September 2024
Yanbu Cement profit falls in first quarter of 2016 07 April 2016
Saudi Arabia: Yanbu Cement Company has reported an 11.1% year-on-year fall in its net profit to US$49m in the first quarter of 2016 from US$55m in the same period in 2015. The cement producer has blamed the profit loss on a fall in sales and a rise in fuel prices.
Pakistan cement despatches hit high in March 2016 07 April 2016
Pakistan: The Pakistan cement industry has recorded its highest ever dispatches of 3.58Mt in March 2016, an increase of 19% year-on-year from 3Mt in March 2015. Exports have grown by 21% to 0.53Mt from 0.44Mt in March 2016. The All Pakistan Cement Manufacturers Association (APCMA) described the growth as ‘encouraging’ as it enabled the industry to hit a capacity utilisation rate of 95%. However, despite this high rate the APCMA added that it was still being accused of price fixing, according to local press.
For the nine months from July 2015 to March 2016 overall cement despatches rose by 9.95% year-on-year to 28.3Mt. Local despatches in the north and south of the country have both shown growth respectively. However, exports fell by 19% to 4.41Mt from 5.44Mt. The year so far has been poor for exports, only picking up growth from February 2016 onwards.
China: Yang Luyu, the mayor of Jinan in Shangdong province, is being investigated for corruption by the Communist Party of China Central Commission for Discipline Inspection (CCDI). Yang has been accused of ‘serious disciplinary violations’ according to Xinhua news agency. He is also the city's Communist Party deputy secretary.
Yang was named in a writ filed with a Hong Kong court in March 2016 according to the South China Morning Post. Two companies, China Pioneer Cement (Hong Kong) and Shandong Shanshui Cement Group, allege that Yang and his deputy mayor, Su Shuwei, conspired with former company directors to take control of the Jinan plant on 7 December 2016. The ex-directors were named as Zhang Caikui and his son Zhang Bin.
China Pioneer Cement (Hong Kong) and Shandong Shanshui Cement Group are subsidiaries of China Shanshui Cement Group. Shanshui Cement has faced financial troubles since a battle for control of the company that took place in late 2015 between Tianrui Cement, its biggest shareholder, and the Zhang family, its second-largest shareholder and former owners.
Germany/Italy: HeidelbergCement has released details on how it will integrate Italcementi into its business. Key details of the plan include the sale of Italcementi’s Belgium operations, the retention of the Italcementi brand and headquarters and the Italian cement producer’s i.Lab centre will assume research and development responsibilities for the entire group. However the acquisition is expected to result in up to 260 job losses at Italcementi’s base in Bergamo. The full integration plan is expected to be complete by 2020.
“Following our motto ‘all business is local’, it is important for us to preserve Italcementi's strengths and professional expertise, which have ensured its success in Italy and abroad. I am convinced that we will be able to achieve the planned Euro400m in synergies and bring Italcementi back to profits by operational improvements, streamlining the administration and leveraging the increased size of our combined business,” said Bernd Scheifele, chairman of the managing board of HeidelbergCement.
The acquisition still depends on approval from the European Commission and the Federal Trade Commission. On 1 April 2016, HeidelbergCement formally submitted the merger plan to the European Commission.
To this end, HeidelbergCement has decided to sell Italcementi’s entire Belgian operations, primarily consisting of Italcementi’s Belgian subsidiary Compagnie des Ciments Belges. The proposed divestment would remove all overlaps between the activities of HeidelbergCement and Italcementi in Belgium and the Netherlands. Preparations forthe divestment have already started and ‘significant’ interest has been noted. BNP Paribas will support the process.
The plan presented in Bergamo by Scheifele says it intends to keep the industrial network and plants in Italy as well as the Italcementi brand. In addition, HeidelbergCement builds on Italian management heading the Group's operations in Italy. i.Lab, based in Bergamo, where Italcementi will keep the headquarter of Italian country organisation, will become the home of the product research and development division of the whole group.
In order to streamline the overall group organisation some staff and administrative functions will be centralised in Heidelberg. According to the integration plan around 170 people will receive relocation offers to other offices within the group. Any redundancies in Bergamo, which could potentially affect between 230 and 260 people, will be handled using Italy's temporary layoff scheme. In addition, severence packages will be negotiated with the unions. At the end of the transition period in 2020, about 210 to 250 professionals will remain in Bergamo.
HeidelbergCement expects the closing of the acquisition of the 45% stake to be finalised in early July 2016 depending on the decision of the cartel authorities in Europe and the USA. Implementation of the integration plan will start after the closing.
Grinding down on demand for slag 06 April 2016
Tata Steel put up its UK business for sale last week. The Indian multinational declared that enough was enough having reported losses of over Euro2.5bn in the territory over five years. Non-UK readers may well wonder what the fuss is about. UK crude steel production comprised 10.9Mt in 2015 or about 0.7% of global production according to World Steel Association data according to World Steel Association data. By contrast the country produced 9.3Mt of cement in 2014 or about 0.2% of world production according to CEMBUREAU data according to CEMBUREAU data.
The UK’s flailing steel industry is worth discussing here for two reasons. Firstly, any decline in the local iron and steel industry will have implications for the supplementary cementitious materials (SCM) market as slag levels vary. Secondly, the cement industry in Europe may have lessons for a fellow heavy industry facing capacity rationalisation.
UK ground granulated blastfurnace slag (GGBS) production levels are low compared to total world supply. However, the UK Competition Commission certainly took note of the GGBS market in 2014. It was worried by LafargeTarmac’s and Hanson’s prominence in both the local GGBS supply chain and local cement production. At that time it ordered the HeidelbergCement subsidiary Hanson to sell one of its slag grinding plants to increase competition in the supply chain for GGBS. A GGBS plant in Scunthorpe was eventually sold to Francis Flowers in July 2015.
The general point here is that a Tata sale of its UK operations could have ramifications for the UK GGBS sector as existing deals are renegotiated following the shakeup. It would be even worse for the local slag market if any of the plants closed. No doubt the Competition Commission would also want to have its say to maintain some sort of competition in an already concentrated market. The UK cement market has been the bright spot in the multinational cement producers’ European regions in 2015. However, construction growth is starting to slow again with hints that the looming European Referendum in June 2016 may be having a negative effect. Uncertainty over GGBS supplies is not helpful in this atmosphere.
A wider lesson for other national cement industries looking in is that if Chinese steel continues flood the world market it will also hit the cement industry. Tata’s woes have been squarely blamed on China dumping its steel on the world market. Various jurisdictions promote the use of SCM cements and concrete for their low-carbon and sustainability properties. If local or existing GGBS supplies are hit then the cement industries may be penalised while the lawmakers and competition bodies play catch-up.
The wider point about heavy industry reducing its production capacity is one that the European cement industry will be well used to. Spain, for example, has seen its cement production drop from 55Mt in 2007 to 15Mt in 2014 according to Oficemen data. Alongside this, demand for cement has dropped to levels not seen since the 1960s. The European response has been to shut plants, sell assets and to merge companies.
The big question following the 2008 recession is whether ‘this’ is the new normal for mature construction markets. Eight years later global interest rates are still lagging and China’s economy is slowing down. All of the European infrastructure was built long ago meaning that steel and cement will only be required to maintain it. Luckily it looks likely that demand for SCMs should stay buoyant as industries are encouraged to decarbonise. The problem though is where the slag comes from. Oversupply in the short term in areas like Europe might be great for cement producers but as the iron and steel industries readjust to market reality there might be a hangover in store.
Israel restricts entry of cement into Gaza 06 April 2016
Gaza/Israel: Israel has once again blocked the entry of cement and other construction materials into the Gaza Strip for private sector projects. It accused Hamas, the militant Islamic organisation in control of the territory, of using the materials to build tunnels in violation of an agreement made after the 2014 Gaza war. The ban will not affect supplies to large international construction projects such as those coordinated by the United Nations.
China: China Resources Cement has issued a profit warning for the first quarter of 2016. It expects its profit for the three-month period to drop ‘significantly’ year-on-year due to lower prices of cement and clinker in China. The Chinese cement producer reported a profit of US$85.1m for the first quarter of 2015.
Brazil: Votorantim’s cement sales volumes fell by 6% year-on-year to 35Mt in 2015 from 37Mt in 2014. However, net revenue from the group’s cement business rose by 6% to US$3.82bn. The Brazilian industrial group blamed the loss of sales volumes on the poor economic situation in Brazil. However, its revenue rallied due to currency variations and growing sales outside of Brazil.
Overall across all business sectors Votorantim reported that its revenue rose by 11% to US$8.57bn. This was supported by higher metal prices in Brazil and positive effects from the consolidation of the group’s foreign operations. Net income dropped by 77% to US$103m
Ireland: Justice Max Barrett of the High Court has ruled that the Competition and Consumer Protection Commission (CCPC) breached the terms of a search warrant by seizing the email account of a CRH executive in 2014. The court also determined that the competition body had breached the Data Protection Acts, the Irish constitution and the European Convention on Human Rights. The court added that the seized emails contained material outside the scope of the investigation.
The CCPC responded by saying it was ‘considering carefully’ the implications of the judgment and the next steps that it would take. However, its investigation into alleged anti-competitive practices by Irish Cement in the supply of bagged cement continues.
The CCPC carried out an unannounced search at the premises of Irish Cement on 14 May 2015 as part of an on-going investigation into alleged anti-competitive practices in the supply of bagged cement. During the search, the CCPC seized a number of electronic documents including the mailboxes of a number of current and former employees of Irish Cement. CRH argued that certain emails in the mailbox of one such employee, Seamus Lynch, were unrelated to the business of Irish Cement and were therefore not entitled to be seized. Accordingly, in November 2015, CRH brought a High Court action against the CCPC seeking an injunction to prevent the CCPC from examining these emails.
Peter Nelson appointed interim chairman of PPC 06 April 2016
South Africa: PPC has appointed Peter Nelson as its interim chairman following the retirement of Bheki Sibiya. A permanent replacement for Sibiya is expected to be recruited by September 2016.
Nelson was appointed to the Board as an independent non-executive director on 25 January 2015. His experience covers manufacturing, mining, telecommunications, healthcare, leisure, property, packaging and the motor industry in listed and private entities in South Africa, the United Kingdom, Zimbabwe and Nigeria. He has served as chief financial officer on several Boards including Telkom, Netcare and Mondi.