Displaying items by tag: LafargeHolcim
Holcim Philippines to increase production capacity to 13Mt/yr
03 December 2018Philippines: Holcim Philippines plans to invest nearly US$300m towards increasing its production capacity by 30% to 13Mt/yr by 2020. It will upgrade its plants at Bulacan and Misamis Oriental with the installation of new kilns, mills and waste heat recovery systems. The upgrades are intended to support the country’s economic development and strong construction sector.
“Our capacity expansion ensures that we can provide a steady supply of quality building materials to support the government’s infrastructure program and the resulting construction activity from the economy’s sustained rise,” said John Stull, Holcim Philippines president and chief executive officer (CEO).
The projects are part of a series of capacity and productivity investments that Holcim Philippines started in 2012 with the rehabilitation of its grinding plant in Mabini, Batangas. This was followed by debottlenecking of plants in 2015 and expansion projects in La Union and Davao that are set to be completed in 2019.
LafargeHolcim obtains American Petroleum Institute certification to produce oil well cement at Theodore plant in Alabama
30 November 2018US: LafargeHolcim has received American Petroleum Institute (API) certification to produce oil well cement at its Holcim Theodore plant in Alabama plant. It says it is one of only four cement plants in the country with an API 10A Monogram and Q1 Quality Management System. Production of Class A oil well cement will start immediately at the site and the company plans to add Class H production in the future.
In order to earn the certification, LafargeHolcim spent more than a year in a process of investing in additional testing equipment, developing a quality management system, conducting internal audits and passing an audit by the API. Oil well cement is designed to meet demanding requirements. It is continuously tested for chemistry, thickening time, fluid loss, free fluid, rheology and compressive strength.
Production at the company’s Theodore plant will complement LafargeHolcim’s ability to maintain a consistent supply of oil well cement to customers in the Gulf region and beyond. The company also produces API A and H well cements at its Joppa cement plant in Illinois.
Switzerland: LafargeHolcim is expecting its sales growth to slow in 2019 but earnings to grow as its ‘Strategy 2022’ management plan takes shape. Net sales are forecast to grow by up to 6% year-on-year in 2018 yet by only 5% in 2019. However, recurring earnings before interest, taxation, depreciation and amortisation (EBITDA) are predicted to rise by up to 5% in 2018 and then by at least 5% in 2019.
“With the recent divestment of our Indonesian operations we reached a major milestone in focusing our portfolio which allowed us to accelerate deleveraging. At the same time we aggressively move forward in Aggregates and Ready-Mix Concrete. These results are strong proof points for our Strategy 2022 and we will continue delivering across all value drivers," said chief executive officer (CEO) Jan Jenisch.
The group has made the forecasts as part of its Capital Markets Day taking place at Bardon Hill near Birmingham, UK.
PCA forecasts slower growth in the US
21 November 2018A couple of long-running news stories popped up this week, led by the Portland Cement Association’s (PCA) latest forecast for the US market. Chief economist Ed Sullivan and the Market Intelligence Group predict slowing cement consumption growth to 2020 as the recovery period ends following the financial crash in 2008. The background to this is an expected rise in interest rates dragging on the construction market, a limited boost from the Trump administration’s tax cuts and rising debt levels hitting federal infrastructure spending.
This marks an abrupt turnaround from the PCA’s April 2018 forecast in which potential federal infrastructure spending was anticipated to kick in towards the end of 2019 creating 4% growth in 2020. To give the PCA credit, it did say at the time that this was contingent on a couple of key steps, including passage of an infrastructure bill, federal and state paperwork, bid letting and review and finally, contract awards leading to construction. Following the US mid-term elections in early November 2018 the prospect of an infrastructure bills seems remoter than before given the political differences between the US House of Representatives and the Senate. This may have been the final straw for the PCA and it adapted its forecast accordingly.
Graph 1: Cement shipments in the US, January – August 2013 - January – August 2018. Source: Portland Cement Association (PCA).
It is also worth reflecting on the third quarter financial results of the multinational cement producers over the last few weeks. CRH may have been crowing this week about how its US performance was driving its business in the wake of its acquisition of Ash Grove Cement and other assets, but many of the other multinational cement producers weren’t. HeidelbergCement, Buzzi Unicem and Titan all blamed the weather in the US for dragging on their results. LafargeHolcim said it suffered less with a ‘soft’ first quarter in 2018 followed by recovery.
The other story this week with relevance to the US was the continued speculation in the Canadian press about the future of the McInnis Cement plant in Quebec. The latest update is that the plant’s shareholders have asked the provincial government if they can swap the debt the province holds in the venture for equity. This has been seen as a potential bid to keep the company operational while it continues to hunt for a buyer. Rumours of a sale have swirled around since the start of 2018, with the Global and Mail newspaper naming HeidelbergCement as being potentially interested. Three bids have been reportedly made by unnamed parties but they were rejected for being too low. A slowing US cement market is particularly bad news for McInnis Cement. The plant is situated on the Atlantic Coast of Canada and exports to the US have been seen as a major part of its business. To this end it officially opened its marine terminal in the Bronx, New York in October 2018.
The main US market needs to find an alternative to the ‘fabled’ infrastructure bill if it wants better growth. Yet, reduced US cement consumption growth won’t help McInnis’ shareholders recoup the money they have sunk in the project. Somebody seems certain to lose in this situation and, with a protectionist incumbent in the White House, it seems likely to be somebody north of the border.
Malaysia: Lafarge Malaysia has appointed Yeoh Khoon Cheng as its interim chief executive officer (CEO).
Yeoh started his career with Deloitte Kassim Chan in 1979. He joined Lafarge Malaysia in 1987 as finance manager and has held various positions involving business development, mergers and acquisitions and corporate finance activities and acted as company secretary from 1990 to 1998. He was appointed as executive director and chief financial officer (CFO) in 1999. From mid-2011 to the end of 2015, he was the CFO for Lafarge Cement China. Latterly, Yeoh was the CFO of Huaxin Cement in China from 2016 to mid-2017. He is a member of the Malaysian of Institute of Accountants and the Malaysian Institute of Certified Public Accountants.
Competition Council starts investigation in Romania
21 November 2018Romania: The Competition Council has launched an investigation into an alleged anti-competitive agreement between Holcim, CRH and HeidelbergCement in early November 2018. It is concerned that there has been possible coordination of prices between the companies since 2010. As part of the probe, it conducted raids at the headquarters of the three companies and seized documentation. It has warned that fines of up to 10% of company turnover are applicable should it find any evidence of collusion. However, it also mentioned that companies that cooperated with the competition authority could expect leniency in the form of immunity to or reduced fines.
Holcim El Salvador receives nod from environmental ministry
19 November 2018El Salvador: Holcim El Salvador has received a ‘Special Mention’ from the Ministry of Environment and Natural Resources as part of the 2018 National Environment Awards, according to the El Mundo newspaper. It won the recognition for its environmental strategy, including efforts to recover and manage eco-systems around its quarries in Metapan.
Nigerian government looks into complaints about quarry at Lafarge Africa’s Ewekoro plant
19 November 2018Nigeria: The Federal Government says it is investigating complaints from residents at Akinbo village near to the quarry of Lafarge Africa’s Ewekoro cement plant in Ogun State. Local residents have complained about breeches of local environmental legislation at the site, according to the Vanguard newspaper. Adegboyega Salam, the Director of Mines Environmental Compliance Department from the Federal Ministry of Mines and Steel Development, said that the issue was related to relocation of the community. He added that he had asked Lafarge Africa for comment. The dispute relates to an agreement between the cement producer and the local community in 2012.
LafargeHolcim sells in Indonesia
14 November 2018LafargeHolcim announced its plans to sell its business in Indonesia to Semen Indonesia this week for US$1.75bn. The deal covers four cement plants, 33 ready-mix plants and two aggregate quarries. It is part of its portfolio assessment scheme with a target to divest assets worth Euro1.7bn in 2019. At the current exchange rate, if the deal completes next year, then that’s most of the target met. Job done.
But wait just a moment. Global Cement Directory 2018 data has Holcim Indonesia’s cement production capacity listed as 11.9Mt/yr. Just taking the integrated cement plants into account and then recognising that the subsidiary has an 80.6% share in the business, puts the cost at a little under US$120/t of production capacity. The other concrete and aggregate assets can only reduce this figure as their value is taken into account. Then, don’t forget that Holcim Indonesia also operates two cement grinding plant: one at Ciwandan in Banten and a mothballed unit at Kuala Indah in North Sumatra. Nor did a cement terminal in Lampung and a cement warehouse in Palembang receive a mention. Holcim Indonesia placed its total cement production capacity at 15Mt/yr in its 2017 annual report. Take that figure into account and one gets a value of below US$100/t for the cement production capacity of Holcim Indonesia. It seems unlikely that LafargeHolcim has undervalued its assets but somebody somewhere must be taking a loss on this deal.
Earlier in the year we looked at LafargeHolcim’s options in Indonesia following speculation in the local press that it was considering selling. Our conclusion was that market overcapacity wasn’t going away anytime soon and LafargeHolcim had a publicly stated desire to sell its assets around the world to cut back its overheads towards profitability. The subsidiary made a loss in 2016 and this tripled to US$58m in 2017. Its earnings before interest, taxation, depreciation and amortisation (EBITDA) have fallen in consecutive years since 2015. LafargeHolcim has opted for the bold option to totally leave the market of one of the world’s top ten national cement producers.
From its perspective, Semen Indonesia said that it was looking forward to taking on-board Holcim Indonesia’s co-processing technology and rolling it to its other plants. Holcim Indonesia’s alternative fuels and recycling subsidiary, Geocycle, processed 0.36Mt of waste fuels in 2017, a 23% year-on-year rise from 0.30Mt in 2016. Semen Indonesia also has plans to submit a mandatory tender offer for the remaining share of Holcim Indonesia. It expressed pride at the transaction making it the biggest cement producer in South-East Asia with a production capacity of 53Mt/yr but it didn’t say exactly where it plans to sell its products.
Graph 1: Domestic cement consumption in Indonesia, 2010 – 2017. Source: Indonesian Cement Association (ASI).
That last bit is important. Since the Holcim Indonesia assets and Semen Indonesia’s plants don’t seem to overlap too much geographically it seems likely that the competition authorities will approve the deal if they can overlook the state-owned company owning over half the country’s production capacity. Indonesian Cement Association (ASI) data put sales at 66.4Mt in 2017, giving a capacity utilisation rate of 84% using the Global Cement Directory’s national capacity of 79.3Mt/yr or 61% using the ASI’s figure of 108Mt/yr for 2017. ASI data shows that local cement consumption grew by 7.6% year-on-year in 2017 following five years of slowing growth. So far, growth for the first half of 2018 seems slower at 3.6% year-on-year to 30.1Mt. These figures may have prompted LafargeHolcim to make its final decision to exit the country suggesting that there is no end in sight to the poor market.
LafargeHolcim’s decision to leave Indonesia seems sound but the selling price seems low and it is walking away from a large market. Either the production assets are old, the market is worse than we think it is or something else is going on. That said though, LafargeHolcim has taken decisive action that should ultimately benefit its bottom line.
Indonesia: LafargeHolcim has signed an agreement with Semen Indonesia to sell its 80.6% share of Holcim Indonesia for US$1.75bn. The assets to be sold to Semen Indonesia include the entirety of LafargeHolcim’s operations in Indonesia, which consists of four cement plants, 33 ready-mix plants and two aggregate quarries. LafargeHolcim says it decided to divest Holcim Indonesia as part of the on-going portfolio review. Closing of the transaction is subject to customary regulatory approvals.
“As part of our Strategy 2022 – ‘Building for Growth’ we have committed to divestments of at least Euro1.8bn. Today’s announcement is an important milestone in reaching our target and to increase our financial strength,” said Jan Jenisch, chief executive officer (CEO) of LafargeHolcim.