Displaying items by tag: Acquisition

France: Switzerland-based Holcim has acquired self-levelling screed producer Chrono Chape. Chrono Chape’s screeds create even foundations for builders to lay floors on. It serves its customers in France with a fleet of batching trucks.

Holcim’s Europe region head Miljan Gutovic said “I am excited to acquire Chrono Chape, as another step in advancing our Strategy 2025 – Accelerating Green Growth. With this operation, we will expand our range of services and geographic footprint in France. Building on the entrepreneurial vision and legacy of the Dupuy family, I look forward to investing in this business’ next era of growth and warmly welcoming their employees into the Holcim family.”

India: Dow Jones Institutional News has reported that Adani Group is in talks with a ‘major shareholder’ of Orient Cement over a possible acquisition of the latter’s stake in the CK Birla Group company.

Orient Cement first began producing cement in Telangana in 1982, and has since spread to Karnataka and Maharashtra, with a cement production capacity of 8Mt/yr.

Orient Cement previously leased land in Maharashtra for a new grinding plant from coal-fired power plant Adani Power Maharashtra, an Adani Group subsidiary, in late 2021. Adani Group entered the cement sector following its acquisition of ACC and Ambuja Cements from Switzerland-based Holcim on 16 September 2022.

US: Investment firm Platinum Equity has concluded a deal to acquire refractories producer HarbisonWalker International (HWI).

HWI chair CEO Carol Jackson said “This is excellent news for our employees, customers, and communities. Platinum Equity supports our intent to continue driving HWI forward into an unprecedented new era of growth. Over the past several years in North America and throughout our global operations, we’ve built operational excellence, differentiated ourselves through our supply reliability, and delivered the deepest and widest offerings of refractory products and expertise. Our new owner is wholly aligned with our leadership team’s vision to aggressively accelerate investments in our business. We are poised to capitalise on the momentum that our team of employees has built together."

Further consolidation of the Indian cement sector looked closer this week with the news that Dalmia Bharat’s cement subsidiary has agreed to buy the remaining cement plants from Jaiprakash Associates. The US$685m deal covers cement and power plants in Madhya Pradesh, Uttar Pradesh and Chhattisgarh. It includes clinker production capacity of 6.7Mt/yr, cement capacity of 9.4Mt/yr and 280MW of captive power capacity.

Chart 1: Map of Dalmia Bharat’s cement plants in November 2022 with region of proposed new plants highlighted in orange. Source: Adapted from Dalmia Bharat investor presentation.

The acquisition gives Dalmia Bharat the opportunity to draw level with Shree Cement in terms of cement production capacity. If the deal completes, then both cement companies will hold a capacity of around 46Mt/yr. This puts them behind UltraTech Cement and Adani Group nationally. In terms of the cost, the proposed acquisition works out at around US$73/t of cement capacity, although this doesn’t take into account the additional captive power generation capacity. This compares to US$119/t for UltraTech Cement’s purchase of Jaiprakash Associates plants in 2017 and US$97/t for Adani Group’s purchase of Holcim’s Indian-based business in September 2022.

Dalmia Bharat’s rationale for its move this week was that it wants to grow in the Central Region of the country and work towards a capacity target of 75Mt/yr by the 2027 financial year and at least 110Mt/yr by the 2031 one. It backed this up in an investors’ presentation by saying that cement consumption was around 170kg/capita locally and that the region represented about 15% of national demand at 54Mt/yr. This roughly checks out with regional integrated/clinker production capacity distribution analysis that Global Cement Weekly carried out in June 2022. Only the East region was lower, but this didn’t take into account grinding plants or new projects.

Completion of the agreement is planned by December 2023 and is subject to the usual regulatory approvals. However, readers may recall the difficulties UltraTech Cement had in the mid-2010s when it attempted to buy two plants from the subsidiary of Jaypee Group. Problems stemming from an amendment to the Mines and Minerals (Development and Regulation) (MMDR) Act caused the original proposal to be rejected by the Bombay High Court in early 2016. UltraTech Cement bounced back though with a deal to buy far more plants instead. This deal completed successfully in mid-2017.

Jaypee Group’s debts have also caused problems along the way. Indeed, this is the reason why it has finally decided to leave the cement business altogether. In early December 2022 it reported its latest default on interest payments towards some of its loans. Overall its outstanding debt was US$3.39bn. Due in part to this, there have been plenty of stories in the local press over the last decade on whoever was reputedly buying the Jaypee Group’s cements assets. In October 2022, for example, Adani Group was reportedly in advanced talks to buy Jaypee Group’s remaining cement business until it denied it publicly. One deal that did reach fruition was Dalmia Bharat’s purchase of Bokaro Jaypee Cement back in 2014 from a joint-venture majority controlled by Jaypee Group. That agreement gave it full control of the 2.1Mt/yr Bokaro grinding plant in Jharkhand. Looking at the current proposed acquisition, one commentator from HDFC Securities in the local business press noted that detail on the transaction is lacking, such as what will happen to existing limestone reserves. Another pointed out that the deal was probably 30 – 40% below the replacement cost because the plants were old, lack of interest from potential buyers and due to the “likely need for additional CAPEX to run operations.”

If the Dalmia Bharat - Jaiprakash Associates deal completes then it marks the end of an era for the Indian cement industry as one of the big players bows out of the sector. It shows once more that, despite the mounting fuel and raw material costs in 2022, companies are still seeing big opportunities. In its December 2022 report, the ratings agency ICRA found that cement sales volumes grew by 11% year-on-year to 187Mt in the first half of the 2023 financial year. The acquisition might also, hopefully, put an end to the endless speculation about who Jaypee Group might be selling its cement plants to! Although, of course, the question then becomes who else might be considering divesting cement assets.

India: Dalmia Cement (Bharat) has concluded a contract for the acquisition of cement and other assets from Jaypee Group for US$684m. Mint News has reported that the deal will bring Dalmia Cement (Bharat) into control of an additional 9.4Mt/yr of cement production capacity, including 6.7Mt/yr of clinker production capacity, as well as 280MW-worth of fossil fuel-fired power capacity. All cement and grinding plants included under the deal belonged to Jaypee Group subsidiaries Jaiprakash Associates and Jaiprakash Power Ventures and are situated in Chhattisgarh, Madhya Pradesh and Uttar Pradesh.

Egypt: France-based Vicat’s stake in Sinai Cement has risen to 67% from 51%. The group purchased US$5.65m-worth of additional shares in the producer from separate investors on 13 December 2022. Reuters News has reported that shareholder Arab Industrial Investment sold its 6.6% stake for US$2.29m.

UK: Germany-based Heidelberg Materials has signed a deal for the acquisition of Mick George Group, the leading concrete recycling company in the East Midlands and East of England. Mick George Group’s 40 sites span bulk excavation, earthmoving and demolition services and demolition waste removal and management, as well as ready-mix concrete and aggregates distribution.

Heidelberg Materials Western and Southern Europe director Jon Morrish said “With the acquisition of Mick George, we are clearly moving towards establishing a truly circular materials and services offer in our UK business. I warmly welcome all 1000 Mick George employees to Heidelberg Materials and look forward to further developing the business together.”

Heidelberg Materials aims to offer circular alternatives for half of its products by 2050.

Costa Rica: Holcim Costa Rica has acquired the heavy precast unit of Productos de Concreto for US$3.35m. The La Nación newspaper has reported that the company also increased its stake in prefabricated construction company Tecnología de Construcción to 100% from 49%. The latter deal's value was US$774,000.

Holcim Costa Rica's corporate affairs manager José Alfredo Alpízar Guzmán said that these latest acquisitions complement the producer's existing abilities to supply its customers.

China: China National Building Material (CNBM) subsidiary Sinoma International Engineering has concluded an agreement to acquire cement plant equipment supplier CNBM Smart Industry Technology. MarketScreener News has reported the value of the deal as US$52m.

CNBM Smart Industry Technology supplies maintenance services and equipment to companies around the globe.

CRH released its third quarter trading statement this week and the results were rosy, especially when compared to its peers in the cement business. Double digit growth in both sales revenue and earnings was reported for the nine month period so far in 2022. The company’s figures mainly attributed this to growth in its Americas Materials and Building Products divisions, although the presentation in its trading update took care to point out that the Europe Materials division had reported growth in the first half of 2022 only for it to run into a slowdown in the third quarter as energy prices increased. Even this wasn’t as bad on a like-for-like basis, with only earnings down in the third quarter in Europe. Chief executive officer Albert Manifold summed it up as follows: “This performance reflects the resilience of our business and the benefits of our integrated and sustainable solutions strategy.”

Manifold’s focus on integrated products was unsurprising given that the group has spent US$3bn in the year to date on businesses that make these kinds of things. These acquisitions have been added to its Building Products division adding to its already strong growth so far in 2022. The big one was the US$1.9bn deal to buy Barrette Outdoor Living, a US-based retailer and distributor of residential fencing and railing products. This was completed in July 2022. Other so-called bolt-on investments in 2022 have reached a total of US$1.1bn for 20 companies including Calstone, Hinkle, Rinker and Normandy in outdoor living, road and critical utility infrastructure sectors.

At the same time the group divested its architectural glass Building Envelope business for an enterprise value of US$3.8bn to private equity company KPS Capital Partners. That deal was completed in May 2022. On a smaller scale, it is also worth noting that Thomas Gruppe announced in early November 2022 that it had signed a purchase agreement to buy Opterra Zement and Opterra Beton. This includes the integrated Karsdorf cement plant, the decommissioned Sötenich grinding plant and the Neufahrn ready-mix concrete plant. However, there was no mention by Thomas Gruppe of the integrated Wössingen plant operated by Opterra Wössingen. Neither Opterra or CRH appears to have commented on this publicly yet though.

How CRH tweaks its business portfolio is interesting in comparison to the other cement companies. As Global Cement Magazine has covered recently, Holcim is bulking up a fourth business in light building materials and Cemex, Heidelberg Materials and others are similarly diversifying away from cement production to various degrees. CRH has generally held a more mixed portfolio away from the heavy materials trio of cement-concrete-aggregates over the last decade. However, it concentrated more on heavy materials when it picked up assets divested in the merger of Lafarge and Holcim in 2015. Since then it has been steadily pulling out of developing markets and focusing on North America and Europe. So, to see CRH moving out of the building envelope sector at the same time as Holcim and others dive in is a clear difference in approach.

The other point to highlight is that Manifold links sustainability to the group’s integrated products plan in his quote above. Earlier in 2022 the company revealed a new 25% reduction target in absolute CO₂ emissions by 2030, that has been certified by the Science Based Targets initiative (SBTi), and a continued goal of becoming net-zero by 2050. It clearly takes sustainability seriously as Manifold was also previously the president of the Global Cement and Concrete Association when it was set up in 2018. Other indicators include the company’s use of an internal carbon price as indicated in its 2021 sustainability report. It also mentioned here that 43% of its direct CO₂ emissions were covered under an emissions trading scheme. One implication here is that focusing on doing business in developed markets means that the group has to take its CO₂ emissions seriously, as legislators in these places do too.

CRH is one of the largest building materials companies in the world and its cement business has grown and shrunk a little over the last decade. Despite this it remains in the top 10 of cement producers globally based on production capacity. Its purview of multiple markets in building materials continues to make it a company to watch as the more traditional heavy materials cement companies adjust their own product portfolios.