Displaying items by tag: LafargeHolcim
France/Syria: A judicial investigation has seized Euro4m from former Lafarge executives, including former chief executive officer (CEO) Bruno Lafont, as part of a probe into the company’s conduct in Syria. Sources quoted by the Agence France Presse said that Euro2.5m was confiscated from Lafont’s leaving package of Euro8.4m as Lafarge merged with Holcim to form LafargeHolcim. Funds were also taken from Bruno Pescheux and Frédéric Jolibois, the former directors of Lafarge Cement Syria, and from Christian Herrault, a dormer deputy general regional manager with overview of Syria.
Lafarge SA, a subsidiary of LafargeHolcim, has been placed under judicial investigation over its actions in Syria between 2011 and 2014. It has been accused of complicity in crimes against humanity and financing terrorism. A panel of three judges in Paris has ordered Lafarge to pay over Euro30m as a security deposit ahead of the trial. Eight former executives, including Lafont, have been charged in connection to the investigation.
Lafarge Zimbabwe sues transport firm
08 October 2018Zimbabwe: Lafarge Zimbabwe is suing Gramiso Investments for an outstanding debt of over US$200,000. The cement producer and transport company entered into a prepayment agreement in which the cement manufacturing giant advanced US$500,000 to Gramiso Investments, according to the Herald newspaper. However, Gramiso Investments allegedly only paid back just over half of this amount. Lafarge Zimbabwe has taken the lawsuit to the High Court.
US: LafargeHolcim has upgraded its terminal at Weirton in West Virginia following a 10-year furlough. The site will be used to store and distribute oil well cement products for markets in the Appalachian region.
“We have made a significant investment in the Weirton terminal in direct response to the growing needs of our energy industry customers. Demand for access to our oil well cement has increased dramatically, yet existing distribution channels had grown congested,” said Jamie M Gentoso, chief executive officer (CEO) of US Cement operations.
The upgrade project included expanding the site, building a new water-based off- loading facility and restoring its silos. During the work LafargeHolcim collaborated with the Army Corps of Engineers, the West Virginia Department of Commerce, the Business Development Corporation of the Northern Panhandle and the local community. In addition, the company worked closely with the West Virginia Department of Environmental Protection and Environmental Protection Agency to assure all operating and environmental permits were in place. As part of this collaboration, LafargeHolcim has also been granted additional funding for surrounding site infrastructure improvements and build-out through the conditional grant program known as the West Virginia Industrial Access Road Program (IAR).
Zimbabwe: Edith Matekaire, the commercial director of Lafarge Zimbabwe, has blamed a backlog of foreign currency exchange as the cause of a shortage of cement. The US$2m backlog has caused plant maintenance shutdowns to take longer than they normally would, according to the Herald newspaper. Due to the lack of adequate funding, the shutdowns have been forced to take place during periods of peak production, causing effects in the market.
Despite this, Matekaire said that the local cement sector has more than enough production capacity to meet customers’ needs. Demand is 1.3Mt/yr and cement production is 2.4Mt/yr. Demand is only expected to exceed production from 2020 onwards.
Update on Mexico: free trade edition
03 October 2018Cementos Fortaleza started building its new grinding plant in Merida this week. The 0.25Mt/yr unit is expected to open in July 2019. It marks the first new plant in the country in a while and it will be only the second in the south-eastern state of Yucatan, joining Cemex’s integrated plant. It follows a number of upgrades at existing plants over the last two years, such as various mill orders by Cruz Azul from European suppliers (as part of an upgrade at two of its plants) and Elementia’s upgrade to its Tula plant.
Note that Cementos Fortaleza is a subsidiary of Elementia, the building materials company partly-owned by ‘Mexico’s richest man’ Carlos Slim. The group has steadily been expanding with its purchase of the remaining share in Cementos Fortaleza in 2015, acquiring a controlling stake in Giant Cement in the US in 2016 and a project to build a grinding plant in Costa Rica in early 2018.
The other big news story this week with implications for the cement sector was the arrangement of the US-Mexico-Canada Agreement (USMCA), the successor to the North American Free Trade Agreement (NAFTA). Although the exact details of the deal are still emerging, the consensus is that the cement industry in Mexico is unlikely to be affected much. The two points that might have implications for the cement industry are changes to rules of origin regulations and tariffs on imports made by low-wage workers. Both clauses are targeted at the automotive sector to protect US industry so it is unlikely that cement will be affected. In addition it is worth remembering that Mexico was the fifth largest exporter of cement and clinker to the US in 2017 after Canada, Greece, China and Turkey. And, all the major Mexican cement producers operate plants in the US, further protecting them from any potential negative consequences of the USMCA.
Graph 1: Mexican cement production, 2009 – 2017. Source: Camara Nacional del Cemento (CANCEM).
Back in Mexico, the graph above shows that production has been growing in fits and starts over the last decade. The last growth trend started in 2013 but it stalled in 2017. However, the Camara Nacional del Cemento (CANCEM) was forecasting growth of 2.5% year-on-year for 2018 in April 2018. The last time this column covered Mexico, back in early 2017, we produced a breakdown of the industry by company and production capacity. This is worth looking at for an overview of the production base.
Cemex, the largest local producer, reported Ordinary Portland Cement sales volume growth of 3% year-on-year in the second quarter of 2018 but flat growth for the first half of the year. This growth was supported by good activity in the formal residential sector with support from the industrial and commercial sector. LafargeHolcim released less detailed figures for the first half of 2018 but it attributed its strong performance in Latin America to Mexico. Overall cement sales for the region grew by 12.1% to 12.6Mt, in part due to large infrastructure projects in Mexico, such as the new Mexico City International airport. The third biggest producer, Grupo Cementos de Chihuahua, said that its cement sales volumes rose by 2.5% in the first half of the year, supported by rising prices.
As reported in early 2017, the Mexican cement industry is moving ahead with confidence. A modest amount of production capacity is being built, the steady market growth since 2013 looks set to continue after a minor blip in 2017 and the main producers are all reporting good performance so far in 2018. Finally, the USMCA looks unlikely to trouble Mexican producers much and their diversified holdings will certainly help them if it does. For the moment - bravo!
LafargeHolcim increases stake in Holcim Azerbaijan
01 October 2018Azerbaijan: LafargeHolcim has increased its stake in Holcim Azerbaijan to 76% from 66%. The move followed the decision by the European Bank for Reconstruction and Development (EBRD) to sell its 10% equity stake in the cement producer, according to ABZ News. Remaining shares in company are held by individual shareholders.
Cameroon: Cimencam has assured Ernest Gbwaboubou, the Minister of Mines, Industry and Technological Development, that the first bag of cement will be despatched from the Nomayos grinding plant in the first quarter of 2019. The comments were made during a visit by Gbwaboubou to the unit, according to Business in Cameroon magazine. The minister also noted that the compensation process for residents affected by a power line to the plant had yet to be completed.
The new plant will have a production capacity of 0.5Mt/yr. The project has an investment of around US$40m. The plant will source pozzolans from a quarry at Foumbot.
Lafarge Africa – was it worth it?
19 September 2018Nigerian financial analysts Cordros Securities concluded this week that the merger of some of Lafarge’s Sub-Saharan African businesses had reduced earnings at Lafarge Africa. The report is interesting because it explicitly points out a situation where the consolidation of some of Lafarge’s various companies have failed in the wake of the formation of LafargeHolcim.
Cordros Securities’ criticism is that Nigeria’s Lafarge WAPCO performed better in 2013 alone before it became part of Lafarge Africa, with a higher standalone earnings before interest, taxation, depreciation and amortisation (EBITDA) margin. Lafarge Africa formed in 2014, a year before the LafargeHolcim merger was completed, through the consolidation of Lafarge South Africa, United Cement Company of Nigeria, Ashakacem and Atlas Cement into Lafarge WAPCO. Since the formation of Lafarge Africa, Cordros maintains that its earnings per share have consistently fallen, its share price has dropped, its debt has risen, its margins have decreased and its sales volumes of cement have also withered.
Cordros mainly focuses on the Nigerian parts of Lafarge Africa’s business, given its interest in that market and the fact that about three quarters of the company is based in the country. It blames the current situation on growing operating costs since the merger, skyrocketing financing costs for debts and efficiency issues. In Nigeria, Lafarge Africa has had to cope with disruptions to gas supplies. Nigeria’s Dangote Cement had similar problems domestically in 2017 with falling cement sales volumes in a market reeling from an economic recession but Cordros reckoned that Dangote is picking up market share in the South West due to an ‘aggressive retail penetration’ strategy. Finally, Lafarge Africa faced a US$9m impairment in 2017 due to its abandoned pre-heater upgrade project at AshakaCem. The project has been suspended since 2009 due to security concerns in the North-East region. The plant faced an attack by the Boko Haram militant group in 2014 and the group has seemed reluctant to invest further in the site subsequently.
Cordros’ final word on the matter is that with the Nigerian cement market performing slower than it has previously, the local market has become a battleground between the established players of Dangote Cement, BUA Group and Lafarge Africa. What little the report does have on South Africa covers problems with old and inefficient hardware, labour disputes, low prices due to weak demand, high competition and a negative product mix.
Lafarge Africa itself presents a more mixed picture, with market growth picking up in Nigeria following end of the recession but continued market problems in South Africa. Overall, its reported sales grew by 4.8% to US$448m in the first half of 2018 but its EBITDA fell by 25% to US$76.4m. Overall cement sales volumes were reported as up by 5.4% to 2.6Mt in the first half but volumes were still falling in South Africa in the second quarter.
Part of the backdrop to all of this is the intention of Lafarge Africa to cut its debt. In May 2018 its chairman Mobolaji Balogun said that the company wanted to cut its debts by 2020 before continuing with its expansion programme. Part of this process will include a new rights issue later in 2018 to allow shareholders to buy stock at a discount.
It must have made sense, on paper at least, to merge the Lafarge subsidiaries in the two largest economies in Sub-Saharan Africa. Once the merger had settled in, with synergies generating extra revenue, the group could have considered adding extra territories such as Kenya. However, it’s not turned out like that. Two recessions in Nigeria and South Africa respectively, old equipment, debt and serious competition from locally owned producers have piled on the pressure instead. From a stockholder perspective, Cordros is not impressed by the performance of Lafarge Africa. The wider question is: what else did Lafarge and Holcim get wrong when they joined to form LafargeHolcim?
Nigerian analysts blame earnings loss at Lafarge Africa on merger
17 September 2018Nigeria: Financial analysts Cordros Securities have blamed falling earnings at Lafarge Africa on the merger of its Nigerian businesses with Lafarge South Africa. In a research report the analysts found that the merger increased operating costs and reduced shareholder value, according to the Vanguard newspaper. Lafarge WAPCO’s earnings per share, earnings before interest, taxation, depreciation and amortisation (EBITDA) and profit before tax have all fallen since 2013. It also found that operating costs had increased ‘significantly’ following the merger, debt had risen and that earnings had also been hit by efficiency issues.
Lafarge announced plants to merge its businesses in Nigeria and South Africa in 2014. The move saw the consolidation of Lafarge South Africa, United Cement Company of Nigeria, Ashakacem and Atlas Cement to Lafarge WAPCO. It was subsequently renamed Lafarge Africa.
Lafarge Zimbabwe says it can supply the market
14 September 2018Zimbabwe: Lafarge Zimbabwe says that it is able to supply the market with cement following a shortage. In a statement the subsidiary of LafargeHolcim said that the recent surge in demand was ‘temporary’ and that, overall, the situation was a ‘positive signal of economic growth,’ according to the Chronicle newspaper. It said that the situation might be attributable to a rise in mortgage finance as well as improved disposable income following a successful tobacco and maize farming season on the back of the Command Agriculture Programme.
Cement prices have reportedly risen by over 50% due to the shortage. Producers have blamed her situation on technical problems following maintenance works at their plants. They have also ruled out any further increases in prices. Despite the cement shortage they have warned against trading cement on the black market.