Displaying items by tag: LafargeHolcim
LafargeHolcim launches Binastore retail network in Madagascar
04 December 2017Madagascar: LafargeHolcim has launched a local franchise of its Binastore retail network at Tsaralalàna. The initiative has signed up 72 local firms, according to the L'Express de Madagascar. The building materials producer expanded its retail network in the Middle East and Africa in June 2017. It also operates a cement plant at Ibity near Antsirabe.
Lafarge Syria managers arrested in Paris
30 November 2017Syria: Three managers of LafargeHolcim were arrested in Paris on 29 November 2017 over allegations that Lafarge Syria, now part of the group, paid money to the Islamic State group in Syria in 2013 and 2014. They included Bruno Pescheux and Frédéric Jolibois. Pescheux was in charge of Lafarge Syria’s plant from 2008 until 2014. Jolibois took over in 2014 for a short while before the plant was abandoned. A third detainee was not named. Investigators are seeking to determine whether executives at Lafarge in Paris knew that payments were being made in Syria to insurgent groups.
LafargeHolcim has not commented on the arrests but has previously admitted ‘errors’ in its handling of events in Syria. It denies criminal wrongdoing and said that it had ‘put everything in place to ensure that this situation cannot be reproduced.’
A preliminary inquiry opened in France earlier in 2017 amid claims that Lafarge Syria had paid insurgent groups to keep roads clear around its plant in Jalabiya after the outbreak of war in Syria. In 2013, Islamic State representatives reportedly summoned two company managers in Syria to demand a cut of operations. They reportedly threatened to stop supplies to the plant and deliveries from it if they did not receive the money. The business is alleged to have paid Islamic State about Euro20,000/month, which represented 10% of the Euro5m that had reportedly been paid to a variety of armed groups.
PPC turns the tables
29 November 2017There are two significant cement producers around the world up for sale at the moment. Last week we dealt with India’s Binani Cement, which has so far attracted 15 separate bids from a number of international and domestic players. Now, we turn our attention to South Africa, where PPC remains the target of approaches by LafargeHolcim and CRH.
This week PPC rejected a partial offer from Canada’s Fairfax Holdings, which it considered neither fair nor reasonable. Like a mutual friend at a party that insists two people ‘really are perfect for each other,’ Fairfax had stipulated in its terms that PPC should merge with AfriSam to create a South African super-producer. It does not appear that this idea went down well and that particular combination now seems further away than ever.
When the news broke that it had rejected Fairfax, we thought that PPC’s stance seemed a little ‘too cool.’ However, looking just at the oversized and import-addled South African market does not give the full picture of what’s happening for PPC at the moment. It has significant and growing activities in the rest of Africa too.
Later this week PPC released its results for the first half of its 2018 fiscal year. Suddenly, its handling of the Fairfax offer made more sense. Over the six months to 30 September 2017, PPC nearly tripled its profit to US$21.1m. Crucially, sales from outside South Africa grew far more rapidly than those at home. While domestic earnings before interest, tax, depreciation and amortisation (EBITDA) rose by 4%, EBITDA from elsewhere increased by 25%. These results bode well for a potential bidding war that now favours PPC.
Even from this greatly enhanced position, PPC was not finished with its announcements for the week. Today it revealed that it plans to build a new ‘mega-factory’ in the Western Cape. Johan Claassen, the interim chief executive of PPC, said there would probably be a formal announcement about new capacity in the Western Cape in 2018. He said that PPC had decided to conduct a feasibility study into a possible replacement for its Riebeeck plant. An Environmental Impact Assessment (EIA) is in progress and the plant is reported to be ‘semi-brownfield.’ Claassen said that the new facility would use around 25% of the current Riebeeck equipment and cost US$200/t of installed capacity.
The news of its results and announcement of the new plant represent a good PR move by PPC given the difficulties faced by the wider South African market. The new information will certainly give cause for CRH and LafargeHolcim to think again about the values of their offers, should PPC also be of the view that these also undervalue the company.
Lafarge Canada invests in monitoring systems to help fuels bid
29 November 2017Canada: As it awaits industrial approval from the Province to burn tyres at its Nova Scotia cement plant, Lafarge Canada says it has spent US$830,000 to install emissions monitoring systems. The company says its new equipment measures plant emissions such as sulphur dioxide, nitrogen oxides, carbon monoxide, carbon dioxide, oxygen, and total hydrocarbons every 10 seconds.
Rob Cumming, Lafarge's environment director, says the company's proposed one year pilot project at its Brookfield plant will allow it to gather the scientific evidence needed to assure the public that it is safe to use scrap tyres as a replacement for coal.
In October 2017, the Environment Department said it was reviewing the company's application and would make a decision on the project within 60 days. The project has drawn criticism from residents near the plant, environmental groups and Nova Scotia's NDP, which has called on the Liberal government to ban tyre burning.
Cigarettes go up in smoke for Holcim Philippines
27 November 2017Philippines: Around 4.748 million packs of cigarettes worth US$2.8m and owned by Mighty Corporation, which is being wound up amid tax evasion charges, were destroyed on Sunday at the Geocycle Compound of Holcim Philippines in Bunawan, Davao City. They were used as an alternative fuel in the plant’s kiln to produce cement.
The cigarettes with counterfeit stamps were discovered at the warehouse owned by Sunshine Cornmill Co., Distribution in General Santos City in a joint operation conducted by members of the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) on 6 March 2017.
"The incineration we will witness today is intended to deliver this message,” said Kelvin Lee, Assistant Secretary of the Office of the Executive Secretary. “Tax evasion does not pay. We will confiscate the offending products and destroy them. No one will profit from the commission of a crime.”
Global Cement would argue that Holcim Philippines is a beneficiary in this process, presumably having gained free alternative fuel!
PPC results could fuel more acquisition interest
24 November 2017South Africa: PPC has seen its net profit rise significantly in the six months to September 2017. It nearly tripled its profit year-on-year to US$21.1m from US$7.3m.
The company benefited particularly from a strong performance from its assets outside of South Africa. Its earnings before interest, tax, depreciation and amortisation (EBITDA) from its non-domestic assets rose by 25%, while group EBITDA grew by 4% to US$86m. The results bode well for a potential bidding war that now favours PPC shareholders.
Earlier in the week, PPC effectively rejected a conditional partial offer from AfriSam and Canada’s Fairfax Group for the company, stating that it undervalued the company. This latest set of results brings this assessment into sharper focus and may give cause for CRH and LafargeHolcim to think again about the values of their own non-binding offers, should PPC also be of the view that these also undervalue the company.
Consolidation gathering pace in India
22 November 2017India’s Economic Times (ET) has run a story today that really illustrates the heart of the current oversupply issues surrounding the cement sector in India. It reports that Binani Cement, one of the country’s many medium-sized domestic players, is circling the drain ahead of full bankruptcy proceedings. According to ‘senior officials,’ who spoke on the condition of anonymity, the company has already attracted interest from LafargeHolcim, HeidelbergCement and CRH, as well as a plethora of domestic players. There are a total of 15 interested parties so far: the three multinationals, nine domestic cement producers and three investment firms.
With 11.3Mt/yr of capacity, Binani Cement is not a small player by international standards. Unusually for an Indian producer, it even has capacity elsewhere, in China and Dubai. It is part of the larger BRAJ Binani Group, which is involved in glass fibre, energy, IT and more. The fact that the cement company is now up for sale really underscores the extent to which India doesn’t need the 100Mt/yr of extra capacity that was highlighted by the Cement Manufacturers Association in September 2017. India could lose 10 Binani Cements overnight and still have enough capacity to meet domestic demand!
Binani’s issues are, at least in part, geographic. It has assets exclusively in the north of India, which has seen weakened homebuilding and infrastructure activities since the implementation of the government’s demonetisation policy, as well as the highest impacts from rising imported fossil fuel prices. The implementation of India’s new Goods and Services Tax (GST), which has increased cement prices, has not helped. The bulk of Binani’s operations are in Rajasthan and Uttar Pradesh, both states far from the coast. When even UltraTech Cement’s profit is down, the squeeze for some smaller producers is becoming too much. On its own Binani cannot handle the heat, but its assets would certainly make a nice addition for a larger player.
In this way, the consolidating Indian cement sector represents a microcosm of the global situation. Binani’s troubles highlight how much better large companies are at spreading the risks of operating in different markets. As discussed in our forthcoming December 2017 issue, the advantages of being a multinational player with a large number of geographical markets appears to be gradually returning once again, with smaller regional players once again suffering from geographical disadvantages.
Of course, in an environment ripe for consolidation it is very interesting to note that CRH is among the international players linked to Binani. It clearly wants the benefits of being a fully-fledged multinational and is going full-steam ahead to get there. It has spent Euro1.34bn on 27 acquisitions of various sizes in 2017, most notably the on-going purchase of Ash Grove Cement in the US. It is making a strong case to purchase PPC in Africa and a larger Indian base makes sense for the company in the longer term. It lost out on Lafarge India’s assets to Nirma in 2016.
We can be sure that the pace of mergers and acquisitions will continue to grow in the rest of 2017 and into 2018 in India and elsewhere. Would you bet against CRH pulling off an Ash Grove, PPC and Binani ‘triple?’ With the group finance director Senan Murphy stating that there was additional room for expansion in 2018, its intent certainly can’t be faulted.
CRH, LafargeHolcim and HeidelbergCement among 15 firms interested in bankrupt Binani
22 November 2017India: As many as 15 companies have shown interest in Binani Cement, which is facing bankruptcy proceeding from its lenders, according to senior officials quoted by India’s The Economic Times. Among them are Ireland-based CRH, Swiss-based LafargeHolcim and Germany’s HeidelbergCement, each of which have shown interest in response to initial bids called by the resolution professional. Other bidders include local firms India Cement, Orient Cement, Ramco Cement, Shree Cement, UltraTech Cement and Piramals. Senior officials said that a total of nine domestic players and three financial investors have shown interest in the company.
The bidders will provide a binding bid with a detailed resolution plan, which would involve acquiring equity and recasting the debt, by 22 December 2017. The bidders will have to provide plans to either acquire the company fully or acquire its assets only. Binani has a manufacturing capacity of 11.3Mt/yr, with integrated plants in India and China and grinding units in Dubai, UAE.
Update on Argentina
15 November 2017Forget the news stories about poor markets in Colombia and Brazil. Argentina is riding a construction boom right now. Local producer Loma Negra recently ran an initial public offering and it picked a good time to do it. It aimed to generate up to US$800m from the flotation and in the end it raised over US$1bn. Good news for its Brazilian owner InterCement no doubt, which was last reported as aiming to sell a 32% stake in the company in order to cover its debts. More cheer must have followed from Loma Negra’s third quarter results this week. Its cement sales volumes rose by 9% in the latest quarter to 1.72Mt due to expanding local construction activity.
Graph 1: Cement production and consumption in Argentina Q1 – 3, 2008 – 2017. Source: Asociación de Fabricantes de Cemento Portland (AFCP).
As Graph 1 shows its experience mirrors the wider industry. Cement production rose by almost the same rate for the industry as whole, by 10% year-on-year to 3.19Mt for the quarter, according to Asociación de Fabricantes de Cemento Portland (AFCP) data. For the nine months as a whole production has also risen by 9% to 8.7Mt. This figure is the third highest in the last decade since 2008. Production peaked in 2015 before dropping a major 10Mt following a subdued construction industry in the wake of devaluation of the Argentinean Peso in late 2015 and early 2016. At the time LafargeHolcim, the operator of Holcim Argentina, also blamed the negative influence of neighbouring Brazil’s own financial woes. The economy has bounced back giving the country’s its highest nine month cement consumption figure, 8.8Mt, in the last decade.
Earlier in the year LafargeHolcim said it was importing 0.25Mt of cement into Argentina between May 2017 and April 2018 because it couldn’t meet local demand from its own plants. Given the over-abundance of clinker in the world one might be forgiven for being sceptical about this claim. Bolivia’s Itacamba announced it was also exporting cement to Argentina this week. However, the other point to note from the graph is that consumption has been about 90,500t higher than production so far in 2017. This is an envious position for local producers to be in. One more striking feature that sticks out from the graph above is the undulating curve than both production and consumption has. The Argentinean economy has been through the ringer in recent years and this shows in the ups and downs of the figures.
From the perspective of the three major domestic producers, Loma Negra’s sales revenue rose by 53.9% year-on-year to US$620m in the first nine months of 2017. Its adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by a whopping 73% to US$157m. Cementos Avellaneda, owned by Spain Cementos Mollins and Brazil’s Votorantim, reported similar good news with its overall results boosted by the Argentine market. Its sales revenue in the country rose by 28.3% to Euro130m and its EBITDA rose by 59.5% to Euro32.4m. Although Mollins did make the point that inflation had been particular problem in Argentina, although its impact had been ‘greatly’ outweighed by price rises. LafargeHolcim has had its problems globally so far in 2017 but Argentina hasn’t been one of them. Its operations in the country have been propping up the group’s Latin American results each quarter so far in 2017. Despite being one of its smaller regions by sales revenues, its sales and earnings delivered some of the group’s highest growth in the third quarter of 2017.
In this kind of environment new production capacity can’t be far away. Sure enough Cementos Avellaneda plans to increases the capacity of its San Luís cement grinding plant by 0.7Mt to 1Mt/yr by the second quarter of 2019. US$200m has been earmarked for the project.
So, great news for Argentina and proof that poor markets can turn around. The Brazilian cement association SNIC reckoned in October 2017 that the rate decline of cement sales was slowing, suggesting that the bottom of the downturn was in sight. On the evidence of the current situation in Argentina once the market does revive, South America will be the place to watch.
France/Belgium: French police have searched the Paris offices of LafargeHolcim as part of an on-going investigation into the company’s conduct in Syria. At the same time the offices of Belgium’s Groupe Bruxelles Lambert (GBL) were also searched, according to the Agence France Presse (AFP). Both companies said they were cooperating with the investigations.
A source quoted by AFP said that the investigators are trying to find out if GBL had been aware of Lafarge Syria’s activities in Syria. GBL is a shareholder of LafargeHolcim that held a 9.4% stake at the end of 2016. The investigation as a whole is attempting to determine whether LafargeHolcim’s predecessor company Lafarge Syria paid terrorist groups in Syria and how much managers knew about the situation.