Displaying items by tag: Australia

We end 2023 with the news that CRH and Barro Group are preparing to acquire AdBri in Australia. The two companies have teamed up to buy all the ordinary shares in the building materials company that they do not already own for about US$750m. Barro already owns a 43% stake in AdBri and CRH owns just under 5% via a cash settled derivative. The plan is for CRH to buy the remaining shares so it ends up with a 57% holding in total. It requires shareholder approval at AdBri, regulatory consent and other conditions to be met to move forward.

Barro Group has been increasing its stake gradually in AdBri over the last 25 years. It hit 43% in 2019 and subsequently the Australian Competition and Consumer Commission (ACCC) investigated it. Barro Group’s course was cleared in 2020, with the ACCC determining that the acquisition would not ‘substantially lessen’ competition in the market between the two companies that overlap for the supply of cement, ready-mixed concrete and aggregates. It also found Barro and AdBri would continue to face competition locally from Boral, Holcim and Hanson. However the ACCC added that it might reopen its investigation if it received further information that altered its conclusion at that time.

The dynamic between Barro Group and AdBri is complicated because they are, at present, both partners and rivals. Barro owns a significant minority stake in AdBri, and its managing director, Raymond Barro, became the chair of the latter company in 2019. The two companies operate a joint venture, Independent Cement and Lime, which distributes cement and lime in Victoria and New South Wales, and runs a slag cement grinding plant in Melbourne. They sell goods to each other too. Yet Barro Group and AdBri also compete against each other, principally in the sale of concrete. Comments made by Raymond Barro to the Australian Financial Review newspaper indicate that this competition looks set to continue even if CRH and Barro Group buy AdBri, given the family ownership structure of the former company. To this end AdBri set up a governance framework for its board in 2015 in part to handle the interaction between the business interests of itself and Barro Group, and this was further revised in 2019. Due to this convoluted relationship, it set up an independent board committee to assess the current proposal from CRH and Barro Group with Barro family nominee directors removed from the consideration process. It then approved the proposal to the next step of negotiations.

The general consensus is that the CRH-Barro Group deal looks likely to succeed. CRH has a limited presence in Australia and Barro Group’s ownership of AdBri doesn’t seem to change much under the limited details released publicly about the proposal. Potential problems could arise from a rival bidder, if the ACCC decided to re-evaluate the situation or if the Foreign Investment Review Board became involved, but we’ll have to wait and see about these. AdBri owns two of the country’s five clinker plants, both in South Australia. Subsidiary Cockburn Cement also used to produce clinker at its Munster plant in Western Australia but this moved over to grinding-only in the mid-2010s. The company also runs three grinding plants. One of these, Cockburn Cement’s Kwinana plant, has been undergoing a costly upgrade project that overshot its original estimate. Purely in terms of active integrated cement production capacity, this places the deal at US$875/t, a high figure but not as much as CRH stumped up to buy Martin Marietta Materials’ South Texas business in November 2023.

This then leads to how CRH and Barro Group might interact running the business in the future. CRH is by far the bigger company, in charge of a multinational building materials concern, and among the world’s largest producers of cement and concrete outside of China. Its decision to make a large acquisition outside of Europe and North America marks a turning point in its growth strategy since the late 2010s. In a statement, CRH’s head Albert Manifold was quick to compare how Australia was “similar in nature to the Southern US and Central and Eastern Europe where we have a significant presence.” Barro Group, meanwhile, has doggedly been taking over AdBri bit by bit over a quarter of a century. What it gains from the current proposal is mostly unknown, but simplifying the ownership structure and delisting from the Australian Stock Exchange could offer a number of advantages to it. Their ambitions appear aligned for the moment but this may not stay the case forever.

That’s it from Global Cement Weekly for 2023. Enjoy the seasonal break if you have one. Global Cement Weekly will return on 3 January 2024.

Australia: Adbri has entered into an agreement to obtain a new limestone carrier for its South Australian cement operations, to replace its MV Accolade II vessel currently in operation there. Specifically, the new carrier will supply raw materials for the Birkenhead cement plant. It is 100% battery electric capable. Adbri has hired marine transport company CSL to supply and operate the vessel. The contract will last until 2043, with the option for two five-year extensions.

Adbri chief executive officer Mark Irwin said “The new vessel will support Adbri to increase cement volumes at Birkenhead, while also supporting the production of lower carbon products such as EvoCem cement, which uses limestone as a clinker substitute.” He continued “The new vessel is expected to start operations with a hybrid system, where electric power will replace about 25% of its diesel fuel. This is expected to reduce Scope 1 emissions by about 40% compared to the current emission intensity seen in the Accolade II operation. By 2031, we aim to achieve 100% electric power capability, further reducing Scope 1 emissions to less than 10% of the current emission intensity seen in the Accolade II operation. This milestone is a crucial step forward in our on-going net zero emission journey.”

Australia: Ireland-based CRH and Barro Group have partnered to jointly acquire Adbri outright. The companies currently control 47.6% of Adbri combined – a 4.6% stake under CRH and a 43% stake under Barro Group. Under their offer to shareholders, CRH will raise its stake in the company to 57%. The partners have valued the company at US$1.4bn as part of their proposal. Following the conclusion of any such deal, the companies reportedly plan to delist Adbri from the Australian Securities Exchange (ASX).

CRH chief executive officer Albert Manifold said "Adbri is an attractive business with quality assets that complement our core competencies in cement, concrete and aggregates. With its leading market positions in Australia, we are delighted that this opportunity has presented itself to us.” He added “It is the next logical step for CRH to expand our existing presence in Australia, where we have been operating for 15 years. We look forward to working with the Barro family over the coming years to enhance the long-term performance of the business, leveraging our scale, industry knowledge and technical expertise to improve long-term growth and operating performance and drive value to achieve the true potential of the business.”

Australia: Adbri says that the cost and timing of its on-going expansion of its Kwinana grinding plant in Western Australia remain ‘on track.’ To date, the producer has invested US$161m in the expansion, towards a projected cost of US$385-420m.

In an accompanying trading update, Adbri said that it expects its full-year earnings before interest, taxation, depreciation and amortisation (EBITDA) to be US$208 -212m in 2023, ‘moderately’ above its previous outlook. In 2022, its earnings before interest and taxation (EBIT) amounted to US$106m. The company has forecast total capital expenditure investments for 2023 of US$208-215m. It previously expected to invest US$221-235m during 2023.

Australia: Western Australia’s environment minister Reece Whitby has questioned the efficacy of tests submitted by Cockburn Cement in relation to its Munster lime plant in May 2023. The tests showed successes in odour reduction during sand feeding at the plant’s Kiln 6. Business News Western Australia has reported that the government and an independent expert have raised ‘areas of concern’ as to whether the trial represents normal operating conditions for the kiln.

David Scaife, who represents Cockburn District in the Western Australia Legislative Assembly, said "My gripe is not with the workers, it is with the senior management and the directors of Cockburn Cement and its owner, Adbri, who have refused to do the right thing either by moving the lime manufacturing operations to its Kwinana facility or at least making the investments necessary to eliminate the odour."

Australia/UAE: Industrial CO₂ emissions reduction research body Heavy Industry Low-carbon Transition Cooperative Research Centre (HILT CRC) has received an invitation to attend COP28. HILT CRC said that the invitation reflects the importance of collaborative research for the decarbonisation of Australia’s heavy industries, including cement.

Chief executive officer Jenny Selway said “Decarbonising heavy industries is a core aspect of cutting down on global emissions to limit global warming to well below 2°C. The low-carbon technology transition in heavy industry is vital for our future: it will ensure we build sustainable industries and create new opportunities for Australia’s economy.”

Vietnam/Australia: Vietnam exported 412,000t of cement to Australia during the first 10 months of 2023. Việt Nam News has reported that this is more than double the 10-month 2022 figure of 157,000t. The total value of the shipments also more than doubled year-on-year, to US$20.5m from US$8.37m.

Australia: The government has begun consultations with affected parties over the possible implementation of a carbon border tax on imports of goods from heavy industries, including cement production. The Herald Sun newspaper has reported that manufacturers’ associations in Australia have welcomed the possible change to emissions laws.

Australia/New Zealand: Belgium-based Etex has signed an agreement with building materials company BGC to acquire the latter’s gypsum and fibre cement businesses. The fibre cement business includes the Canning Vale fibre cement boards plant in Western Australia. BGC also operates nine warehouses across Australia and New Zealand. Etex says that the deal expands its activities in the ‘attractive’ local market, with significant growth opportunities. Finalisation is expected in early 2024.

Etex CEO Bernard Delvaux said “This deal is a strategic opportunity for Etex to complement our footprint in Australia and further increase the accessibility of our products and services for customers. This will both reinforce our gypsum wallboard offering and position us well in the growing fibre cement activities through a broad product range and good channel access.”

Australia: Boral has been halting production at its various production plants when the cost of electricity becomes too high. “At a certain point during the day, when the price goes up to a certain level, our manufacturing stops,” Chief executive officer Vik Bansal told the Australian Financial Review energy and climate summit. He added that the company had assessed that it was cheaper to have “thousands of people waiting idle for the prices to come down than actually do the work.” Additional reporting by the Sydney Morning Herald newspaper revealed that Boral’s staff had been working overtime and in night shifts to manage energy costs and to maintain the supply of building material products to its customers. Bansal told the summit that the company’s electricity costs rose by 54% in the 12 months to the end of June 2023.

However, Bansal was not clear whether all or just some of Boral’s plants have been stopping production temporarily due to peak daily electricity prices. The company produces cement, lime, concrete, asphalt and aggregates at 360 locations.

Boral has signed a fixed-price, 10-year power purchase agreement that will cover 19% of its renewable electricity needs to 2035, but is reportedly struggling to find other cost-effective options. In August 2023 it also reduced its emissions reduction target to 2025 from 2019 figures to up to 14% from 19% previously. It blamed this on “external factors” such as delays in securing the required regulatory approvals for the next phases of an alternative fuel program.