September 2024
Ireland: CRH recorded consolidated sales of US$32.7bn in 2022, up by 12% year-on-year from US$29.2bn in 2021. The producer's Americas Materials business reported sales of US$14.3bn, up by 15% US$12.4bn. Across the Americas, its cement revenues grew by 8% year-on-year. A 12% regional price rise offset a decline in the business' cement sales volumes. CRH's Europe Materials business reported sales of US$10.6bn, in line with 2021 levels. Its cement revenues were US$2.04bn across the region.
Chief executive officer Albert Manifold said "Our 2022 performance reflects the outstanding commitment of our people, the underlying strength and resilience of our business and the continued delivery of our integrated, solutions-focused strategy. Despite significant cost pressures throughout the year, we delivered further improvements in profits, margins and returns. Our strong cash generation together with our relentless focus on disciplined capital allocation has also delivered the strongest balance sheet in our history, providing us with significant opportunities for further growth and value creation going forward."
Portugal: Secil says that it will commission its Outão cement plant's new line, called a Clean Cement Line, in mid-2023. The line will produce Portland limestone cement (PLC).
Jornal de Negócios News has reported that this will increase the producer's consumption of limestone, for which its already partly relies on imports. Secil has submitted an application to expand its limestone mines, entitled New Quarry Plan, to the Portuguese Environment Agency. Under the plan, Secil will connect it Vale de Mós A and Vale de Mós B quarries. It will thereby secure sufficient supply to become entirely reliant on mined limestone in its cement production. The plans also leave a 27 hectare 'plateau' at the site, which will be available for other uses.
Pakistan: Thatta Cement produced 211,000t of cement during the first half of 2023 financial year, up by 3.7% year-on-year from 204,000t during the first half of 2022 financial year. Its clinker production rose by 55% to 190,000t from 122,000t. The producer despatched 215,000t of cement, up by 4.7% year-on-year from 205,000t. Its despatches of clinker fell to 0t from 4990t.
Thatta Cement said "During the period under review, persistent political instability and indecisive monetary measures have left the business to face gross challenges. Recent floods brought on by extremely strong monsoon rains have damaged the national infrastructure and created a food crisis. The catastrophic flood has killed thousands of people, besides flooding one-third of the country. This has further compounded the agony of an economy which has already been struggling for its survival due to ever increasing current account deficit, sharply rising inflation rate and massive rupee devaluation."
Paraguay: Industria Nacional del Cemento (INC) has suspended cement production and despatches at its Vallemí cement plant in Concepción. The La Nación newspaper has reported that torrential rain washed away raw materials stocks stored at the site. INC expects the plant to remain shut until 17 March 2023. It reassured customers that its Villeta grinding plant will continue to despatch cement as usual. CEO Ernesto Benítez said that it was 'inconceivable' that the suspension would not disrupt the domestic cement supply, given INC's 40% market share.
Switzerland: Holcim has commissioned the world's first cement plant digital twin at one of its cement plants in Switzerland. The software models the plant and is integrated with sensors, analytics and machine learning technology. UK-based HyBird also participated in the development of the technology. Holcim expects it to help to optimise its operations. Under its Plants of Tomorrow automation strategy, it will now aim to roll out the system across all of its cement plants, beginning with those in Europe.
Holcim's global head of Plants of Tomorrow, Rozemarijn Wesby, said "Our digital twin in Switzerland is a breakthrough for the entire industry. By leveraging digital technologies like this, we are generating massive amounts of data, allowing smarter decision-making to take our operational efficiency to the next level."
2022 roundup for the cement multinationals 01 March 2023
The key trends to note from the financial results of cement producers in 2022 released so far are that sales revenues are up, sales volumes of cement are mostly down and earnings have mostly dropped too. Readers are not going to be surprised that 2022 was a tough year for business as the raw materials and services inflation coming out of the coronavirus period was heightened by energy cost spikes caused by the Russian invasion of Ukraine. Producers put their prices up in response to deliver often record high annual revenues.
Graph 1: Sales revenue from selected cement producers in 2021 and 2022. Source: Company reports. Note: Figures calculated for UltraTech Cement.
What sticks out by looking at the sales volumes of cement figures in Graph 2 (below) is that Holcim’s cement sales volumes were about the same as Heidelberg Materials’ were in 2022, at around 120Mt. Remember, Holcim’s cement sales volumes were 200Mt in 2021 and 256Mt in 2015 at the time of the merger with Lafarge. Large divestments have followed with the sale to Adani Group of Holcim’s India-based companies in 2022 being one of the biggest. UltraTech Cement, meanwhile, has been steadily increasing its India-based cement production capacity.
Graph 2: Cement sales volumes from selected cement producers in 2021 and 2022. Source: Company reports. Note: Figures calculated for UltraTech Cement.
By company, Holcim’s diversification and regionalisation strategy appears to be paying off well. Reducing its exposure to the cement market is giving it a strong story to tell as it grows its light building materials division, frames this as a success in sustainability and moves out of developing markets. How well this will work if and when it ends the divestment and investment stage remains to be seen. One point to highlight is that its operating profit fell by 18% year-on-year on a like-for-like basis to US$3.43bn in 2022. As well as contending with high costs in 2022, a subsidiary connected to the group was fined US$778m by the US Department of Justice in late 2022.
Heidelberg Materials’ approach to the current economic conditions in 2022 seems to have been to keep its head down and push on for decarbonisation rather than diversifying its business. So it followed the ‘sales up, costs up but earnings down’ pattern of a few of the other cement companies covered here. Although, that said, it did diversify its name to ‘Materials’ from ‘Cement’ in September 2022.
Cemex experienced the same problems as the other companies for most of 2022 but conditions started to improve in the fourth quarter in most of its territories. In particular, it reported that earnings started to grow in Mexico towards the end of 2022 despite falling sales volumes of cement. It attributed this to its pricing strategy. Of note this week, the Mexican government is preparing to support higher levels of imports of cement into the country due to a shortage in the southeast of the country.
Buzzi Unicem, meanwhile, noticed a faster slowdown in cement deliveries in its key markets in Italy, the US and Eastern Europe in the last quarter of 2022 from a general trend that could also be seen earlier in the year. In its largest market, the US, it reported that investment in residential construction slowed. This was further affected by the growing cost of building materials and the rate of inflation, although increasing spending on infrastructure helped to keep domestic consumption stable. A favourable currency exchange rate between the US and the Euro also helped the company to report provisional earnings growth. Vicat’s US businesses in the US and Brazil helped cushion the group somewhat with a large rise in sales revenue. However, earnings in the US were hit by the costs related to the start up of the new kiln at the Ragland plant in Alabama, as well as general energy cost inflation. Its business in France fought against inflation with ‘significant’ price rises delivering a high increase in sales revenue but this was insufficient to prevent earnings from dropping.
The non-European based cement producers present a different picture. Despite the high energy costs, UltraTech Cement managed to increase its revenue and sales volumes of cement in 2022. Its net profit fell though year-on-year in the nine months to 31 December 2022. The company is targeting a cement production capacity of 159Mt/yr by around the 2025 financial year with the aim of becoming the largest cement producing company in the world outside of China. Dangote Cement managed to raise its prices at home in Nigeria to fight off inflation and hold revenue and earnings up. This was harder internationally though with supply chain disruption, high commodity prices, high freight rates and a plant shutdown in Congo blamed for holding earnings back.
Inflation and the energy markets will be clear concerns in 2023. If energy prices for industry stabilise globally then there is more of a chance for business as usual as markets cope better with higher costs. The continued dilemma for multinational cement companies remains whether to decarbonise through diversification or investment in new processes, and how far to go along either path. Meanwhile, the large regional producers are starting to show themselves outside of China, as UltraTech Cement’s growth trajectory testifies. One test for these companies is balancing the risk of expansion versus potential tighter local environmental regulations. The environmental rules of export markets are also a factor to consider here with the head of AdBri calling this week for an Australian equivalent to the European Union’s border adjustment mechanism to block so-called ‘dirty’ imports.
The next set of financial results from the cement sector in 2022 to look out for will be those from the large China-based cement producers. Once these are released we will examine them in more detail.
Jan Jenisch to be proposed as new chair of Holcim 01 March 2023
Switzerland: The board of directors of Holcim intends to propose Jan Jenisch as the group’s chair at its annual general meeting in May 2023. The move follows current chair Beat Hess’ decision not to stand for re-election. Hess was elected to Holcim’s board of directors in 2010 and became its chair in 2016. Jenisch has been the chief executive officer (CEO) of Holcim since 2017 and a member of the board of directors since 2021. He was previously the CEO of Sika from 2012.
Mark Irwin confirmed as head of AdBri 01 March 2023
Australia: AdBri has appointed Mark Irwin as its chief executive officer (CEO). He took the position on an interim basis in October 2022 following the departure of Nick Miller. Irwin has previously worked for a number of Australia-based industrial companies including OZ Minerals, BHP, Asciano, Transfield and GrainCorp.
Pakistan: Power Cement has appointed Taha Hamdani as its chief financial officer. He succeeds Irfan Sikander Bawa in the post.
National Cement Company to commission 2.5Mt/yr West Pokot cement plant in September 2023 01 March 2023
Kenya: National Cement Company expects to commission its upcoming West Pokot clinker plant in September 2023. The cement company says that the plant will produce clinker for export to neighbouring countries in Central and East Africa. A previous survey by the Kerio Valley Development Authority proved reliable reserves of 1.2Mt/yr of limestone in the area. When commissioned, National Cement Company expects the new plant to generate 2000 direct jobs.