September 2024
CCNN revenue and income down in first quarter 04 May 2016
Nigeria: The Cement Company Of Northern Nigeria (CCNN) has reported a net revenue of US$17.9m for the first quarter of 2016, compared to US$22.2m in the same period a year earlier. This represents a 19% decrease year-on-year. CCNN’s profit before income tax dropped more dramatically, falling by 61% to US$1.79m from US$4.67m.
Lafarge Africa launches US$302m refinancing bond 04 May 2016
Nigeria: Lafarge Africa is marketing a US$302m bond to refinance some of the US Dollar-denominated debt held by its subsidiary United Company of Nigeria (UNICEM), which it bought in 2015. Chief finance officer Anders Kristiansson said that there was strong interest for the bond and that book-building was expected to open in the second week of May 2016.
The cement maker said it had received approval from Nigeria's Securities and Exchange Commission (SEC) for a US$500m bond, but will issue US$302m for five-years. "We are in the process of restructuring the UNICEM debt,” explained Kristiansson. "We want to refinance the US Dollar borrowings that we have in UNICEM."
UK financier to take 40% stake in ARM 04 May 2016
Kenya: The UK-based development financier CDC is set to acquire a 40% stake in ARM Cement, after the firm injected US$140m into the family-owned Kenyan cement manufacturer.
The CDC funds will allow ARM to retire expensive short-term loans that have been weighing down the company’s earnings. The CDC is owned by the UK’s Department for International Development.
“We are proud to back a founder-led frontrunner in East African manufacturing,” said Mark Pay, CDC’s managing director for equity investments. “This investment will strengthen a company (that is) making a difference to the local economy, bringing jobs and lower-cost raw materials to a region traditionally dependent on imports.”
UAE: India's JK Cement has revealed that its plant in Fujairah, UAE is due to reach full production capacity by 2017. At full capacity the plant will be able to produce 0.6Mt/yr of cement.
The plant is unusual in that it can produce both grey and white cement from the same kiln. The expansion of the UAE plant's production capacity is in line with increased demand for white cement in the Middle East, according to JK Cement’s Ajay Mathur.
India: India's upper house of Parliament has approved changes to the country's mining law to make it easier to sell mining rights, a move that could spur acquisitions in the cement and mining sectors.
Lawmakers approved the Mines and Minerals (Development and Regulation) (Amendment) Bill, allowing the transfer of mining rights by companies that received them through a government allocation. The bill was cleared by the lower house of Parliament in March 2016 and now needs to be signed off by the President to become law.
In the past, mining rights had either been distributed to companies through government auctions or through individual allocations, a method that raised questions about arbitrariness in decision-making.
In 2015 the government implemented a new law that made it mandatory to auction mining rights. It also permitted the transfer of mining rights previously won through auction, but was silent on whether rights received through a government allocation for captive uses could be sold.
The latest rule provides clarity and could help speed up proposed merger deals such as UltraTech Cement’s planned takeover of Jaypee Group's cement plants and LafargeHolcim's plan to sell two cement units to Birla Corp.
Cemex to sell major cement assets in US 04 May 2016
US: Mexico’s Cemex has agreed to sell a raft of assets in the US in a US$400m divestment to pay down the company's debt. The assets include the Lyons cement plant in Colorado, the Odessa cement plant in Texas, three terminals in Texas and building materials businesses in Texas and New Mexico.
The assets will be purchased by Mexican rival Grupo Cementos de Chihuahua (GCC), which already has three integrated cement plants in the south and central United States. The acquisition, due to be completed by the end of 2016, will increase GCC’s cement capacity in the US by 1Mt/yr to around 5.6Mt/yr.
Cemex is expected to sell up to US$1.5bn worth of assets during the course of 2016 and 2017. It is still reeling from debt that it took on from its 2007 acquisition of Australian rival Rinker, which came directly before the onset of the global economic downturn.
HeidelbergCement loss down in first quarter 04 May 2016
Germany: HeidelbergCement has announced its results for the first quarter of 2016. While its revenue was completely flat at Euro2.8bn, cement volumes rose from 16.8Mt in the first quarter of 2015 to 17.6Mt in the first quarter of 2016. However, the group maintained an operating loss of Euro72m, albeit a significant improvement on the Euro123m lost a year earlier. HeidelbergCement’s net debt was down by Euro237m to Euro5.9bn.
The group highlighted improving demand in the US as among the reasons for its improved performance. Cement volumes increased by 6% year-on-year in each of the two years to March 2016. Revenue in the US and Canada was Euro714m, a rise of 14.6% year-on-year. Net income for the region was Euro24m, a turnaround from a loss of Euro18m in the first quarter of 2015.
In Western Europe, positive cement sales trends were led by Germany and the UK, with the Netherlands and Belgium also contributing well. Cement sales in the region were up by 3.1% year-on-year for the quarter to a total of 3.4Mt. Volumes were also up in Scandinavia (1.7% year-on-year), Eastern Europe (6.6%) and in the group’s Central Asia, Russia and Ukraine region (0.7%).
In Western and Southern Europe revenue was down by 2.1% to Euro683m. The region, however, saw a loss of Euro8m for the quarter. Cement sales revenue improved by 1.8% to Euro290m, against a backdrop of falling aggregates, ready mix and asphalt revenues.
In North and Eastern Europe and Central Asia, cement volumes were 2.9% up year-on-year to 3.9Mt. Revenue for the region was Euro420m, a rise of 9.7% year-on-year, with cement revenues up nearly 7% to Euro225m. The group’s net loss in this region increased marginally, to Euro28m from Euro25m a year earlier.
In the group’s Asia-Pacific region, Indonesia saw better market conditions, driven by the arrival of new infrastructure works. India saw moderate increases in volume and Australia also improved. China saw lower prices and sales volumes. The total volume of cement sold in the region during the quarter was 5.8Mt and the region’s revenue was Euro637m. This generated a profit of Euro120m, a 18.8% decline on the preceding year’s profit of Euro148m.
In Africa and the Eastern Mediterranean Basin cement volumes were virtually flat at 1.9Mt. Total revenue was slightly down from Euro252m in 2015 to Euro240m in the three months to March 2016. Revenues from cement-based operations were down by 8.7% to Euro177m.
Excluding exchange rate and consolidation effects, HeidelbergCement now expects a moderate increase in revenue and a high single to double digit increase in operating income and before non-recurring effects profit for the financial year. The company also expects increases in sales volumes of cement, aggregates and ready-mixed concrete.
Ireland: Even as it adjusts to its mammoth Euro6.5bn 2015 acquisition of LafargeHolcim’s divestments, Irish group CRH is reported to be mulling the purchase of US and Belgian cement assets, which HeidelbergCement may have to sell as a consequence of its acquisition of Italcementi. In Belgium HeidelbergCement and Italcementi have 4.5Mt/yr out of a total of 6.2Mt/yr of integrated cement capacity. In the US they share around 16.4Mt/yr out of 115Mt/yr.
Chief executive Albert Manifold told analysts that the group is focused on cutting back on its debt levels and is likely to look at assets should HeidelbergCement be forced to sell. "US cement is of interest to us and we're fully aware of the asset that may spin out of the potential acquisition," he said. "With regards to Belgium, it's a prime asset and certainly it would make a good fit with our businesses, providing the value is right."
CRH is also currently linked with a possible US$1.5bn acquisition of LafargeHolcim’s Indian cement businesses. The apparent enthusiasm CRH has with respect to expand is at odds with the majority of major players in the cement sector, many of which are going through periods of transition or are struggling with debt. "I'm always interested to open the paper and see what businesses we're bidding on,” added Manifold. “People are trying to talk up competition on deals. We're probably in 10% of the stuff we're associated with."
CRH’s earnings before interest, tax, depreciation and amortisation (EBITDA) grew to almost Euro1bn following a ‘positive trading backdrop’ in its main markets in the first three months of the 2016.
Kenya: Central Bank of Kenya (CBK) deputy governor Sheila M’Mbijiwe is seeking re-election to the board of LafargeHolcim majority-owned Bamburi Cement. A notice sent to shareholders stated that the CBK senior executive will be seeking a new mandate when the company holds its 65th annual general meeting on 2 June 2016 in Mombasa. The 58-year-old senior CBK executive, who also sits on the regulator’s Monetary Policy Committee, was set to retire by rotation but is seeking to retain the seat.
Others seeking re-election are Daniel Patterson and D Drouet who are also retiring by rotation but are eligible to seek to be elected again.
Update on the cement industry in Central Asia 27 April 2016
A few news stories in recent weeks have emerged concerning falling cement sales in Central Asian countries. Steppe Cement reported in mid-April 2016 that its cement sales had fallen by 12% year-on-year to US$5.98m in the first quarter of 2016 from US$6.79m in the same period in 2015. The cement producer noted an overall drop of 16% in the cement market in Kazakhstan, with a slowing reduction in March 2016 compared to the preceding four months. It forecast that the domestic cement market would contract by 1.1Mt in 2016 to 8.5Mt. The country has a cement production capacity of 11.85Mt/yr according to Global Cement Directory 2016 data. So on average this would see a drop in the capacity utilisation rate to 72% from 81%.
Likewise, Italcementi reported a fall in cement consumption in the fourth quarter of 2015 although overall in 2015 it reported consumption up by 9%. It is currently upgrading its Shymkent cement plant to a dry kiln with testing planned for early 2016. Meanwhile, HeidelbergCement – the other multinational present in the country, reported cement sales growth of over 9% due in part to the ramp-up of its new CaspiCement cement plant. How this will turn out after HeidelbergCement takes control of Italcementi remains to be seen.
Then, Holcim Azerbaijan reported that its sales had fallen by 37% to US$56m in 2015. It blamed the resultant loss it made on not being able to cut its production costs fast enough to match the falling revenue. The parent company LafargeHolcim blamed it on a ‘significant’ decline in public and private construction. Elsewhere, the World Bank reported a 13% drop in the construction sector in the second half of 2015 as the government cut investment.
Tajikistan may have broken this pattern as it reported that its cement production volumes rose by 33% to 373,000t in the first quarter of 2016. Over half of this output came from the 1Mt/yr Huaksin Ghayyur Cement plant that was commissioned in March 2016. The same news source reported government estimates that local demand will be 3.5Mt/yr in 2016. Similarly, Turkmenistan reported growing cement production in 2015 due to the opening of the 1.4Mt/yr Polimeks cement plant in Lebap. Otherwise there has been little reported recently from the cement industries in Uzbekistan and Kyrgyzstan although the World Bank has reported that their economies are in reasonable shape.
The multinational cement producers all noted the economic problems caused by low oil prices in the Central Asian countries in which they operate. In February 2016 this was reinforced by the International Monetary Fund after its latest visit to Azerbaijan. The World Bank also expects little growth in gross domestic product (GDP) in the region in 2016. Low oil prices have followed economic problems in Russia that have also impacted upon the region due to its economic ties with that country and membership of the Commonwealth of Independent States (CIS).
This is bad news for the local markets but it is especially bad news for the Chinese cement industry. As China has faced production overcapacity and falling prices at home, its suppliers and producers have sped off down the Silk Road to seek expansion prospects elsewhere. With this route blocked, the Chinese industry faces one fewer opportunity to avoid the crunch at home.
For more information of the cement industries in Central Asia read Global Cement's feature on the region from January 2016