Displaying items by tag: Refractory
UK: Calderys has completed its acquisition of NG Johnson Northern, a refractory installation company based in Ellesmere Port. It aims to retain the brand and expand its Engineering, Design and Supervision activities in the UK market. NG Johnson Northern focuses on incineration, petrochemical and aluminium industries and its clients include Hanson, LafargeHolcim and Quinn Cement.
As mentioned last week, there were a number of big news stories, one of which was the planned merger between RHI and Magnesita. On 10 October 2016 both companies announced that they were combing to form a ‘leading’ refractory company with complementary assets and a completion date penned in for 2017. As Informed’s Mike O’Driscoll presents a good overview of the two companies and the general implications of the merger we will focus on the cement industry aspects of the merger here. It is worth noting here that the new company will be established in the Netherlands but its shares will be listed in London. O’Driscoll reckons that had the UK voted to stay in the European Union the new company would have been based in London.
Comparing like-with-like for RHI and Magnesita is difficult because Magnesita doesn’t publish figures on its refractory sales to the cement industry. However, RHI produced 443,000t of refractory materials in 2015 for its Industrial Division, including the cement and lime industries, and Magnesita produced 151,000t for its Industrial Division at the same time. As can be seen in Graph 1 RHI produces nearly three times as much refractory as Magnesita in this area. Sales volumes for RHI have fallen over the last five years and Magnesita’s sales hit a high in 2013. Total revenue for RHI, across all business lines, was US$1.95bn or about double that of Magnesita.
Graph 1: Refractory sales volumes to industrial divisions for RHI and Magnesita, 2011 – 2016. Sources: RHI and Magnesita financial reports. Note: Figures for Magnesita are calculated from percentages.
RHI reported that 12.6% of its revenue in 2015 came from the cement and lime industries. It pointed out that this sector of its business benefited from the growing construction industry in North America. Elsewhere, it had a tough time in most of its territories, with the exception of Indonesia where its revenue grew due to a major contract won in the lime segment. Over the last five years RHI’s revenue from its cement and lime customers dipped to a low in 2013 before recovering year-on-year since then.
However, the situation has deteriorated during the first half of 2016 with revenues from the cement and lime industries falling by 13% year-on-year. China was blamed as the biggest single factor, with business down by roughly a quarter as a result of the downturn in the construction industry, falling property prices and lower investment activities. One interesting point that RHI made at this time was that, “the globally weak economic situation and regional excess capacities are causing a decrease in repair volume.” Another was the importance the refractory producer placed on Africa and on Nigeria and Algeria in particular. This seems to belie the petrodollar woes Nigeria has experienced recently and the scaling back by Dangote Cement of its international expansion plans.
Magnesita reported that sales volumes for its industrial segments sector, including cement, dropped by 11.7% year-on-year to 133,000t in 2016. It blamed the shortfall on the declining cement industry in Brazil with problems in Venezuela also contributing. In contrast to RHI though it reported growing sales in the Middle East and Africa, notably in Saudi Arabia and Egypt. Sales revenue actually rose by 10.2% to US$145m due to favourable exchange rates on sales outside of Brazil.
In the first half of 2016 the negative trend in Brazil continued for Magnesita with sales volumes falling by 22% in its so-called ‘established’ markets. This was compensated for by Bolivia, Mexico, Argentina and the Middle East, Africa and the Commonwealth of Independent States territories. Sales volumes for its industrial segments sector rose slightly by 1.1% to 75,200t in the first half of 2016. Again, sales revenue grew on the back of exchange rates.
As with mergers between large producers in the cement industry, if global growth is stagnating, then mergers offer an alternative way for refractory companies to compensate. However, LafargeHolcim’s promise of savings and synergies has withered to periodic news bulletins of what assets the group is planning to sell next. One question to pose is whether the merger of RHI and Magnesita will herald a similar drip-drip of assets disposals in coming years or whether it will usher in a new era for the refractory industry. A large part of this will depend on the health of the steel industry, as well as minority markets such as cement.
Austria/Brazil: RHI and Magnesita are to merge to create a new refractory company called RHI Magnesita. RHI’s management board has agreed to sign a share purchase agreement with Magnesita’s controlling shareholders regarding the acquisition of a controlling stake of at least 46%, but no more than 50% plus one share of the total share capital of Magnesita, pending RHI’s supervisory board approval. The purchase price for the 46% stake will be paid in cash amounting to Euro118m and 4.6 million new shares to be issued by RHI Magnesita. The new company will be established in the Netherlands and listed on the London Stock Exchange.
As pat of the agreement, GP Investments (GP) will become a relevant shareholder of RHI Magnesita. The combined company’s corporate governance will consist of on a one-tier board structure while GP will be represented on the board of directors.
The deal is dependent on approvals by the relevant competition authorities, the migration of RHI to the Netherlands, the listing of RHI Magnesita’s shares in the premium segment of the Official List on the Main Market of the London Stock Exchange and RHI’s shareholders not having exceeded statutory withdrawal rights in an amount of more than Euro70m in connection with organisational changes preceding RHI’s migration from Austria. The migration and the preceding organisational changes in Austria require qualified approval by RHI’s shareholders’ meeting. If the deal is terminated for reasons not under the control of Magnesita’s controlling shareholders, an aggregate break fee of up to Euro20m is payable by RHI to Magnesita’s controlling shareholders.
The merger transaction is expected to complete in 2017. Until then, the two companies will remain completely separate and independent. Therefore customers, suppliers, employees and other stakeholders should expect no change in management teams, commercial relationships, supply chains and product offerings during this period.
RHI and Magnesita say that the new refractory company will bring together complementary businesses, both in terms of products and geographical footprint. Magnesita have a presence in South America and the US compared to RHI’s presence in Europe and Asia. The merger is also expected to aid the company’s position against the growing Chinese refractory industry. In addition, Magnesita’s position in dolomite-based products is complementary to RHI’s asset portfolio, which traditionally has a strong focus and an excellent market reputation for high-quality magnesite products.
Synergies from the merger are expected to deliver at least Euro36m in earnings before tax (EBIT) by 2020. However, if RHI Magnesita’s stake in Magnesita significantly exceed 46%, RHI expects substantially higher synergies of approximately Euro72m, especially in the areas of enhanced production efficiency and cost benefits in research and development, marketing and administrative functions. In addition, capital expenditure synergies are expected to amount to be Euro2 – 7m/yr and aggregate working capital savings of Euro40m are expected in the coming years.
India: The refractories division of Dalmia Bharat Group has signed a memorandum of understanding for a joint venture with Seven Refractories to develop and supply a wide range of monolithic refractories for the Indian market.
“We are committed to bringing the most advanced solutions to our customers across the iron, steel and cement industries. This partnership will combine the strengths of both companies to provide customised solutions with the latest monolithic refractory technology combined with quicker deliveries and localised services,” said Sameer Nagpal, CEO-Refractories, Dalmia Bharat Group.
Brazil: Magnesita’s sales revenue from its Industrial Minerals business segment, which includes sales to cement producers, has fallen by 8.2% to US$74.1m from US$80.6m. However, sales volumes rose slightly to 75,200t from 74,400t. Declining sales volumes in Brazil were offset by growing volumes elsewhere in Latin America and in the Middle East, Africa and northern Asia. In addition, negative currency exchange effects hit sales revenue. The company’s Industrial Minerals business segment serves the cement, nonferrous and glass industries
Magnesita’s total refractory sales volumes fell by 6.2% year-on-year to 0.46Mt in the first half of 2016 from 0.49Mt in the same period of 2015. Its net operating revenue fell by 9.4% to US$467m from US$537m. Its earnings before interest, tax, depreciation and amortisation (EBITDA) fell by 2% to US$77.2m from US$78.8m. The refractories producer blamed the result on steel production declines in South America and Europe and on cement production declines in Brazil.
“This decrease in volumes is partially due to our strategic decision to focus only on markets with adequate and sustainable margins. However, the outlook for the second half seems constructive in some markets, especially in the US, our largest market,” said Magnesita’s CEO, Octavio Lopes. He added that the company’s geographic diversification has never been greater and that the company is gradually reducing its exposure to any ‘specific’ market.
India: Ingo Gruber has been appointed the Executive Director, Manufacturing and Technology, of Dalmia Bharat Group’s refractories business. Gruber will be responsible for four manufacturing plants in India, one in China and the India Technology Centre.
Gruber joins Dalmia Bharat after spending 25 years in international refractory markets with experience in manufacturing, technology and process improvement. He also brings knowledge in manufacturing and technology integration strategies during mergers and acquisitions. Previously, Gruber held various leadership roles at RHI and its group companies across Europe.
The Refractory business of Dalmia Bharat Group comprises two specialty companies: OCL Refractories and Dalmia Refractories. Established in 1954 as a unit of OCL India, OCL Refractories is a leading refractory supplier to domestic and international steel plants. Set up in 1959, Dalmia Refractories, previously Shri Nataraj Ceramics and Chemical Industries, specialises in high alumina refractory bricks for the Indian cement industry.
Vietnam: The Vietnam National Cement Association (VNCA) has proposed that the Ministries of Planning and Investment, Finance, and Construction reduce import duties on aluminium cement to improve the competiveness of local refractory producers. At present the country charges a tax of 32 – 37% on imports of the input material used to manufacture refractory concrete and refractory bricks. However, imports of refractory bricks are only charged 6%, according to the Viet Nam News newspaper.
The VNCA suggested the government cut duties on aluminium cement imports to support local firms and reduce the country’s dependence on foreign partners, such as China. Vietnam imports refractory concrete and refractory bricks from China, India, South Korea and Germany.
US: HarbisonWalker International (HWI) has increased its inventory levels of monolithic refractory materials in response to customer demand. The North American supplier refractory products and services says it is now supplying its widest ever range of materials. The company previously announced a restructuring and rebranding initiative in May 2016 to increase its competitiveness. This included reorganising its distribution centres as Global Sourcing Centres to hasten delivery and product availability.
HWI runs an international network in North America, Europe and Asia, with 19 manufacturing plants, 30 global sourcing centres and technology facilities in both the US and China. Its cement refractory products include Versagun, Versaflow, Shot-Tech, Kruzite-70, Kala, Magnel RS, Magnel, Thor, Magnel Ultra and Magnel Ultra AF.
Brazil: Magnesita’s net operating revenue has dropped by 17% year-on-year to US$66.9m for the first quarter of 2016 from US$80.2m in the same period in 2015. The company’s sales volumes of refractory materials fell by 8.7% to 232,000t from 254,000t. Earnings before interest, taxation, depreciation and amortisation (EBITDA) fell by 12.8% to US$11.4m from US$13.1m. The company blamed the falling revenue on falling steel production in South America and Western Europe and on a poor construction market in Brazil negatively affecting its cement clients.
"2016 began with interesting prospects for Magnesita. While the world is mired with excess steel production, uncertainties surrounding the Chinese economy and substantial political turmoil in Brazil, we have begun to see green shoots coming out of the US (our most relevant market) and the first results of the array of self-help initiatives Magnesita has overtaken in the last few years,” said Octavio Pereira Lopes, Magnesita’s chief executive officer. He added that the quarterly drop in steel production in Western Europe was driven by a 39% drop in the UK due to capacity shutdown.
Germany: The 14th REFRA-Kolloquium will take place on 31 May to 3 June 2016, at the Estrel Hotel & Convention Centre in Berlin. Industry experts and specialists will gather for a series of presentations on technical developments in the cement and refractory industries. The event will also include a panel discussion and a related exhibition.
The REFRA-Kolloquium events are organised by Refratechnik, a manufacturer of refractory materials for the cement industry. In 2012 almost 800 participants from 70 countries attended the REFRA-Kolloquium.