giant LafargeHolcim about the consequences of supplying cement for the 3000km wall that US President Donald Trump intends to build along the border with Mexico.
LafargeHolcim, the biggest cement producer in both the world and the United States, fell under scrutiny after Chief Executive Eric Olsen said, in remarks published in several media outlets, that the company is ready to supply cement for the border wall.
Presidential candidate Emmanuel Macron said that companies such as LafargeHolcim must consider the ‘ethical aftermath’ of their business deals, after the Franco-Swiss firm said it stands ready to work on the project.
"Being a private company, whose headquarters are mainly in Switzerland, does not free it from having an ethical conscience and asking questions before participating in certain projects," Macron told Agence-France Presse. LafargeHolcim is already under attack in France for Lafarge’s handling of its Syrian operations during the spread of ISIS in the region.
The world's second biggest cement producer, Mexican firm Cemex SAB, is also facing pressure at home to boycott the wall. The Mexican government has been a staunch opponent of Trump's project.
The 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.
HeidelbergCement appeals against investigation by European Commission into purchase of Cemex Croatia28 February 2017
Croatia: HeidelbergCement has appealed against an investigation by the European Commission into the proposed joint purchase with Germany’s Schwenk Zement of Cemex Croatia. The cement producer asserts that by considering Schwenk and itself rather than Duna-Dráva Cement (DDC), a subsidiary that both companies own equally, the commission has given the transaction a ‘Union dimension,’ according to the Official Journal of the European Union. Although DDC is based in Hungary, within the European Union (EU), it imports cement into Croatia (in the EU) from Bosnia & Herzegovina, a country outside of the union. The appeal was made in late December 2016 but only reported in late February 2017.
The European Commission revealed that it was investigating the proposed acquisition of Cemex Croatia by HeidelbergCement and Schwenk in October 2016. The commission was concerned that the transaction would merge the biggest producer in the area with the biggest importer, potentially reducing local competition.
US: The US Customs and Border Protection plans to start awarding contracts by mid-April 2017 for a proposed border wall with Mexico. The agency says it will request bids on or around 6 March 2017 and that companies would have to submit ‘concept papers’ to design and build prototypes by 10 March 2017, according to the Associated Press. Finalists must then submit offers with their proposed costs by 24 March 2017. No details on where construction will start or how much it will be cost have been released.
Estimates for the cost of a 2000-mile border wall vary significantly. The Government Accountability Office estimates it would cost on average US$6.5m/mile for a pedestrian fence and US$1.8m/mile for vehicle barriers. However, an internal Homeland Security Department report prepared for department secretary John Kelly places the bill at about US$21m according to an anonymous source quoted by the Associated Press. It proposes that existing barriers built during the George W Bush administration be extended first in stages.
The cost of the wall will depend on the height, materials and other specifications of the project. Granite Construction, Vulcan Materials and Martin Marietta Materials are all likely to be potential bidders and Mexico’s Cemex is also likely to benefit from any increase in demand for construction materials in the region.
US: Cemex USA has officially opened its new headquarters in Houston, Texas. Division president Ignacio Madridejos marked the event by presiding over a ribbon-cutting ceremony at the site at 10100 Katy Freeway in Memorial City in west Houston. More than 200 employees are now working at the new offices.
“These new offices show how Cemex USA stands strong,” said Madridejos. “This beautiful building will be part of the community for years and illustrates our commitment to being part of it.”
Mexico: Cemex is selling a 15.6% stake in Grupo Cementos de Chihuahua (GCC). If all 51,750,000 shares of GCC are sold the cement producer will raise around US$240m in revenue before expenses. Following the sale Cemex will retain a 7.4% direct interest in GCC.
US: Cemex has completed the sale of its Fairborn cement plant in Ohio and a cement terminal in Columbus to Eagle Materials for US$400m. Cemex said proceeds from the sale will be used for debt reduction and general corporate purposes. Bank of America Merrill Lynch acted as financial advisor to the cement producer for the transaction.