September 2024
Mexico: Cemex has announced that it has promoted its chief financial officer (CFO), Fernando Gonzalez, to chief executive. Gonzalez replaces Lorenzo Zambrano, who died suddenly on Monday 12 May 2014. It also named Rogelio Zambrano, a cousin of the late executive, as its new chairman. Lorenzo Zambrano had been chief executive since 1986 and chairman since 1995.
"We will stay focused on creating value for all of our stakeholders," said Rogelio Zambrano in a statement. "I am very optimistic about Cemex's future." He has been a member of the Cemex board since 1987 and president of the company's finance committee since 2009.
Fernando Gonzalez joined the company in 1989 and held senior positions in a number of regions before being named executive vice president for finance and administration several years ago. "We are encouraged by the positive outlook and the improving business environment in the markets where we operate," he said in the release.
The board's decision to replace Lorenzo Zambrano from within the company is likely to reassure investors of continuity at Cemex, which is seeing a recovery in earnings after the recent economic crisis led the highly leveraged firm to refinance debt, sell assets and lay off around 10% of its workforce. The speed at which the board has responded is also likely to instill confidence.
After taking over the company, Zambrano embarked on a rapid and ambitious international expansion that transformed Cemex from a regional producer into a global supplier of cement and building materials, borrowing heavily to acquire companies and aggressively paying down debt.
Dismal demand continues in Catalonia 16 May 2014
Spain: Cement demand in the northern Spanish region of Catalonia went down by 15.1% year-on-year to 108,191t in April 2014, according to the regional cement association Ciment Catala. Exports of cement and clinker from the region grew by 44% to 223,219t in April 2014, over twice the volume of regional consumption. The decline in sales of cement in Catalonia was attributed to the lower amount of civil works.
Mexico: The board of Cemex may soon decide on a new CEO to replace the late Lorenzo Zambrano, who died of heart failure in Madrid on 12 May 2014. A funeral Mass was held on 14 May 2014.
Directors are likely to hold a meeting in the next few days, according to CFO Fernando Gonzalez. "The board meeting should occur this week," said Gonzalez. "What I can't tell you is the result." A swift decision by directors on a new CEO may reassure investors about the course of Cemex after Zambrano's three-decade tenure. He led the company to the top of the regional industry with US$29bn of acquisitions and became one of Mexico's best-known CEOs, while leaving no publicly anointed successor. Gonzalez, Cemex's CFO, is the odds-on favourite to succeed Zambrano according to analysts.
Gonzalez said that he didn't know whether the board would consider hiring a leader from outside of the company and that major shifts in the business are unlikely. "Cemex's strategy should be maintained," he said. "The strategy is to participate in the global market of the building materials industry." Gonzalez, who isn't a director, said that only the board knows the details of Cemex's succession planning. Even if the board meets this week, there's no guarantee it will make a final decision on new leadership.
Kenya: Kenya's antitrust authority may force Lafarge to sell some of its interests in the country if the cement maker is found to be flouting domestic competition rules.
The Competition Authority of Kenya (CAK) is probing Lafarge's influence on Kenya's cement industry through its 59% stake in Bamburi Cement and 42% shareholding in East Africa Portland Cement Co (EAPCC). The findings will be published in June 2014, according to the CAK's director general Francis Kariuki.
"The current arrangement between Lafarge and EAPCC may be deemed to be an unwarranted concentration of economic power because of the close directorship Lafarge has in EAPCC and Bamburi," said Kariuki. The CAK is investigating pricing in the Kenyan cement industry amid a dispute between shareholders and the government over ownership of EAPCC. Kenya's Treasury holds a 25% stake in the company, while the state-owned National Social Security Fund has 27%.
The government wants Lafarge to dilute its shareholding in EAPCC because no company should hold a 'monopolistic stake' in Kenyan industries, according to Industrialisation and Enterprise Development permanent secretary Wilson Songa. Cross-shareholdings are 'widely recognised to dampen competition,' according to the CAK. Bamburi Cement, in which Lafarge has a controlling stake, owns 12.5% of EAPCC. "Even passive shareholdings change the incentives to set prices, as some of the earnings from sales diverted to a rival are now internalised," said the CAK.
If Lafarge is found to have a monopolistic position in Kenya, the CAK may force Lafarge to sell its stake in one of its businesses in the country, according to Kariuki. Kenyan law also stipulates that anyone found guilty of price fixing faces a US$115,000 fine or a five-year jail term.
US: Eagle Materials Inc has reported financial results for fiscal year 2014, which ended on 31 March 2014. Company revenues were up by 40% year-on-year to US$898.4m and net earnings grew by 50% year-on-year to US$200m, reflecting improved sales volumes and stronger sales prices across all business lines. Annual revenue and earnings improvement also reflects the acquisition of assets, including cement plants in Missouri and Oklahoma on 30 November 2012.
Fiscal 2014 operating earnings from cement were up by 94% year-on-year to US$89.5m, while revenues from cement, including joint venture (the Texas Lehigh Cement Company LP) and intersegment sales, grew by 44% year-on-year to US$438.2m. Cement sales volumes reached a record 4.6Mt for the year.
Operating earnings from cement during the fourth quarter of fiscal 2014 were up by 422% year-on-year to US$12.0m. The earnings were impacted by US$4.5m associated with the annual maintenance outage at the Illinois cement plant, whereas 2013's fourth quarter cement earnings were impacted by US$14m, associated with maintenance costs at the recently acquired cement plants cement plants in Missouri and Oklahoma. Cement revenues for the quarter, including joint venture and intersegment revenues, grew by 10% year-on-year to US$81.7m. Cement sales volumes for the fourth quarter were up by 4% year-on-year at 803,000t.
Railroad to African riches 14 May 2014
The prospects for the East African cement industry have risen this week following the formal agreement to build a new railway line linking the port city of Mombasa and Nairobi in Kenya. The US$3.8bn project will replace the existing 100 year old narrow gauge track with work scheduled to start in October 2014 and a completion date in 2018. The second phase of the project is then intended to extend the line to neighbouring inland countries including Uganda, South Sudan and Rwanda among others.
The bottom line here from Reuters' reporting is that the new line will cut freight costs by more than half to US$0.08/t per km from US$0.20/t per km. Anybody considering sending freight along the 610km line could see their costs drop from US$122/t to US$49/t. With the average cement price in Kenya reported at US$75/t at the start of 2014, these kind of prices seem unlikely to throw the market to the mercy of overseas imports. Moving one tonne of cement along the full length of the line would cost more than half of the selling price. Yet the effect on input costs or transport over smaller distances may have an effect, especially if the inland extension actually gets built.
Kenya has four integrated cement plants with a production capacity of 3.4Mt/yr. Of these three - ARM Cement, Bamburi Cement (Lafarge) and Mombasa Cements are on the coast – and only one plant, the East African Portland Cement Company, is based inland in Nairobi. In addition National Cement and Savannah Cement both run clinker grinding plants near Nairobi.
A number of plants are being built. Most recently, Savannah Cement announced plans in April 2014 to build a clinker production plant. The East Africa Portland Cement Company plans to build a plant in Kajiado for operation by 2016. Nigeria's Dangote Cement has a 1.5Mt/yr cement plant planned to start operation in 2016 in Kitui, between Nairobi and the coast with ARM seeking funding to build a 2.5Mt/yr cement plant in the same region. Cemtech, a company owned by India's Sanghi Group, has plans to build a plant in West Pokot County in western Kenya but the project has been delayed due to issues with land acquisition.
Despite all this development activity Kenyan Bureau of Statistics figures suggest that more cement is being produced in the country than is officially being consumed. In 2013, 4.8Mt of cement was produced but only 3.94Mt was consumed. Yet both production and consumption have more than doubled since 2004 from 1.87Mt and 1.27Mt respectively. With the Kenyan construction sector averaging a growth rate of 6.45%/yr between 2004 and 2012, it looks likely that consumption will continue to rise and all these new cement plants are poised to benefit form this.
The old Ugandan railway, which the new railway seeks to replace, started construction in 1896 and was backed by the British government. It was nicknamed the 'Lunatic Line' given the harsh terrain and the high worker fatalities. The perils facing the project were capped by a pair of man-eating lions who attacked workers as depicted in the book 'The Man-Eaters of Tsavo' and eventually made into a film called 'The Ghost and the Darkness' starring Michael Douglass. Then as today the potential benefits of connecting the African coast to the interior were seen as high.
Bernard Terver appointed area manager of India 14 May 2014
Switzerland: Onne van der Weijde, Area Manager for India until 25 April 2014, and member of Holcim Senior Management, will leaves Holcim effective from 1 June 2014. The member of the Holcim Executive Committee, Bernard Terver, responsible for the Indian Subcontinent, will take over direct responsibility for the country.
South Africa: Investors have confirmed that construction has started on a new 1Mt/yr cement plant by Mamba Cement in Northam, Limpopo. Nedbank Capital and the Bank of China Johannesburg are providing US$107m of debt capital to fund Mamba, according to Business Day. Equity was provided by majority shareholder Jidong Development Group, the China-Africa Development Fund and by Women Investment Portfolio Holdings.
Nedbank Capital's infrastructure, energy and telecommunications head Mike Peo said that construction had already started and the project was expected to be completed by 2016.
"We obviously had a very hard look at the South African cement market. This plant is very close to Johannesburg, a primary market, so the transport costs and the actual cost point at which it can compete is going to be very attractive," said Peo. He added that the outlook for cement demand was 'extremely good' driven by government's infrastructure plans and the provision of housing.
Nigeria approves new cement standard 14 May 2014
Nigeria: Final approval for a new national cement standard has been given by Olusegun Aganga at the Federal Ministry of Industry, Trade and Investment. Following a short grace period all cement manufactured locally or imported must meet the approved standards and will be tagged 'NlS 444-1'. The implementation of a new standard for cement follows a battle between cement industry stakeholders regarding whether poor quality cement had been to blame for building collapses.
The highest grade - CEM I 52.5R, 52.5N, or 52.5 - will now be used for the construction of bridges. The second highest grade - CEM II 42.5R, 42.5N or 42.5 grade – will be used for the casting of columns, beams, slabs and for block moulding. The lowest cement grade - CEM I & II 32.5R, 32.5N or 32.5 cement grade – will be used only for the plastering of buildings.
According to the ministry, the new guidelines would, "Enable the end users make the right choice; help to avoid unethical application of the different types of cement; enhance proper identification of the different cement classes and enhance traceability as well as guide users." The ministry added that the standards were reviewed because they had attained the five-year mandatory period for review, as well as concerns over the quality of cement in the Nigerian markets.
Iran exports 18.8Mt in 2013 – 2014 calendar year 14 May 2014
Iran: Iran exported 18.8Mt of cement clinker in the Iranian calendar year that ended on 20 March 2014 according to the Ministry of Industries, Mines and Trade. The figure was a 38% increase from the 13.7Mt exported in the 2012 – 2013 year. The ministry added that 69.7Mt of cement was produced in the country in the 2013 – 2014 period. Of this total 79% was consumed domestically.