As you may have noticed over the years, I can be prone to pessimism when it comes to the outlook for the global cement industry. Over the last six years or so, since the gathering storm clouds formed that eventually broke to give us the acute phase of the Global Financial Crisis of 2007 and 2008, I have regularly written here about the inevitable fall in cement demand, the possibility of the collapse of the Euro and the likelihood of Greece being the first to leave, and various other nightmare scenarios that have yet to come to pass.
As a good scientist though, having postulated a theory, I should then look at the evidence and then revise my theory. It seems that I was (partly) wrong. The fact, is, the Euro has not collapsed, Greece remains in the currency block and the world has not ended.
Indeed, it appears that we have turned a corner. In a boom time, all forward indicators point upwards and in a bust all indicators point down: At the inflection point between boom and bust there are likely to be some indicators that point up and some that point down. To me, it feels like the forward indicators are progressively turning positive (not yet all of them, to be sure, but many). I do not rely on the perfidious pronouncements of politicians for my evidence, but on the usually-reliable accounts and forward looking statements of the cement companies, reported in the pages of this very magazine, Global Cement. These are the results from the front line (sometimes almost literally), and they give valuable pointers to where we have just been and where we are going to, in terms of cement demand.
On page 34 of the December 2014 issue of Global Cement Magazine, Europe-based Holcim reports weaker growth than expected, but growth all the same, driven by the US, India and the Philippines (but with lower sales in Azerbaijan, Italy and Argentina). North America and Europe both reported growth, at least in EBITDA. On page 35 HeidelbergCement reports that 'growth is expected in all areas,' while Buzzi's sales volumes, EBITDA and profits all grew, with capacity utilisation and sales higher in all regions apart from Italy and Poland.
On page 44, Cemex reported sturdy results, with like-for-like EBITDA increasing by 3% in the third quarter of 2014 compared to 2013, due to higher sales volumes in Mexico, the US, the rest of the Americas and in its Asia region operations. Although sales fell in its Northern Europe region, sales increased in its Mediterranean region by 7%. On page 45, Eagle Materials (the only solely-US-operating publicly-quoted cement and building materials company) reports an increase in earnings of 19% in its second quarter 2014 cement results, driven by increased volumes and robust price increases. Caribbean Cement Company, on page 45, reports revenues up around 20%, driven by growth in the cement markets of Trinidad and Jamaica.
In Asia, Kohat Cement (page 48) reports profits up by 11% due to higher prices and slightly increased volumes, while in India, UltraTech's second quarter profit was up 55% due to higher cement demand (but also due to acquisitions). In Malaysia, however, Tasek Corp reported a 7% drop in earnings due to 'stiff competition.' Not all the indicator needles are pointing in the same direction yet.
In Africa and the Middle East, the situation is much more mixed. Although Raysut Cement of Oman has announced that its profits have increased by 8% (page 50), EAPCC of Kenya has posted a full year loss due to increased price competition and overhead costs. In Egypt, Arabian Cement's profit is also down, by 32%, despite the fact that cement sales increased by 17%.
Reviewing the results as a whole, you have to say that it is a pretty encouraging picture. Despite the industrial torpor and political slothfulness of Europe, the continent is slowly putting its house in order by closing old and inefficient plants, by adding more competition to the markets, and by liberalising employment laws to make it easier to hire (and fire) employees. With a large dose of monetary stimulus promised in early 2015 by the ECB, we could start to see cement demand taking off in Continental Europe in 2015. We are surely at the bottom of the boom and bust cycle in Europe, so that even 'basket-case' economies like Greece have started to see impressive growth rates (albeit from a low base). Alas, it seems that Italy (and France?) still have a distance to go before they 'touch bottom.'
The Ebola outbreak in western Africa has thrown that region into turmoil, and HIV/AIDS continues to wreak havoc with communities throughout the continent. On both fronts though, there are glimmers of hope. The Americas shine like a beacon in terms of future promise - Even Argentina has the prospect of better days ahead. Throughout southeast Asia, companies are registering positive results, and are also busy building new capacity, which is a conspicuous sign of optimism for the future.
It is only in China, where results are not transparent and where cement plants continue to be demolished amid over-capacity, that my optimism finally fails me.
