September 2024
Portland Cement Association downgrades US consumption forecast due to weather and infrastructure budget 30 October 2017
US: The Portland Cement Association (PCA) has downgraded its forecast for cement consumption in 2017 and 2018 due to bad weather and lower anticipated budgets for the public construction sector. The association now expects cement consumption to rise by 2.6% in 2017 and 2.8% in 2018. It previously anticipated a 3.5% growth rate for both years in a statement made in May 2017.
“Once infrastructure and tax reform initiatives take hold and affect economic and construction activity, then we can expect growth in cement consumption to accelerate to higher levels,” said Ed Sullivan, PCA senior vice president and chief economist.
Sullivan noted the updated forecast assumes tax reform and a US$250bn national infrastructure program spearheaded by the Trump Administration and the House of Congress. However these initiatives are unlikely to begin until mid-2019. He added that the dual fiscal stimuli would accelerate GDP growth, construction spending and cement consumption. Lowering unemployment rates are also expected to add to inflationary pressures alongside these fiscal programs.
The PCA said that rising inflation would necessitate a stronger Federal Reserve reaction and is expected to result in a rapid and perhaps larger-than-expected increase in interest rates. This, in turn, could cause a slowdown in the construction industry leading to a potential decline in activity from the end of 2021.
Carthage Cement strike cancelled 30 October 2017
Tunisia: A planned strike by workers at Carthage Cement for late October to early November 2017 has been cancelled. The decision to call off the industrial action follows a meeting between Finance Minister Ridha Chalghoum and UGTT Secretary General, Noureddine Taboubi, according to African Manager. Further meetings between the management of the cement producer and the unions have been scheduled.
Switzerland: LafargeHolcim has grown its sales and earnings on a like-for-like basis so far in 2017. Its net sales rose by 4.3% on a like-for-like basis to Euro16.7bn in the first nine months of 2017 from Euro17.5bn in the same period in 2016. Its operating earnings before interest, taxation, depreciation and amortisation (EBITDA) adjusted rose by 9.2% to Euro3.69bn. Cement sales volumes fell to 156Mt from 177Mt although this was reported as a rise of 1.8% on a like-for-like basis.
The cement producer attributed its gains to positive contributions from markets in Latin America, North America and Europe. However, market conditions were reported to be challenging in Asia Pacific and Middle East Africa where it said that actions are being taken to address weakness in key countries.
“While the company delivered solid quarterly results, they do not reflect our full potential. As the market leader, we will hold ourselves to a higher standard than anyone else in our sector,” said Jan Jenisch, group chief executive officer (CEO) of LafargeHolcim. “Today we have reset expectations for the group’s outlook to a level that reflects the current business dynamics. While I am reviewing the business, I have an immediate focus on simplification, cost discipline and performance management.”
LafargeHolcim in talks with PPC 27 October 2017
South Africa/Switzerland: LafargeHolcim says it is in talks with the board of directors of Pretoria Portland Cement (PPC) regarding a possible transaction in Africa. It added that no agreement with PPC has yet been reached and no assurance could be given at this stage that a transaction will materialise.
Canada’s Fairfax Financial Holdings with AfriSam made an offer for PPC in early September 2017. However, PPC said that the offer was ‘undervalued.’ Nigerian company Dangote Cement has also said that it is interested in buying PPC for the ‘right’ price.
Cemex grows profit in third quarter of 2017 26 October 2017
Mexico: Cemex has increased its profit in the third quarter of 2017 due to growing sales and low costs. Its net profit rose by 1% year-on-year to US$289m in the third quarter of 2017 from US$286m in the same period in 2016, according to Dow Jones. Sales increased by 2% to U$3.5bn due to higher cement sales volumes in several markets and higher prices in Mexico and the US.
The group’s overall cement sales volumes remained unchanged at 17.5Mt. Sales by volume fell in Mexico due to earthquakes, bad weather and lower government spending on infrastructure. Cement sales volumes in the US rose on a like-for-like basis.
Update on Saudi Arabia 25 October 2017
Arabian Cement Company had some choice words for a contractor this week when it blamed it in a bourse statement for a delay for a new mill at its Rabigh plant. The project has been pushed back to the third quarter of 2018 from the fourth quarter of 2017. The second phase of the plan, to build a new clinker production line, has also been placed under review.
The contractor may have given Arabian Cement an excuse to put a question mark over its new line, but the market reality has been stark. Also this week, Saudi Cement Company reported that its net profit had fallen by 51.5% year-on-year, to US$92.3m in the first nine months of 2017 compared to US$190.4m in the previous period. It blamed falling sales.
Graph 1: Cement sales (Mt) by quarter in Saudi Arabia, 2015 to September 2017. Source: Yamama Cement.
As Graph 1 shows, cement sales volumes in Saudi Arabia have been dropping since 2015. Sales fell by 5.3% year-on-year to 10.5Mt in the third quarter of 2017 from 10.9Mt in the same period in 2016. Year to date figures show a worse trend with a drop of 17.4% to 35.2Mt in the first nine months of 2017 compared to 42.7Mt in the same period in 2016. This decline has accelerated compared to a decrease of 5.4% from 45.1Mt in 2015 for the first three quarters.
Analyst Al Rajhi Capital provided some context to this situation in its September 2017 report on the August 2017 sales figures. It reported particularly steep declines in cement sales volumes of over 35% for Northern Cement, Najran cement and Hail Cement for the first eight months of the year. However, some producers - including City, Qassim, Yanbu and Al Safwa - did manage modest gains. Overall though the financial services company did not expect any pickup for the second half of 2017.
Last time this column covered the kingdom’s cement industry in early 2016 it asked when the government was going to relieve the export ban. Cement production was high, inventory was pilling up and infrastructure spending was falling. The ban was subsequently lifted but commentators worried that it would be too restrictive to have much effect due to tariffs and volume restrictions. A steady stream of cement producers has applied for export licences since then, but exports have not alleviated the situation. With inventory remaining high for the producers, current export policy failing to help and the local construction market subdued, it is unlikely that anything is going to change soon for the local cement industry. In fact it may even get worse if the government decides to revise its energy price policy later in 2017 or in early 2018, adding to the input cost burden of the producers.
Talk of market consolidation in this kind of market environment seems inevitable. This is exactly what happened earlier in the month when Jihad Al Rashid, the head of the Saudi National Committee for Cement Companies, said to local press that the local market only needed four large cement producers rather than the 17 companies it has at present. The question at this stage seems to be when, rather than if, will this process start.
Nigeria: Onne Van der Weijde, the chief executive officer (CEO) of Dangote Cement, has decided to step down. He will leave the post at the end of 2017 to return to his home country of the Netherlands. He has served three years in the role. Following the departure he will be appointed as a non-executive director with effect from 1 January 2018.
Until a successor is appointed, JO Makoju, Honorary Adviser to the chairman and former managing director of Lafarge WAPCO will be the acting managing director and CEO of Dangote Cement.
China: Huang Ting has been appointed as the chief financial officer (CFO) of China Resources Cement. He succeeds Lau Chung Kwok Robert who departed from the post on 20 October 2017. Lau will remain as an executive director of the company.
Huang, aged 48 years, joined the group in July 2003 and has held various management positions with the company, including financial controller since May 2012, general manager of the finance department in 2011 and 2012 and Deputy General Manager (Guangdong) from 2008 to 2011. He graduated from Xiamen University with a bachelors degree in economics in 1992.
YTL Group founder Yeoh Tiong Lay dies 25 October 2017
Malaysia: Yeoh Tiong Lay, the founder of YTL Group, has died at the age of 88. Lay started with a construction company in Kuala Selangor in 1955 and the built the company into a conglomerate including cement production, power generation, water and sewerage services, communications, construction contracting, property development and investment, hotel development management and more. He was appointed to the board of directors of YTL Corp in mid-1984 and was appointed as the executive chairman in 1985.
Eagle Materials’ sales revenue rises by 18% to US$742m in six months to September 2017 25 October 2017
US: Eagle Materials’ sales revenue rose by 18% year-on-year to US$742m in the six months to September 2017 from US$630m in the same period of 2016. The revenue from its wholly owned cement business rose by 24% to US$311m. Overall cement sales volumes rose by 14% to 3.08Mt from 2.7Mt. The cement and gypsum wallboard producer benefitted from the acquisition of a cement plant in Fairborn, Ohio as well as increased net sales prices across most of its businesses.
"Eagle Materials' quarterly results reflect hurricane and other weather-related operational and demand interruptions. We were more fortunate than many, as our employees remained safe and our operations incurred no damage. Eagle is poised to serve our customers' additional needs as they meet the challenges of rebuilding over the coming quarters," said Dave Powers, president and chief executive officer (CEO) of Eagle Materials.