September 2024
2017 for the cement multinationals 07 March 2018
HeidelbergCement’s acquisition of Italcementi really sticks out in a comparison of the major multinational cement producers in 2017. Both its sales revenue and cement sales volumes jumped up by more than 10% year-on-year from 2016 to 2017. It still puts HeidelbergCement behind LafargeHolcim and CRH in revenue terms but the gap is shortening. Although, as we reported at the time of its preliminary results in late February 2018, on a like-for-like basis its sales and volumes only rose by 2.1% and 1.1% respectively.
Graph 1: Sales revenue from multinational cement producers in 2016 and 2017 (Euro billions). Source: Company financial reports.
The European markets may be back on their feet but serious growth came from mergers and acquisitions. Along the same lines, India’s UltraTech Cement is set to reap the reward of its US$2.5bn acquisition of six integrated cement plants and five grinding plants from Jaiprakash Associates in mid-2017. Although as can be seen in graphs 1 and 2 it had been doing fairly well even before this.
Graph 2: Cement sales volumes from multinational cement producers in 2016 and 2017 (Mt). Source: Company financial reports.
We’ve included Ireland’s CRH this year to present the scale of the company. When it says that it is the world’s biggest building materials company, it means it! CRH doesn’t publish its cement sales volumes, which makes it hard to compare it to other cement producers. In part this may be due to the company’s regional-focused structure and its approach to the construction industry. In Global Cement Magazine’s Top 100 Report 2017 – 2018 feature, CRH was placed as the seventh largest cement producer by installed capacity with 50.5Mt/yr. The major story with CRH in recent years has been its steady stream of acquisitions, notably Ash Grove Cement in the US in 2017.
LafargeHolcim may remain the biggest cement producer in the world outside of China but it made an income loss of Euro1.46bn in 2017. At face value its cement sales volumes fell by 10.2% to 210Mt in 2017 from 233Mt in 2016 but this was mainly due to divestments in China, Vietnam and Chile. On a like-for-for-like basis its volumes rose by 3.3%. To this kind of mood music the emphasis on the release of its 2017 results this week was the announcement of a five-year plan to refocus the company. However, reports of overcapacity in Algeria that also emerged this week suggest the group may have its work cut out.
Cemex described 2017 as a ‘challenging year’ as its operating earnings fell due to a lower contribution from the US and South America despite growth in Mexico and Europe. Hurricanes in Florida had a negative impact in the US and the Colombian market suffered from falling production in 2017. UltraTech Cement uses a different financial year to the other companies detailed here, which makes comparisons a little harder. However, its profit after tax fell in the third quarter that ended on 31 December 2017 due to rising costs of petcoke and coal. Undeterred though, its expansion drive continues this week with its continued efforts to try and win the bid for Binani Cement. Vicat, meanwhile, reported falling earnings in part due to the poor market in Egypt. Yet overall its sales and volumes rose in 2017 aided by recovery in France. Finally, Buzzi Unicem rode out the Italian market with its acquisition of Zillo Group delivering a rise in sales and cement volumes.
Wider trends are hard to call given the differing geographical spreads of these cement producers. Europe has been recovering from a decade of stagnation and Asian markets are no longer reliable. South America is mixed with places like Brazil, and now Colombia, underperforming. Yet Argentina is proving one of the fastest growing construction markets at the moment with local plants unable to meet demand. Africa remains profitable and promising as ever but divided between the north and the Sub-Saharan region.
Once the effects from mergers and acquisition activity by the larger cement producers start to fade then the actual situation may become clearer. In the meantime, the effects of the recent cold snap in Europe on the first quarter results for 2018 could be pretty varied. The Financial Times newspaper, for example, quoted one pundit from the Construction Products Association who estimated the industry lost 1% of its annual output to the bad weather in the UK. This may not be great news for any company relying on the European market.
Ireland: CRH has appointed Richard Boucher as a non-executive director.
Boucher, aged 59 years and an Irish citizen, has experience in all aspects of financial services and was the chief executive of Bank of Ireland Group between February 2009 and October 2017. He also held a number of senior management roles within Bank of Ireland, Royal Bank of Scotland and Ulster Bank. He is a past President of the Institute of Banking in Ireland and of the Irish Banking Federation.
He is a consultant for Fairfax Financial Group and acts as its nominee on the Board of Atlas Mara, a company with investments in banks in Africa. He is also a non-executive Director of Eurobank Ergasias, a bank based in Athens, Greece that has operations in Greece and several other European countries. He holds a Bachelor of Arts (Economics) from Trinity College, Dublin and is a Fellow of the Institute of Banking in Ireland.
Denmark: FLSmidth has appointed Mikael Lindholm as Chief Digital Officer (CDO) with effect from 1 May 2018. Lindholm has worked on digitalisation in the global Internet of Things since the mid-2000s, most recently in a position as Vice President, Internet of Things Asia with Telenor. His previous experience includes strategic and operational experience from both the service industry and traditional manufacturing.
US: CarbonCure Technologies has appointed Ted Jones as its Vice President of Sales and Marketing. Previously he worked as the sales and marketing lead with Oldcastle Precast, Contech Engineered Solutions, and The Fort Miller.
Jones succeeds Bill Holden as Vice President of Sales. He will be launching and spearheading a new Industry Advisory Council, which is an advisory board made up of concrete industry leaders. He will continue to sit on CarbonCure’s Board of Directors. Jennifer Wagner, the former Vice President of Marketing, has been promoted to the Executive Vice President of Corporate Development.
Breedon Group sales in 2017 bounce on acquisitions 07 March 2018
UK: Breedon Group has described 2017 as ‘one of the most productive years’ in its history following the full-year contribution from Hope Construction Materials that was acquired in mid-2016. Its sales revenue rose by 43% year-on-year to Euro728m in 2017 from Euro507m in 2016. Its underlying earnings before interest and taxation rose by 35% to Euro90m from Euro66.5m.
“We completed the integration of our largest-ever acquisition, concluded two bolt-on purchases and announced an important transaction with Tarmac that, subject to approval by the competition authorities, will see us streamline our ready-mixed concrete network in exchange for a substantial new reserve of minerals and a strategically valuable asphalt plant. This did not, however, distract us from our operational focus and we once again delivered a solid financial performance,” said executive chairman Peter Tom.
The construction materials group said that construction output continued to grow in 2017, rising by 3% despite a softening of the market during the second and third quarters of 2017. It reported ‘marked’ geographical disparities, with generally stronger demand in England than in Scotland and many regional variances within both countries. Growth was led by increases in residential and infrastructure development.
The group completed a programme of capital investment during the year at its Breedon Cement division. This included buying a fleet of new tractor units and powder tankers, upgrading the pre-heater riser, kiln feed and rail line at the Hope cement plant and a replacement excavator at the limestone quarry.
India: Nuvoco Vistas plans to increase its specialist cement product range by 5 – 10% over the next two years. The cement producer is undergoing cost cutting initiatives and brand transition exercises, according to the Telegraph of India newspaper. Sales volumes of microfibre-based cement are expected to double to 10% of the company’s product mix. On the production side, the company is considering reducing costs by installing captive power plants and waste heat recovery units.
Nirma Group purchased three cement plants and two grinding plants from Lafarge India with a total production capacity of 11Mt/yr in 2016. Its cement business, Nuvoco Vistas, operates six plants in Chhattisgarh, Rajasthan, Jharkhand and Bengal and Haryana.
UltraTech Cement fights rejected bid for Binani Cement 07 March 2018
India: UltraTech Cement is querying the National Company Law Tribunal (NCLT) why its bid for Binani Cement had been rejected. The auction for the bankrupt Binani Cement was won by a consortium consisting of Dalmia Bharat and Bain Capital’s India Resurgent Fund and Piramal Enterprises, according to the Business Standard newspaper. UltraTech Cement is questioning how the bid selection process was conducted.
Although JSW Cement won the first round of bidding, the NCLT decided to ask for more bids. Bidders were then informed that their bids would be assessed using a weighted system that would consider each company’s background, experience and upfront cash to be paid to the secured lenders.
Tata International signs contract with Vissai Cement Group for joint-venture in Vietnam 07 March 2018
Vietnam: Tata International Singapore has signed a memorandum of understanding with Vissai Cement Group to form a joint venture company in to use the port of Vinh. The deal is expected to create a distribution network for coal, according to the Press Trust of India. The company will also be responsible for Vissai Cement’s coal imports. The joint-venture is expected to benefit from the port’s location as a key gateway for trade into and out of Laos.
Lao Cement starts trading on Lao Securities Exchange 07 March 2018
Laos: Lao Cement has started trading on the Lao Securities Exchange. It celebrated its first day of trading on the stock exchange on 2 March 2018, according to the Xinhua news agency. The cement producer is a joint venture between the Chinese and Lao governments.
Vietnam: Xuan Thanh has hired Denmark’s FLSmidth to provide five onsite advisors with the purpose of optimising the production of its cement plant while minimising the production costs. The customer's 12,500t/day cement plant is located in Ha Nam, Vietnam, and is the largest cement plant in South East Asia. FLSmidth has also supplied the equipment for the cement plant since 2017.
"By implementing best practices and data from other cement plants globally, we can assist Xuan Thanh in improving their output while minimising their production costs. In other words we will enhance their productivity. This contract is a continuation of the long-standing partnership between Xuan Thanh and FLSmidth and will optimise the production of high quality cement to the local market," said Per Mejnert Kristensen, Group Executive Vice President, Cement Division of FLSmidth.