September 2024
Lafarge plans to increase cement production capacity 01 August 2014
Zambia: Lafarge Cement Zambia plans to double its cement production capacity from its two local plants to meet the growing demand, according to CEO Emmanuel Rigaux. In 2013, the domestic market for cement grew by 17%, largely driven by the continued increase in government infrastructure projects, mining expansion activities and to a smaller extent by individual home building projects.
"Lafarge Zambia is planning to double its capacity in Ndola and Chilanga through debottlenecking and construction of a new line," said Rigaux. "This will enable us to remain the market leader and preferred supplier of construction solutions in Zambia." Rigaux said that in 2013 production volumes improved by 105,000t to 1.18Mt from 1.07Mt in 2012, representing 9% growth. Volumes are expected to continue to improve on the back of strong growth in the construction industry in both domestic and export markets. Rigaux said that domestic sales volumes grew by 18% in 2013, while export sales volumes declined by 25% due to increased focus on the domestic market.
"The second half of 2013 saw a sharp improvement in operational and industrial results both at both our Ndola and Chilanga plants," said Rigaux. "Lafarge Zambia also implemented targeted cost reductions and logistical optimisations, which enabled us to improve our operating margins." Rigaux said that Lafarge Cement Zambia's financial position and cash flow remained solid with strong cash position and no external debt.
Germany: HeidelbergCement has reported that its profit for the second quarter of 2014 declined to Euro233m from Euro368m in the same period of 2013. However, earnings before interest and income taxes (EBIT) grew to Euro527m from Euro511m in 2013. Revenues for the quarter were Euro3.57bn, down from Euro3.59bn in 2013. HeidelbergCement's cement and clinker sales volumes rose by 4% to 22.3Mt compared to 21.4Mt during the second quarter of 2014.
HeidelbergCement announced that it plans to start a process to divest its building materials unit in September 2014 and expects to conclude the sale quickly. Potential buyers include private equity funds, not industrial enterprises, according to Bernd Scheifele, HeidelbergCement's CEO. Scheifele added that HeidlerbergCement would consider buying assets to be sold by Lafarge and Holcim, except for assets located in the UK and Germany.
Italy: Cementir Holding has confirmed that its 2014 earnings before interest, tax, depreciation and amortisation (EBITDA) will exceed Euro180m after posting annual growth of 26.4% in the first half of 2014.
Cementir reported EBITDA of Euro78.4m in the first half of 2014, up from Euro62m in the same period of 2013. Revenues inched up to Euro473m from Euro472m, with sales in Turkey, Scandinavia and the Far East offsetting weaker sales in Italy and Egypt. Net profit rose to Euro20.5m from Euro7.4m in the first half of 2013.
The exchange rates on the foreign markets affected sales in Euros. The currency depreciations to the euro, on the other hand, helped Cementir to cut its operating costs by Euro29.3m from the end of June 2013 to Euro386m at the end of June 2014. Cementir's net financial debt went up by Euro30m from December 2013 to Euro355m at 30 June 2014, as a result of plant maintenance, dividend distribution and changes in working capital.
For 2014, Cementir expects the growth trends in Scandinavia, Turkey and the Far East to continue, while it is difficult to predict the performance in Egypt due to the political and social unrest.
Thailand: Siam Cement has reported a 14% drop in its net profit in the second quarter of 2014. Weak domestic cement demand and lower chemical earnings hit the company after months of political unrest. Thailand's domestic cement demand is expected to grow by 1% at most in 2014 due to a drop in construction activity and a lack of new infrastructure projects, according to Siam Cement's chief executive Kan Trakulhoon.
Siam Cement posted a net profit of US$268m in the April – June 2014 period, down from Euro310m during the same period of 2013. Cement and building materials contributed 41% to Siam Cement's profit and weak domestic demand prompted an increase in exports.
"We export more to ASEAN nations, but we don't make much profit from exports," said Trakulhoon. "This is to help support our supply chain, while we continue to run at full capacity."
Siam Cement expects its performance to be positive in 2014 on expectations that Thailand's 2015 fiscal budget will speed up infrastructure investments, while consumer confidence should recover from the fourth quarter of 2014.
"Domestic cement demand should drop by 2 - 3% in the third quarter of 2014 from a year earlier, while growth in the fourth quarter of 2014 should be flat," said Trakulhoon. He added that cement demand in Thailand for the whole of 2014 would grow by 0 - 1%.
Siam Cement is also stepping up its ASEAN expansion by revising its current US$7.8bn five-year investment plan that kicked off in 2013. The plan is being revised for approval at a board meeting in August 2014. Cement plants in Cambodia, Indonesia, Laos and Myanmar are already in the pipeline, while other building material plants are planned to reduce shipping costs through increased local production.
"There are many opportunities in the ASEAN region, including mergers and acquisitions," said Trakulhoon. "There is no limit. It depends on how fast we acquire the companies. We are open to any acquisition proposals." Trakulhoon added that Siam Cement's primary focus outside of Thailand is on companies in Vietnam and Indonesia, where operations have been especially robust. ASEAN business rose by 20% in the first half of 2014 and now accounts for 9% of Siam Cement's overall sales revenue. That proportion is expected to rise in the coming years.
UK: The construction industry slow-down that started in 2008 led to Hanson Cement, HeidelbergCement's UK subsidiary, laying off 70 employees at its cement plant in Padeswood, Flintshire, Wales. At the time, Hanson considered closing the plant, but instead ran at half capacity in the hope the situation would improve. It has now submitted plans to Flintshire council for a new production line, which the company said would create 35 new jobs, following a building industry upturn.
"It's a good news story considering we've gone through such a depressed period," said Hanson's David Weeks. "We have three plants in the UK; one in Padeswood, one in Lancashire and one in Lincolnshire. We only really needed two and Padeswood would probably have been the one to go. But we decided to hang on in and now we're confident that we'll get Padeswood up to full capacity once again." Hanson Cement said that work will start immediately if it gets the go-ahead.
LafargeHolcim: A half-time reality check? 30 July 2014
It has been another week of financial results from the global cement industry, with big hitters Lafarge and Holcim reporting what some might call 'concerning' numbers for the first half of the year. Both cement producers are, of course, making preparations ahead of their proposed merger, which could come to pass within 12 months, all being well. But are things well?
In the first half of 2014, Lafarge saw its earnings before interest, tax, depreciation and amortisation (EBITDA) decrease by 2%, with sales down by 5%. Lafarge noted that its shrinking size, this week highlighted by the sale of its Pakistani assets, and adverse exchange rate effects did not help matters. CEO Bruno Lafont was up-beat in asserting that North American and European markets would see improvements over the rest of 2014. Meanwhile, things are slightly better at Holcim, which reported an increased EBITDA (albeit just by 0.2%) as well as like-for-like sales that were up by 4.8% compared to the first half of 2013. However, its increased sales volumes and revenues could not prevent a fall in net income.
If one takes these results together, the first half of 2014 seems to been one of general stagnation for the future LafargeHolcim. It is important to remember that even more asset sales are inevitable, mainly from the weaker performer Lafarge. We are left to ponder how the new LafargeHolcim will perform in 12 months time.
At present, without serious improvement across all world economies, it is likely that LafargeHolcim (and other multinational producers) will continue to be on relatively shaky ground post-merger. The reality is that many of the promising markets that the company will serve are no longer rapidly-growing emerging economies, but are instead caught up in lower-than-expected growth (for example in Indonesia, India, China and Brazil), political disputes (for example in Algeria, Thailand, Eastern Ukraine and the Middle East) and other damaging events (for example the Ebola outbreak in West Africa). The global economy is certainly 'uneven,' as Holcim's CEO Bernard Fontana said in Holcim's results statement, but it also seems to be getting more uneven. Simple geographical and income groupings for countries, for example 'Far East = Profit,' are becoming increasingly out of date.
Navigating such a rapidly-changing world is, in one sense, less difficult for larger companies than smaller ones because risk can be spread over a much wider range of economies. However, larger companies are also slower to react to changes and the appropriateness of their responses may not be ideally tailored to individual markets. When LafargeHolcim comes to be, it will likely suffer also due to the inherent difficulties of merging two such large firms that may not see eye-to-eye on all issues. This will have to be done without some of its best assets and a lot of its 'run-time' will be dedicated to the merging process. In such an environment it is easier to be distracted from its main tasks: is it possible that this effect is already becoming apparent? As Lafarge and Holcim's latest results show, there is little room for deterioration in their results.
There is a key question: Is the LafargeHolcim first half EBITDA slide a sign of poor markets or related to preparations for the merger that shareholders will tolerate as they anticipate future riches? Will LafargeHolcim be profitable in the long-run?
India: JK Cement has appointed Sushila Devi Singhania as an additional director with effect from 26 July 2014.
IFC allocates loan to National Cement Company 30 July 2014
Kenya: National Cement Company has received a US$70.2m loan from the International Finance Corporation (IFC). The loan will be used to fund its cement production expansion programme. With the help of the loan, National Cement Company can bolster cement production five-fold to 1.7Mt/yr by 2016 at a cost of US$200m. National Cement Company's CEO Narendra Raval stated that the company aims to close the Kenya's 6Mt/yr cement production gap to stabilise cement prices.
Raval stated that the company's five-fold increase in cement production would see a significant reduction in cement prices in Kenya, where increasing prices have been driving up the cost of construction. However, the entrance of new cement companies in the local market has seen an increase in competition and a gradual reduction in the volume of imported cement.
China's building materials sector continues to slow 30 July 2014
China: China's building materials sector remained sluggish as the property market showed no signs of warming, according to the National Development and Reform Commission (NDRC). Cement output rose by 3.6% year-on-year to 1.14Bnt in the first half of 2014, slowing by 6.1% points from the expansion seen during the same period of 2013. The data pointed to the continuing weakness in the property market. The average home price in 70 Chinese cities fell by 0.47% during June 2014, the second consecutive monthly drop after a 0.15% fall in May 2014.
Philippines: The Cement Manufacturers Association of the Philippines' (CeMAP) president, Ernesto Ordonez, said that total cement sales for the first half of 2014 reached 10.72Mt, up from 10.14Mt for the first six months of 2013. For the second quarter of 2014 alone, cement sales climbed by 3.2% to 5.52Mt from 5.35Mt in the comparable period of 2013. Compared to the first quarter's 5.19Mt, cement sales in the second quarter of 2014 grew by 6.19%. The increase in sales was seen amid higher demand from both the public and private sectors.
Ordonez said that there was a Department of Public Works and Highways (DPWH) budget increase, while the private sector continued to grow because of increased confidence in the government. The latest data from the Department of Budget and Management (DBM) showed that government spending for infrastructure and capital outlay posted a 24.5% increase to US$2.16bn as of April 2014, compared to US$1.74bn in 2013. The notable infrastructure disbursements were channelled mostly to on-going reconstruction and rehabilitation efforts in communities devastated by Super Typhoon Yolanda. The DBM said that the increase in disbursements is also due to the Aquino administration's stronger focus on strengthening the economy through infrastructure and capital outlay investments.