Displaying items by tag: Adelaide Brighton

Australia: Construction materials maker Adelaide Brighton has increased its net profit by 3.9% to US$158m in 2012, from US$152m in 2011. The company said that mining and resources projects in South Australia, Western Australia and the Northern Territory had more than offset weakness in residential and commercial construction.

"While net profit increased only modestly in 2012, we see this as a good result considering the challenges facing the industry," said managing director of Adelaide Brighton, Mark Chellew.

The company's revenue rose by 6.9% to US$1.21bn in 2012 from US$1.13bn in 2011. Earnings before interest and tax (EBIT) rose by 1% to US$232 from US$229m.

Although the company didn't provide any specific details on the cement part of its business, it did comment that sales increased overall in 2012 due to increased mining and project demand despite the weak building sector. Energy costs increased by 8%, including the US$3m after tax impact of the carbon tax. Adelaide Brighton said it is employing a number of strategies to mitigate rising energy costs including fixed price energy contracts for a portion of energy requirements, the use of alternative fuels and a continual review of operational improvements.

In December 2012 Adelaide Brighton acquired 30% of an integrated white clinker and cement production facility in Malaysia for US$29.5m. The investment is expected to generate acceptable returns and secure long term supply for Australian markets.

Chellew said the carbon tax, environmental regulations and cost pressures were likely to affect the outlook for 2013 but reaffirmed the company's commitment to reducing its carbon footprint by using imported materials and alternative fuels. The company said the high Australian dollar had enabled it to import more clinker, cement and blast furnace slag at cheaper prices. However, the strong currency and mixed local demand had curtailed domestic price growth.

As 2012 draws to a close the challenges posed by the Australian carbon tax to the Australian cement industry are starting to show. First, Holcim Australia announced it was to lay off 150 staff. Then Boral released the news that it was planning to cut 90 jobs at its Waurn Ponds cement plant.

Following years of debate the Gillard government introduced the Clean Energy Act in July 2012. Heavy polluters were initially charged US$23/t of CO₂ emitted, more than twice the cost of similar schemes in Europe where it is US$10/t. A key criticism of the scheme was that it would damage the Australian domestic cement industry with cheap imports. However the Australian government cushioned the move with compensation packages for major polluters, including cement producers, currently set to last five years.

Although the Australian cement industry hasn't totally collapsed, with the loss of 1800 jobs as the Australian Federal Opposition warned of in 2011, imports have been favoured in recent months. Boral's suspension of clinker production at Waurn Ponds will increase imports. The change will result in 25-30% of Boral's clinker being imported. It's worth noting that Boral pointed out in its press release that this was 'in-line' with the Australian industry.

Adelaide Brighton, the country's third biggest producer after Holcim and Boral, may not have laid anybody off but it has secured a 10-year supply of foreign clinker. On 5 December 2012 the building materials producer announced that it was going to a buy a 30% stake in Malaysian white clinker and white cement producer, Aalborg Portland Malaysia. In the accompanying press statement the company's chief financial officer explicitly blamed the carbon tax as one of the reasons for the acquisition.

Whether the job losses at Boral and Holcim can be totally blamed on the carbon tax remains to be seen. Boral's second-half profit for the year ending 30 June 2012 suffered a fall of 59% to US$35.7m. Holcim noted weaker demand outside of mining regions for the third quarter of 2012. By contrast, Adelaide Brighton reported steady gains in its half-year report for 2012 although cement sales only increased 'marginally'. Elsewhere in its report Adelaide Brighton stated that it would cope with the impact of the carbon tax by reducing reliance on domestic manufacturing. These can hardly be comforting words for the Australian cement industry.

Australia: Australian building materials producer Adelaide Brighton will buy a 30% stake in a Malaysian white clinker and white cement producer, Aalborg Portland Malaysia (APM) for US$29.7m. APM is owned by Aalborg Portland A/S, a subsidiary of Italian entity Cementir Holding. The deal also secures a 10 year supply agreement with APM and continues Adelaide Brighton's efforts to access raw material given its 'maxed-out' production capability.

"The high dollar, rising power costs, the carbon tax and increasing labour costs make building a new plant in Australia too high in terms of capital expenditure costs," said Adelaide Brighton's chief financial officer Michael Kelly. He added that Adelaide Brighton needs to secure imports and that the acquisition provides a strategic position in Asia for the company.

APM is also considering a US$18.6m expansion of the plant to increase white clinker production capacity from about 2015. Imports of cementitious products, including grey and white clinker, cement and blast furnace slag are expected to increase from approximately 1.6Mt/yr in 2012 to more than 2Mt/yr in 2016.

Australia: Cement and lime manufacturer Adelaide Brighton Ltd (AB) has announced that its half-year profit for the first six months of 2011 declined by 10.6% amid weakness in the housing sector. The company stressed, however, that it was confident with regard to its future earnings. AB's net profit fell to USD64.67m for the six months to 30 June 2011 from USD72.0m in the first half of 2010. Its revenue declined by 2.2% USD531.5m.

While outlining a mixed to steady outlook of demand for its building products, AB said that it was, "confident on future earnings due to its strong exposure to infrastructure and resources."

Covering off the furore over Australia's potential CO2 tax, AB said that it had, "already significantly reduced its carbon footprint by using alternative fuels and sourcing alternative raw materials." It added that it had already closed inefficient clinker facilities and was now the largest importer of cement and clinker into Australia. This, it said, has helped to reinforce a strong position for the company relative to domestic cement and clinker competitors.

AB's apparent stance is distinctly opposed to those of the members of the public (who came out in protest in the capital Canberra on 16 August 2011), Opposition politicians, BCG Cement and the Cement Industry Federation, which have variously warned of massive job losses in the cement industry, price increases and emission leakage to countries with weaker environmental regulations.

Chris Harris from AB said that the company believed that the carbon tax, as proposed, would not have any significant impact on the continuation of AB's successful growth strategy of the past decade and that AB would continue its successful long-term strategy of operational improvement, growth in the lime business and vertical integration into downstream markets.