Half-year results from some of the major global cement producers are starting to present a detour from the usual European doom-and-gloom and optimism for the BRIC economies (Brazil, Russia, India, China and South Africa) of recent years.
Yes, Europe is dragging balance sheets down (particularly certain countries), but some indicators are starting to stabilise following a good second quarter. Very possibly the cost cutting programmes of the multinational cement producers are starting to kick in. Alternatively, perhaps these cement markets have finally bottomed out.
Lafarge has suffered a bad six months with cement sales down by 6%. However, its sales decline in Western Europe has slowed down with the worst news now coming from Central & Eastern Europe. Cemex has reported a better second quarter in 2013 with overall sales up by 4%. It too can show softened declines in its European territories. Italcementi and its subsidiary Ciments Français both saw revenues falling in the half year but either at a reduced rate or with a slowdown in the rate that earnings before interest, taxes, depreciation and amortisation (EBITDA) are declining.
Only HeidelbergCement's results have resisted any direct signs of an improvement in Europe. Overall revenue has remained stable for the half year with its profit up year-on-year. In Europe its revenue reduction has worsened to 4.7% for the half year. However it did observe a 'significant' improvement in cement sales in the UK.
Meanwhile, one of the cement industry's more reliable markets in recent years – India – is showing signs for concern.
As our news roundup this week reports, the country's largest standalone cement producer, UltraTech, had its profits drop year-on-year by 13.5% to US$111m for the most recent quarter and its net sales actually dropped slightly. Holcim has also been active in India with the announcement that it is simplifying its corporate structure to cut costs. In addition Lafarge reported that its market growth in India was 'subdued', considerably down from the 24% growth in cement sales seen in that country in the first half of 2012.
The news from UltraTech and Lafarge suggest that the rate of growth of the Indian cement industry is slowing. The unanswered question from Holcim's activity in India is whether they are doing it to counteract European losses or to counteract a loss of profitability in India.
Holcim's half-year results will make interesting reading when they are released in mid-August 2013 and may help to decide whether the worst is over in Europe.
