We said to expect more consolidation in Italy. Well, today it happened. Last time Global Cement Weekly covered the country, in June 2017, it reported upon the Buzzi Unicem deal to buy Cementizillo. Today, HeidelbergCement announced that it is going to buy Cementir Italia from Cementir Holding for Euro315m.
Our first reaction is that the deal seems cheap. The agreement covers five integrated cement plants and two cement grinding plants with a total capacity of 5.5Mt/yr, as well as the network of terminals and concrete plants. HeidelbergCement is buying all of this for Euro57/t. This suggests a downward trend given that Buzzi Unicem paid Euro80/t for the Cementizillo units in mid-2017. Although, Cementir only paid Euro38/t when it purchased Sacci in mid-2016.
Cementir’s acquisition of Compagnie des Ciments Belges (CCB) boosted its sales revenue, volume and operating profit in 2016 and in the first half of 2017. However these figures suffered on a like-for-like basis due to falling revenue in Turkey and Malaysia. Overall revenue rose in Italy for the company in 2016 due to a growing ready mix concrete business. However, with this removed, its sales revenue would have fallen by 14% year-on-year due to a 13.5% decrease in the sales volumes of cement.
Cementir Holding chief executive officer (CEO) Francesco Caltagirone has framed the sale of Cementir Italia in terms of improved financial leverage. He’s placed it at close to 0.5x by the end of 2018. This, he says, will allow the group to “…take the opportunities arising in the future, as it has happened during the last twelve months.” By this he likely means the purchase of CCB. Given the low cost for what Cementir picked up the bankrupt Sacci, it makes one wonder whether their plan all along was to leave Italy and they just happened to pick up a bargain along the way.
Meanwhile, HeidelbergCement has framed its acquisition in terms of preparing its presence in the Italian market for the future when the recovery kicks in. The usual talk about synergies is also there and Italian workers for both Italcementi and Cementir Italia will be wondering what this means for their jobs. Given that the group’s overall sales have struggled to grow so far in 2017, the company may be telling the truth when it says it’s banking on the medium to long term in Italy. After all, in its half-year report for 2017, it described the Italian economy as subdued and reported cement sales volumes as ‘stable.’
Once the deal completes, Cementir Holding will be an Italian-based cement company without any production facilities in Italy. Unless the group is planning to re-enter its home market at a later date, it does suggest a certain lack of confidence at home. Let’s see if HeidelbergCement has the nerve to stick it out.
