Displaying items by tag: corporate
Argos USA to go public
08 December 2021Cementos Argos announced this week that it is starting the process for an initial public offering (IPO) for its US business. It said that this had followed several months of consideration by its board of directors. Getting listed on the New York Stock Exchange is expected to help the company ‘optimise’ its capital structure and promote growth, due in part to the recent approval of the US$1Tn Infrastructure Bill in the US and a general positive cycle expected for the local construction materials sector over the next decade.
Argos’ decision to go public in the US comes hot on the heels of several recent attempts in Colombia to buy stakes in two of the major shareholders of Grupo Argos, the parent company of Cementos Argos and Argos USA. First, Grupo Gilinski tried to buy a majority stake in Grupo Nutresa in early November 2021. Then, at the end of November 2021, Grupo Gilinski put in an offer for a large minority share, up to 32%, of Grupo SURA.
Argos, Nutresa and SURA are all part of a highly interconnected group of companies known as the Grupo Empresarial Antioqueño (GEA), which each own stakes in each other. In part this structure helps to prevent hostile takeover attempts. However, Grupo Gilinski appears to be trying to challenge this, in the eyes of some market observers. Grupo Argos is the next obvious target for such an attempt after Nutresa and SURA. In response Grupo Argos has said that it won’t take part in Grupo Gilinski’s public acquisition offer to buy shares in Nutresa (it owns around 10% itself). Instead it has accelerated its plans for Argos USA and also wants to consolidate its interests in road and airport concessions, energy and real estate into a single entity, also to be listed in New York. All of this can be seen as action intended to make any further moves by Grupo Gilinski on GEA harder. Corporate tussles between Grupo Gilinski and GEA also hark back to a long-running legal dispute from the late 1990s over the formation of Bancolombia.
It is reasonable for the US subsidiary of Cementos Argos to want to raise funds from an IPO. The business has gradually been expanding over the last 15 years or so. First it acquired ready-mix concrete operations in the southern US from 2005. Then it purchased two integrated cement plants from Lafarge in 2011, at Roberta in Alabama and Harleyville in South Carolina respectively. This was followed by the integrated Newberry plant in Florida from Vulcan Materials in 2014, along with two grinding units in Florida. Finally, it picked up the integrated Martinsburg plant in West Virginia from HeidelbergCement in 2016. More recently it has been divesting some of its concrete plants in the US. At present Argos USA is the ninth largest cement producer in the country by cement production capacity.
Its cement sales volumes have grown by 4.5% year-on-year to 4.6Mt in the first nine months of 2021 and earnings before interest, taxation, depreciation and amortisation (EBIDA) rose by 25% to US$239m although sales revenue dipped very slightly to US$1.09bn. Ready-mixed concrete sales volumes have also fallen, by 12% to 3.98Mm3. The growth has been attributed to both residential and commercial markets and the Infrastructure Bill is expected to keep demand brisk for the next few years. Looking at the wider picture, cement generated about 64% of Grupo Argos’ revenue in 2020, its biggest share after energy generation and a concessions business. A third of Cementos Argos’ revenue so far in 2021 came from the US.
It’s fascinating to glimpse what may be some of the inner corporate workings of Grupo Argos and the various things it has to consider for its US cement business. The US subsidiary is clearly a major earner for it with a buoyant future. The Portland Cement Association (PCA) was forecasting cement consumption growth of nearly 8% in 2021 and 2% in 2022 in its summer summary and that was before the infrastructure bill made it into law. Further expansion in the US by Argos is to be expected and the planned IPO underlines this. Meanwhile whether this and other actions are enough to stymie Grupo Gilinski remain to be seen.
Cementos Argos to launch US initial public offering
07 December 2021US: Cementos Argos plans to begin trading publically in mid-late 2022 with the launch of an initial public offering (IPO) on the New York Stock Exchange.
The company said “The listing in the US will contribute to the purpose of fully capturing the business value of the company, optimising the capital structure and obtaining the necessary resources to continue executing the growth strategy that the company plans to achieve in that country as a result of the recent approval of the Bipartisan Infrastructure Law for US$1tn and the positive cycle expected for the construction materials industry in the residential, commercial and civil works segments during the next 10 years.”
Saurashtra Cement and Gujarat Sidhee Cement announce merger
01 December 2021India: Saurashtra Cement and Gujarat Sidhee Cement have agreed to merge into a single entity. Their respective boards of directors approved the plans on 30 December 2021.
Update on Holcim, November 2021
24 November 2021Holcim’s investors’ event last week confirmed the changes the company has been making to its sales mix. At its Capital Markets Day it revealed its commitment to expand the net sales of its Solutions & Products division to 30% of the group total by 2025. This division covers products such as roofing, mortar, precast concrete and asphalt. At the same time it is reducing the proportion of sales from its cement division. Graph 1, below, from a presentation given by chief executive officer Jans Jenisch, hints at what group may be aiming for: roughly a third of its sales from cement; a third from aggregates and ready mixed concrete; and a third from the Solutions & Products division in 2025.
Graph 1: Forecast growth of sales by Holcim’s Solutions & Products division to 2025. Source: Holcim Capital Markets Day 2021 presentations on website.
To give readers an idea of the scale of change in Holcim’s cement business since the merger with Lafarge in 2015, just look at the figures. In 2015 LafargeHolcim sold 256Mt of cement and it had a cement production capacity of 374Mt/yr. In 2020 it sold 190Mt of cement and it had a cement production capacity of 288Mt/yr. However, the ratio of sales from cement has remained consistent at just below 60%.
This all changed in January 2021 when Holcim announced it was buying roofing and building envelope producer Firestone Building Products for US$3.4bn. Instead of trimming down the business to make synergistic changes as it had been for the previous five years the group significantly changed its sales mix. As noted in ‘2021 in Cement’ in the December 2021 issue of Global Cement Magazine, Holcim remains the world’s largest non-Chinese cement producer. Yet its acquisitions in 2021 have consisted of ready-mixed concrete and aggregate companies in mature markets, and Firestone. Its divestments have been cement subsidiaries. Since 2019, and including the agreed Brazilian sale, planned to complete in 2022, the group has generated US$4.1bn in these divestments. Almost as if to reinforce this change of direction the group also switched its name to Holcim in May 2021.
Aside from the focus on expanding the scope of the Solutions & Products division over the next few years, the group said at its recent investors’ event that it wants to lead in sustainability and innovation. It also reminded investors that growth remains in building materials markets. Once Jenisch had established the potential the construction market has in the coming years it was all about so-called ‘green’ growth. On the sustainability side this includes promoting the group’s Science Based Targets initiative net-zero targets by 2050, pushing sales of its low-carbon concrete products and working on increasing the uptake of construction and demolition waste in Europe. The group has a target of reaching 25% or higher for sales of its ECOPact ready-mixed concrete product by 2025. Holcim reported Scope 1 CEM specific CO2 net emissions of 555kgCO2/t in 2020 and it has target of 475kgCO2/t by 2030. This is broadly in line with its peers. Cemex has also committed to 475kgCO2/t or lower and HeidelbergCement is currently aiming for 500kgCO2/t or lower by 2030.
Simultaneously promoting sustainability and growth in products that release CO2 during their manufacture is quite the balancing act for all cement producers. The way Holcim appears to be squaring this particular circle is by heading elsewhere. Back in January 2021 we asked whether Holcim would leave it with the Firestone acquisition or go further. This question has now been answered with Holcim’s intent to increase the share of its Solutions & Products to 30% by 2025. Other large cement producers don’t seem to be diversifying their sales mix at the same speed but similar strategic thinking along supply chains can be seen from the proposed buyer of LafargeHolcim Brazil, Companhia Siderúrgica Nacional (CSN) Cimentos. CSN is a steel manufacturer and buying cement assets gives it somewhere to use its slag. Fittingly, Holcim’s investors’ day ended with a night out at a museum holding an exhibition on the history of concrete. For now at least concrete looks set to remain a key part of the business.
Vicat agrees Euro250m financial agreement
24 November 2021France/US: Vicat Group has signed a Euro250m financing agreement taking the form of a private placement with US investors. The first tranche of the agreement covers Euro100m, with a maturity of 10 years, at a fixed rate of 1.27%. The second tranche is for Euro150m, with a maturity of 15 years, at a fixed rate of 1.57%. The group says it will use the funding to strengthen the liquidity of its balance sheet, extend the overall maturity of its debt and reduce its average debt ratio.
Holcim commits to 40% sustainable financing by 2024
10 November 2021Switzerland: Holcim says it wants to reach at least 40% of sustainable financing by 2024. It intends to put climate action, water preservation and safety at the heart of its strategy to do this. The company has linked this commitment with the completion of two new sustainability-linked financing transactions worth above Euro2.8bn. It has also joined the United Nations Global Compact (UNGC) Chief Financial Officers (CFO) Taskforce alongside 60 companies representing a combined US$1.7Tn in market capitalisation. The UNGC CFO Taskforce aligns members’ finance strategies with the United Nations Sustainable Development Goals (SDG).
Holcim’s CFO Géraldine Picaud said, “Sustainability is at the core of what we do. That's why we set ourselves some of the most ambitious goals in our industry. Walking the talk, we are putting climate, water and safety at the heart of our financing strategy. To make a bigger impact, I am delighted to be a member of the UNGC CFO Taskforce to move this agenda forward with my peers.”
In August 2021, Holcim refinanced a Euro3bn syndicated credit line linking it to climate and safety in line with the UN SDGs. The cost of the credit facility will depend on the company’s achievement of its annual targets in these areas. In September 2021, Holcim placed a new 10-year US$100m sustainability-linked bond, based on its 2030 CO2 reduction target. This issue represents its first private placement of a US Dollar medium-term note linked to climate action. The investor will be entitled to a higher coupon should the company not meet its climate objective. These actions follow the company’s Euro850m sustainability-linked bond issued in November 2020.
Brazil: Votorantim Energia and Canada-based CPP Investments have announced the consolidation of their Brazilian energy assets in a new jointly owned renewable energy platform called VTRM. The new company's assets will reach 3.3GW in capacity by October 2022, consisting of 2.3GW in hydroelectric power and 1.0GW in wind power. Its planned projects, including hydroelectric, solar and hybrid power plants, will increase its capacity by 58% to 5.2GW.Its existing assets sold 2.6GW of electricity in 2020. The partners said that the new company will also be well-positioned for future growth, including the acquisition of operational assets and those in planning or under construction. CPP Investment will inject and additional US$269m into the venture following the conclusion of the deal.
As part of the restructuring, Votorantim Energia will cease to manage Votorantim's cement subsidiary Votorantim Cimentos' dedicated energy assets. The cement producer will then incorporate these into its own operations. This will enable Votorantim Energia to focus on energy generation for sale.
Group president João Schmidt said that the consolidation reflects the major role that energy business will play in the company's future. He said "Globally, there is a growing urgency around renewable energy and the energy transition. Alongside a partner like CPP Investments, which has shared our long-term views on energy since 2017, we are ready to accelerate our role in the sector." He added "Through the assets consolidation into a single platform, Votorantim and CPP Investments will share in a new cycle of growth and value generation together."
Ciments Calcia to relocate headquarters in early 2022
01 October 2021France: Ciments Calcia says that it will move into its new headquarters in La Défense, Hauts-de-Seine department, in early 2022. The Les Echos newspaper has reported that the Covid-19 pandemic previously delayed the move, which the company announced in late 2019. It will leave ‘part of its services’ at its existing Guerville, Yvelines department. Some staff will work at the new headquarters ‘two or three days a week’ due to the benefits of remote working.
Carbon Direct buys 7% stake in Calix for US$17.7m
15 September 2021Australia: US-based Carbon Direct has bought a 7% stake in Calix. Reuters News has reported the value of the stake as US$17.7m. Reuters News has reported that Calix plans to use the proceeds to scale up its carbon capture and storage (CCS) technology, as demonstrated at the LEILAC and LEILAC 2 installations at Lixhe, Belgium, and Hanover, Germany.
Calix chief executive officer Phil Hodgson said "As the world puts emissions trading schemes in place, CCS does start to look like a multibillion dollar addressable market.”
Cemex launches sustainability-linked financing framework
08 September 2021Mexico: Cemex has launched a sustainability-linked financing framework. It says that it is the ‘most comprehensive’ such framework in the building materials sector. The framework further aligns Cemex’s corporate sustainability commitments to its financing strategy, as part of its ‘Future in Action’ program. It establishes Cemex’s guiding principles when issuing new sustainability-linked financing instruments, including public bonds, private placements, loans, derivatives, working capital solutions and other financing instruments. Sustainalytics, an independent company that specialises in providing environmental, social and corporate governance research, ratings and data to institutional investors and companies, validated the framework’s alignment with the Sustainability-Linked Bond Principles, the International Capital Market Association’s Climate Transition Finance Handbook and the Loan Market Association’s Sustainability-Linked Loan Principles.
“Climate change is one of the biggest challenges of our time, and we will continue to address it as a fundamental component of our business strategy,” said Maher Al-Haffar, Cemex's chief financial officer. “Cemex is committed to increasing the role sustainable finance plays in its capital structure by potentially linking the cost of financial instruments to the achievement of targets, directly aligning our corporate finance strategy to sustainability commitments and further contributing to a low-carbon future.”
Cemex has included three key performance indicators in the framework: net CO2 emissions per tonne of cementitious product, clean electricity consumption and alternative fuels rate. All of them were qualified by Sustainalytics and deemed aligned with the company’s climate action strategy. Cemex currently has a 2030 target of reaching below 475kg/t of CO2 for cementitious products.