September 2024
UltraTech deal with Jaypee delayed by mine transfer legislation 01 September 2015
India: UltraTech Cement is seeking clarification from the Indian government over the transfer of limestone reserves as part of its deal to buy two integrated cement plants in Madhya Pradesh from Jaypee Group, according to HT Media. A clause in the Mines and Minerals (Development and Regulation) Act 2015 barring the transfer of mines that were not allotted through auctions is delaying mergers and acquisitions (M&As) in the mining sector.
According to a clause in the new Act, transfer of the mining licence is allowed only for mines that have been auctioned. Most of the operational limestone mines in India were allotted and not auctioned. The Act allows for these reserves to be auctioned in the future. However, legal experts are divided on whether this clause will apply retrospectively.
UltraTech agreed to buy Jaiprakash Associates' cement plant with a clinker capacity of 2.1Mt/yr and a cement grinding capacity of 2.6Mt/yr at Bela in Madhya Pradesh in December 2014. It then agreed to buy a second plant at Sidhi with a clinker capacity of 3.1Mt/yr and a cement grinding capacity of 2.3Mt/yr. The deal included access to the limestone reserves in Madhya Pradesh.
The new legislation is also expected to affect Lafarge's sale of its east Indian assets to Birla Corp.
Cherat Cement revenue up but profit down 28 August 2015
Pakistan: Cherat Cement Company posted a profit of US$12.4m in the year ending 30 June 2015, a slight decrease from US$12.7m a year earlier. Turnover rose to US$63.2m compared to US$62.1m a year ago.
Bamburi Cement profit up 94% in first half 28 August 2015
Kenya: Bamburi Cement has reported a 94% jump in its pre-tax profit for the first half of 2015 to US$43m compared to the first half of 2014. Turnover grew to US$186m from US$166m, as governments and others continued to invest in infrastructure projects.
The company attributed the strong performance to growth in demand in its two main markets of Uganda and Kenya, cost cutting and gains in its US-Dollar-based liquid assets due to a steep weakening of the Ugandan and Kenyan currencies. Exports to other African markets were also strong.
"The outlook for the rest of 2015 is stable, with projected and continued positive growth in all regional East African economies," said Bamburi in a statement.
Ireland: CRH CEO Albert Manifold has said that the company will now take a pause from large-scale acquisitions following the completion of its US$7.3bn acquisition of various Lafarge and Holcim assets and its recent US$1.3bn acquisition of glazing products producer C R Laurence. Manifold was quoted by the Wall Street Journal as saying that significant acquisitions going forward are 'unlikely,' and that the company will focus on integrating its two big acquisitions over the next 12 - 18 months.
CRH had previously been linked with two other large-scale cement industry acquisitions. In India, it was in the running to acquire 5Mt/yr of Lafarge assets that have since been sold to Birla Group. Meanwhile, in South Korea CRH had been linked with the wholesale acquisition of Tongyang Cement & Energy. Due to Manifold's announcement, it appears that the South Korean deal is no longer on the table.
Dangote to open 1.5Mt/yr plant in Cameroon 27 August 2015
Cameroon: Dangote Cement will open its new 1.5Mt/yr Sinoma-built cement plant in Douala, Cameroon today. "Africa's future growth is intrinsically linked to cement," said Aliko Dangote earlier in August 2015, as he opened another new factory on the outskirts of Ndola, Zambia. Both plants are part of Dangote Cement's US$4.3bn expansion across Africa and Asia, which we reported on earlier.
Boral annual profit up by nearly a half 27 August 2015
Australia: Boral has recorded an increase in full-year profit, buoyed by the return to profitability of its US business for the first time since 2007, a pick-up in local demand and cost-cutting initiatives.
Australia's largest building materials provider posted a net profit of US$183m in the year to 30 June 2015, a 48.3% increase on the previous year's US$123m. Underlying profit rose by 45% to US$178m. However, Boral's total revenue over the same period fell by 15.2% to US$3.15bn.
Boral chief executive Mike Kane said that the results reflected the benefits from the company's overhaul of its business which reduced the size of its workforce and resulted in the closure of some unprofitable operations. "We've improved Boral's cost base, strengthened the balance sheet and we are managing our portfolio of businesses more efficiently," he said.
In the current 2016 fiscal year, Boral said it will focus on maintaining underlying earnings from construction, materials and cement, while property earnings remain uncertain. Building products are seen remaining broadly steady, while USGBoral will deliver further underlying improvement.
Pakistan producers slam Iranian imports 27 August 2015
Pakistan/Iran: The Pakistani cement industry has once again spoken out against imported cement from Iran and alleged massive under-invoicing across the border. Industry sources said that the Iranian cement, which was earlier being smuggled, is now entering Pakistan at very low rates due to under-invoicing. They say that importing cement into Pakistan, itself a cement exporter is 'incomprehensible.'
Taha Khan Javed, Elixir Securities Pakistan's head of research, said that the government needs to realise that this lax attitude towards under-invoicing and the 'rampant' import of Iranian cement is hurting both the government and the local cement industry. Pakistan already has surplus capacity and its exports are falling due to a slowdown in exports to Afghanistan and other regions. In the case of Afghanistan this is also, in part, due to Iranian imports.
CRH first half results show increase in sales and earnings 27 August 2015
Ireland: CRH has reported improved results for the first half of 2015. It reported that sales increased by 13% year-on-year to Euro9.4bn over its global operations. Although sales fell by 1% in Europe, they rose by 32% in the Americas. Earnings before interest, tax, depreciation and amortisation (EBITDA) from continuing operations were up by 29% globally, by 4% in Europe and by 57% in the Americas. CRH's profit before tax was Euro63m, a 3% improvement on its Euro61m pre-tax profit it made in the first half of 2014.
CRH reported that the acquisition of assets from Lafarge and Holcim were now fully integrated into CRH. It has also announced a further Euro1.15bn acquisition of US-based glass manufacturer C R Lawrence.
"We are on track to deliver another year of growth in 2015," said Albert Manifold, CEO of CRH. "Trading in the Americas has been good and, against a mixed macro-economic backdrop, underlying trading in Europe is broadly in line. We have made good progress towards achieving our goal of restoring margins and returns to peak over the cycle, with further margin improvement in each operating division. We are now applying CRH rigour to (our) new businesses to integrate them efficiently and to drive performance."
Cementos Argos helped by rising capacity, better conditions and exchange rate effects in first half 27 August 2015
Colombia: In the first half of 2015, Cementos Argos recorded revenues of US$1.09bn, 26% more than in the same period in 2014. Its earnings before interest, tax, depreciation and amortisation (EBITDA) were US$210m, 31% higher than during the first half of 2014.The company sold 14% more cement in the first half of 2014 compared to the first half of 2014, with sales rising to 6.8Mt.
Jorge Mario Velásquez, Cementos Argos' CEO, said, "The consolidated results of the first half of the year show the good individual performance of our business segments and of our growth and market diversification strategy. Thanks to this, Argos is now recording more than 60% of its revenues in US Dollars or currencies closely tied to the US Dollar, which is a situation that puts us in a privileged position given the current circumstances."
In Colombia, Cementos Argos obtained revenues of US$403m, 13% more than in the first half of 2014. During the quarter, the expansion of the Rioclaro Plant became operational, adding 0.9Mt of installed capacity. Its EBITDA in the country was US$91m, which was an improvement of 15% year-on-year.
In the United States an increase in government expenditure, the increase in construction licenses and the highest housing construction levels seen in the last seven years all contributed to an EBITDA of US$49m in the first half, an 89% rise compared to the same period last year.
China – the new not-so normal 26 August 2015
The Chinese stock market volatility this week has not been a surprise for the cement industry. The question for both the local cement industry and the wider economy is how the current economic jitters are being managed. Are we witnessing the long expected hard landing of the Chinese economy or will the state planners been able to dodge it?
Growth in the housing market and infrastructure spending has been falling. The country's cement producers have reduced their production growth as the industry consolidates. First half profits in 2015 have fallen for many Chinese cement producers including China Resources Cement and Asia Cement. Anhui Conch, one of the top three cement producers in the world, reported that its first quarter profits in 2015 fell by 31%.
Chinese cement production figures have always seemed incompatible with other data suggesting incomplete information. For example, the Global Cement Directory 2015 reported China's cement production capacity at 1.48Bnt/yr. At full capacity utilisation this would suggest a national cement consumption of 1057kg/capita, a figure that bears no resemblance to any other country on earth with the exception of petrochemical giants like Saudi Arabia and Qatar. Although, to be fair to China, it's recent economic growth has been unprecedented. Poor reporting, the country's unique state regulated capitalism, language difficulties and other factors may all have contributed to confusion among western analysts.
In mid-August 2015 China devalued the Yuan in its biggest drop in 20 years. It is likely it was a strategy to boost exports to rally markets against a sliding stock market since mid June. At the time of writing the Chinese authorities have now tried cutting interest rates with a similar aim and the markets have rallied.
The effect of a devalued Yuan is relevant due to China's overcapacity in several heavy industries such as a steel and cement. Already European and North American steel bodies have cried out against the threat of fresh Chinese exports undercutting their business. Clinker exports are likely to pose less of a risk given its relative low value and high transport costs. Even so, China exported less than 15Mt in 2013, a tiny portion of its production capacity. Altering the exchange rate might well help that export figure creep up. This would be bad news for local cement producers in coastal areas of East Africa for example. Here, Chinese imports might be harder to resist than, say, southern Asian ones, due to Chinese investment in the region. Recent spats over Chinese cement imports in Kenya and Zimbabwe underline this issue.
More worrying for the wider cement industry will be the risk of Chinese cement plant manufacturers and suppliers further undercutting western firms. Eurocement signed a deal with Sinoma in November 2014 for the Chinese equipment producer to supply three 3Mt/yr production lines for US$93.3m each or just over US$30m per 1Mt of production capacity. Compare this to FLSmidth's charge to a Qatari firm of US$190m in October 2014 to build a 2.24Mt/yr production line or just over US$80m per 1Mt of production capacity. This is not a completely fair comparison due to the plants being in completely different regions, but it gives some idea of the price pressures non-Chinese equipment manufacturers face. In their defence the usual argument is that their equipment is better made. However, cement producers being able to buy even cheaper Chinese kit will not help their plight. Today we report on Dangote Cement signing yet more contracts with Sinoma to build new cement plants in Africa.
The actions of the Chinese financial authorities show that they are trying careful tweaks one-by-one to fix the situation. The real problem though is that, as China transitions from a developing nation into a developed one, broader structural changes to the general economy may be required instead of tweaks. A massively over-producing cement industry is a symptom of this and how the country copes with it is instructive to how it will succeed overall. Bold attempts to consolidate the industry have shown willingness in recent years. Unfortunately the current crisis may artificially prop up an industry that should be reducing in size.