September 2024
Adelaide Brighton warns of lower profit in 2016 31 August 2016
Australia: Adelaide Brighton has said its annual net profit is likely to fall in 2016 compared to 2015, mainly on the back of lower income from property deals. However, its management has offered an otherwise bullish outlook, with price rises looming for several key products.
Adelaide Brighton said it expects net profit for 2016 to be US$143-150m. The top end of the range would represent a 3.8% decline year-on-year. It reported that annual sales volumes of cement and clinker were likely to be below 2015 levels, but volumes of premixed concrete, aggregates and concrete products would be significantly higher than a year earlier.
For the first half of 2016, Adelaide Brighton reported a net profit of US$57.8m, a 6.7% decrease compared to the same period of 2015. After stripping out the impact of property transactions, the company's earnings were 7.8% higher year-on-year.
Can China’s cement companies merge themselves into profit? 30 August 2016
Check out this graph of Chinese cement prices from September 2015. An author at Business Insider attributes it to Larry Hu, the Chief China Economist for Macquarie. It pretty much sums up the mood analysts have at the moment regarding the Chinese cement industry.
Figure 1: China cement prices, 2012 – 2015. Source: CEIC, Bloomberg, Macquarie Research September 2015.
The recent announcement by the Assets Supervision and Administration Commission regarding the merger of China National Building Materials Group Corporation (CNBM) and China National Materials Group Corporation (Sinoma) comes hot on the heels of a series of poor half-year financial returns from China’s major cement producers. Attempts to tackle overcapacity in its local cement industry have been underway for a few years now. Actions taken include demolishing outmoded capacity, merging companies and expanding overseas. However as the construction markets have cooled in the country the scope of what the cement industry is facing has become clear, as revenues and profits have tumbled.
Now that the first half cement sales volume data has become available from the National Bureau of Statistics of China (NBSC) the response of the cement industry to its predicament has emerged. As can be seen in Figure 2 there has been a rough trend of sales decline throughout 2014 and 2015. The first half of 2016 has started to buck this trend as sales volumes have risen year-on-year for both quarters.
Figure 2 – Chinese cement production by quarter, 2014 – 2016. Source: National Bureau of Statistics of China.
Sales revenues have dropped for most of the major companies that have publicly released their results for the first half of the year. The exception is Taiwan Cement, which makes a large proportion of its sales revenue outside of China (People’s Republic of China). Its sales revenue in China barely rose year-on-year in the first half of 2016. However, the cement sales volumes for all these companies have started to show what is happening. They have risen for most of the producers examined. Essentially, each of these producers is producing more cement but making less money. As Digital Cement puts it, the industry is in a 'low-profit position.' Increased market competition and endemic industry overcapacity are causing this.
Mergers and acquisitions have been the big story for the European multinational producers following the economic crash in 2007. Returns from low growth markets have been substituted for efficiencies of scale, knowledge sharing and greater international reach. Lafarge and Holcim merged in 2015 and HeidelbergCement is due to complete its acquisition of Italcementi later this year. However, as LafargeHolcim's disappointing financial returns and its continued slew of divestments show so far, the merger has not worked as well as may have been hoped… yet.
Whether China's version of this works with its large state owned enterprises is uncertain. Mergers are meant to cut out inefficiencies through economies of scale. Yet the question remains: can even larger Chinese cement producers do this when they are state controlled and harangued by pressures outside the normal market, particularly when local regions try to preserve their industries. The last such big deal, between Anhui Conch and China Resources Cement, fell apart in July 2016. The plans for CNBM and Sinoma may fare better but if the price of cement keeps falling then the market may have other ideas.
For more information see the China country report in the September 2016 issue of Global Cement Magazine
Chile: AES Gener is exploring options to sell by-products from its Guacolda coal-fired power station to cement producers. The power-generation company has asked for permission to do so and has approached Polpaico, owned by Holcim, and BSA, owned by Hurtado Vicuna group, according to the Diario Financiero newspaper. Guacolda produces around 40,000t/yr of synthetic gypsum and 60,000t/yr of Ash. AES Gener is already selling 30,000t/yr or half of the ash generated at its Ventanas power plant, to Melón. The company also has agreements in place with a number of universities to explore the use of these materials in concrete, cement, agriculture and mining activities.
Fall in Sinoma's sales revenue lead by engineering division 30 August 2016
China: China National Materials Company's (Sinoma) sales revenue has fallen by 5.8% year-on-year to US$3.26bn in the first half of 2016 from US$3.46bn in the same period of 2015. All three of its business divisions reported falling revenue in the period, led by its cement equipment and engineering services business, which recorded the greatest decline at 8.51% to US$1.42bn from US$1.55bn. Sinoma blamed this on a fall in orders. Its cement business reported a 4.22% fall in sales revenue to US$1.2bn from US$1.25bn. This was attributed to 'intense' market competition and low cement prices. Cement sales volumes rose by 7.61% to 33.5Mt. The company's overall net profit rose by 2% to US$64m from US$62.8m. However, its net profit attributable to shareholders fell by 30.9% to US$46m from US$66.6m.
Indonesia: SDIC Papua Cement Indonesia's new cement plant in Manokwari, West Papua is set to start operation later in 2016. The director general of chemical, textile and numerous industries, Achmad Sigit Dwiwahyono, West Papua vice governor Irene Manibuy and president director of PT SDIC Group Lin Bing officiated at the operation of the new kiln on 27 August 2016, according to the Indonesian News Agency. The 3200t/day plant has been built at a cost of US$500m. It is hoped that the plant will stabilise the price of cement in the province and support local infrastructure development.
LafargeHolcim makes transport deal in Iraq 30 August 2016
Iraq: LafargeHolcim's subsidiary in Iraq has signed an agreement with the General Company for Land Transport to transport 0.5Mt/yr of cement in 2016. If successful the deal could be extended for five years, according to local press. The contract is the largest in the General Company for Land Transport's history.
Saudi Arabia: Southern Province Cement has commenced trial operation at the second production line of its Bishah cement plant. The trial operation will continue until the plant reaches a contractual design capacity of 5000t/day of clinker. Once the trial is complete the plant's production capacity from its three lines will reach 33,000t/day of clinker. The company noted in a statement that there are neither expected costs nor financial impact for this trial operation. The date of full operation will be announced later.
KCP Cement to expand Muktyala plant 30 August 2016
India: KCP Cement is set to build a new production line at its Muktyala cement plant in Andhra Pradesh. The company intends to invest US$60m towards increasing the unit's production capacity to 3.52Mt/yr from 1.86Mt/yr. The upgrade will be completed by the end of 2017, according to the Hindu newspaper. Other planned works include spending US$7.4m towards building railway sidings for the plant.
ACC to expand Jamul and Sindri plants 30 August 2016
India: ACC plans to expand its plants at Jamul in Chhattisgarh and Sindri in Jharkhand as part of a US$447m capital project intended to increase the company's production capacity by 5Mt/yr to 35Mt/yr. The project will also include building a ‘couple of new plants’ according to comments made by KN Rao, Director - Energy and Environment, to the Hindu newspaper. Following the upgrades the Jmaul cement plant will have a clinker capacity of 2.79Mt/yr and a cement grinding capacity of 1.1Mt/yr. The Sindri unit will have a grinding capacity of 1.35Mt/yr.
Schade Lagertechnik gains orders in Uzbekistan and Jamaica 30 August 2016
Uzbekistan/Jamaica: Schade Lagertechnik has announced details of orders its has received from the cement industry from Kyzylkumzement in Uzbekistan and from Caribbean Cement in Jamaica.
In July 2016 Scaahde won a contract to supply two bridge type reclaimers and a stacker to Kyzylkumzement in Uzbekistan. The two reclaimers, each with a capacity of 1000t/hr and a rail span of 30m, and the 1200t/hr stacker will be delivered in the autumn of 2017 so that the plant can be commissioned in early 2018. The project is being supported with the aid of World Bank financing.
The order is part of the modernisation and improvement of cement plants that was called for two years ago by the Uzbek construction materials collective, Uzstroymateriali. This investment programme comprises nine projects for modernisation and reconstruction of plant at three of the largest cement works in the country, Kyzylkumzement in Nawoi, Akhangaranzement in the Tashkent region and Bekabadzement also in the Tashkent region. The investment volume at Kyzylkumzement alone is in the order of US$40m. Currently there are six cement plants in Uzbekistan with a total installed capacity of around 8Mt/yr.
Schade will also supply a full-portal reclaimer for limestone, with a capacity of 700t/hour and a rail span of 42m, to Caribbean Cement in Jamaica in the autumn of 2017. The project phase leading up to this order had been going on for almost 20 years. Rather than investing in a new machine, the initial plan was to convert an existing one. In the end the management decided that the purchase of a new machine would be more economical than incorporating all the required modifications into the existing machine.
Schade Lagertechnik produces equipment for bulk material stockyards and blending bed technology. It is part of the Aumund Group.