Displaying items by tag: Italcementi
HeidelbergCement buys Italcementi
Undeniably the big story of the year, HeidelbergCement has gradually acquired Italcementi throughout 2016. Notably, unlike the merger of Lafarge and Holcim, the cement producer has not held a party to mark the occasion. Instead each major step of the process has been reported upon incrementally in press releases and other sources throughout the year. The enlarged HeidelbergCement appears to be in a better market position than LafargeHolcim but it will be watched carefully in 2017 for signs of weakness.
LafargeHolcim faces accusations over conduct in Syria
The general theme for LafargeHolcim in 2016 has been one of divestments to shore up its balance sheet. However, one news story could potentially sum up its decline for the wider public. In June 2016 French newspaper Le Monde alleged that Lafarge had struck deals with armed groups in Syria, including so-called Islamic State (IS), to protect its assets in 2013 and 2014. LafargeHolcim didn’t deny the claims directly in June. Then in response to a legal challenge on the issue mounted in November 2016 its language tightened to statements condoning terrorism whilst still allowing some wriggle room. As almost all of the international groups in Syria are opposed to IS, should these allegations prove to be true it will not look good for the world’s largest cement producer.
China and India balance sector restructuring with production growth
Both China and India seem to have turned a corner in 2016 with growing cement production and a generally more upbeat feeling for the industries. Both have also seen some high profile consolidations or mergers underway which will hopefully cut inefficiencies. China’s focus on its ‘One Belt, One Road’ appears to be delivering foreign contracts as CBMI’s recent flurry of orders in Africa attests although Sinoma’s equipment arm was losing money in the first half of 2016. Meanwhile, India may have damaged its own growth in the short term through its demonetisation policy to take high value Indian rupee currency notes out of circulation. In November 2016 cement demand was believed to have dropped by up to half as the real estate sector struggled to adapt. The pain is anticipated to carry on until the end of March 2017.
US industry growth stuck in the slow lane
The US cement industry has failed to take off yet again in 2016 with growth lagging below 5%. The United States Geological Survey (USGS) has reported that clinker production has risen by 1% in the first ten months of 2016 and that it fell in the third quarter of the year. In response, the Portland Cement Association (PCA) lowered its forecasts for both 2016 and 2017. One unknown here has been the election of President-elect Donald Trump and the uncertainty over what his policies might bring. If he ‘goes large,’ as he said he wants to, on infrastructure then the cement industry will benefit. Yet, knock-on effects from other potential policies like restricting migrant labour might have unpredictable consequences upon the general construction industry.
African expansion follows the money
International cement producers have prospered at the expense of local ones in 2016. The big shock this year was when Nigeria’s Dangote announced that it was scaling back its expansion plans in response to problems in Nigeria principally with the devaluation of the Naira. Since then it has also faced local problems in Ghana, Ethiopia and Tanzania. Its sub-Saharan competitor PPC has also had problems too. By contrast, foreign investors from outside the continent, led by China, have scented opportunity and opened their wallets.
Changes in store for the European Union Emissions Trading Scheme
A late entry to this roundup is the proposed amendment to the European Union (EU) Emissions Trading Scheme (ETS). This may entail the introduction of a Border Adjustment Measure (BAM) with the loss of free allowances for the cement sector in Phase IV. Cembureau, the European Cement Association, has slammed the changes as ‘discriminatory’ and raised concerns over how this would affect competitiveness. In opposition the environmental campaign group Sandbag has defended the changes as ones that could put a stop to the ‘cement sector’s windfall profits from the ETS.’
High growth shifts to Philippines and other territories
Indonesia may be lurching towards production overcapacity, but fear not, the Philippines have arrived on the scene to provide high double-digit growth on the back of the Duterte Infrastructure Plan. The Cement Manufacturers Association of the Philippines (CEMAP) has said that cement sales have risen by 10.1% year-on-year to 20.1Mt in the first three quarters of 2016 and lots of new plants and upgrade projects are underway. The other place drawing attention in the second half of the year has been Pakistan with cement sales jumping in response to projects being built by the China-Pakistan Economic Corridor.
Global Cement Weekly will return on 4 January 2016
US: HeidelbergCement has completed the sale of its Martinsburg, West Virginia cement plant and eight related terminals to Cementos Argos. With the finalisation of the sale the group has now met all the obligations with regards to its acquisition of Italcementi.
“With the disposal of the US assets we fulfil the obligation of the Federal Trade Commission and improve the net financial position of HeidelbergCement after the acquisition of Italcementi,” said Bernd Scheifele, chief executive officer of HeidelbergCement.
HeidelbergCement and Cementos Argos announced the sale in August 2016. The transaction purchase price was US$660m on a cash and debt-free basis. The FTC approved the agreement in November 2016.
Germany: HC Trading and Interbulk Trading have merged their operations to form HC Trading, following the acquisition of Italcementi by HeidelbergCement. The merger will continue the group’s international trading activities, specialising in cement, clinker, coal and petroleum-coke by expanding the trade network and improving its position in the market. The total turnover of the new trading company will be around US$1.4bn.
“We trust that, by having an enlarged geographic reach as well as an expanded product portfolio, we will be able to further enhance our efficiency to better serve the market and our business partners,” said Emir Adiguzel, the chief executive officer of HC Trading. He added that the group intends to use idle capacity from former Italcementi plants to meet demands from import facilities in Africa, North America and South East Asia.
Federal Trade Commission approves request by HeidelbergCement and Italcementi to sell Martinsburg cement plant16 November 2016
US: The Federal Trade Commission (FTC) has approved an application from HeidelbergCement and Italcementi to sell the Essroc cement plant in Martinsburg, West Virginia, eight cement terminals in the mid-Atlantic region and related assets to Argos USA, a subsidiary of Cementos Argos. The divestiture was required by the FTC’s August 2016 final order settling charges that the US$4.2bn merger of HeidelbergCement and Italcementi would be likely to harm competition in five regional markets for cement in the US. The Commission vote to approve the divestiture was 3-0.
Germany: HeidelbergCement has reported its first financial results following the completion of its takeover of Italcementi in mid-October 2016. Its revenue rose by 8% to Euro10.9bn in the first nine months of 2016 from Euro10.1bn in the same period in 2015. Its earnings before interest and taxation (EBIT) rose by 1.7% to Euro1.40bn from Euro1.38bn. However, its profit fell by 3% to Euro738m from Euro763m. The boost in sales revenue was attributed to the integration of Italcementi into the group but the drop in profits was blamed on higher taxes in North America.
Cement sales volumes grew by 21% to 73Mt from 60.6Mt. Although, on a like-for-like basis, with adjustments consolidation effects, this was reported as 2.5%. Particular growth was reported in the Western and Southern Europe territory due to the influx of new assets from Italcementi. The group’s sales revenue from cement grew by 12% to Euro5.24bn from Euro4.66bn.
Italy: HeidelbergCement, the sole shareholder of Italcementi, has appointed a new board of directors its subsidiary at a shareholder meeting on 19 October 2016. The new members are Luca Sabelli as chairman, Dominik von Achten as executive vice president, Lorenz Näger as executive vice president and Roberto Callieri as chief executive officer.
On 12 October 2016, HeidelbergCement purchased the remaining Italcementi shares that had not been tendered in the mandatory tender offer. From this date HeidelbergCement became the sole shareholder of Italcementi and owns 100% of the share capital. Italcementi shares were delisted from the Italian Stock Exchange on the same day.
Belgium: HeidelbergCement has completed the sale of its operations in Belgium, primarily consisting of Italcementi’s subsidiary Compagnie des Ciments Belges (CCB) to an affiliate of Cementir Holding. The European Commission has approved the agreement.
“With the disposal of the Belgium assets we fulfill the obligation of the European Commission and improve the net financial position of HeidelbergCement after the acquisition of Italcementi,” said Bernd Scheifele, CEO of HeidelbergCement.
HeidelbergCement and Cementir Holding announced the sale on 25 July 2016. The transaction has an enterprise value of Euro312m on a cash and debt-free basis.
Italy: Italcementi will start temporary lay-offs for workers at its Scafa and Monselice cement plants when unemployment benefits end on 31 January 2017. The plans were announced at a meeting on 14 October 2016 following agreements signed in December 2015 at the Ministry of Labour by trade union representatives and Italcementi’s workers, according to the Il Sole 24 Ore newspaper. The cement producer has confirmed that the on-going reorganisation at its plants are related to poor market conditions and not the acquisition of Italcementi by HeidelbergCement.
Canada: The board of directors of Italcementi have met in Milan, Italy and have decided on integrate its operations in the Canadian market with the operations of HeidelbergCement, which from 1 July 2016 has been holding the majority stake in Italcementi and will take over the entire company following a mandatory takeover bid. The transaction involves the acquisition by Canadian Lehigh Hanson Materials (LHM), indirectly owned by HeidelbergCement, of the entire share capital, including ordinary and preference shares, of US-based Essroc Canada, which is indirectly owned by Italcementi, through vehicle company Essroc Netherlands. The price which Essroc will receive for the sale of Essroc Canada to LHM, equal to some US$281m, will be paid by assigning to Essroc 42,288 LHM shares of the new issue, or 15.5% in LHM share capital, and for the remainder - in cash US$151,000.
Italy: Industry minister Carlo Calenda has said he is a ‘little’ worried about the intentions of HeidelbergCement to reduce its business in Italy after it buys Italcementi. The government is negotiating with HeidelbergCement about the purchase and it has confirmed its readiness to support investments, according to the Il Sole 24 Ore newspaper. The government has also asked the German construction materials producer to make a wish list and has launched a series of meetings.