Displaying items by tag: Australia

Australia: James Hardie Industries, an Australian fibre cement producer, has posted an 80% fall in its net profit to US$28.9m during the first quarter of its 2015 fiscal year, which ended on 30 June 2014. During the same period of its 2014 fiscal year, net profit was US$142m.

The company revised down its full year earnings expectations due to an uncertain US economic recovery. James Hardie generates 66% of its revenue in Europe and the USA. James Hardie's CEO, Louis Gries, said that the US market 'is recovering more modestly than we assumed at the start of the year.'

Bad news for both cement workers and local clinker production in Australia and New Zealand this week with the announcement of job cuts and planned closures of clinker plants. Holcim New Zealand has confirmed that around 120 jobs will go when its Westport cement plant closes in 2016 along with the rationalisation of a few management jobs when the company integrates its Australian and New Zealand businesses. Meanwhile, Boral announced that it will cut 28 jobs from its Maldon Cement plant in Australia when it ceases clinker production at the end of 2014.

With these planned closures cement production capacity in the antipodes will shrink by just over 1.5Mt/yr to around 7.5Mt/yr, a reduction of over 15% Alongside the drop in native cement production players are re-focusing on an import market.

The trend is highlighted by the fact that Boral's Maldon site will retain its grinding mill. Earlier in June 2014 it was reported that Vue Australia is planning to convert a brownfield site on Kooragang Island, New South Wales into a cement storage and transfer plant. In February 2014 Cockburn Cement cut 44 jobs at its Munster cement plant as it started to restructure its operation for grinding using imported clinker. Also in February 2014 Cement Australia, the joint-owned company between Holcim and HeidelbergCement, had a US$17m expansion of its cement loading and storage facility for processing at Osborne approved by local authorities.

Following its restructuring in 2013, which has seen clinker production cease at Waurn Ponds and soon to cease at Maldon, Boral reported that its cement revenues grew in its 2012 – 2013 financial year. This is likely to continue when the 2013 – 2014 year is reported in August 2014. Likewise, Adelaide Brighton reported growing revenues in 2013. Cement Australia reported growing cement sales year-on-year in the first quarter of 2014 following reduced sales in 2013.

All in all the local cement industry in Australia and New Zealand has taken quite a knock in recent years. Reasons for this have included a poor recovery for the local building materials market, high-energy costs, the Carbon Tax in Australia, competition concerns and the spectre of cheap clinker imports from East Asia undercutting everything. However the return to revenue and then profit suggest that the worst of the job cuts and clinker production shrinkage is over.

In this business environment, revelations such as a China Resources spending upwards of US$300,000 on golf are unlikely to garner sympathy for any measures that appear to reduce international competiveness for Australian industry. The current Australian government led by Tony Abbott is set to make good on its promise to repeal the Carbon Tax from July 2014. The environmental effects will be unclear given that the tax may have cut emissions from participating companies by 7%, falling from 342Mt in 2011 – 2012 to 321Mt in 2012 – 2013, according to the Investor Group on Climate Change. As is usual with localised carbon taxation or legislation, whether global emissions fell during this period or whether emissions grew in looser jurisdictions to compensate is hard to calculate. The trend towards clinker imports suggests that there may be a significant contribution from the latter.

New Zealand: Holcim New Zealand has revealed that a company shake-up will result in four management jobs in Christchurch being axed in the next few months. In addition, the wind-down of the Westport cement plant in 2016 has been confirmed, which will result in the loss of about 120 jobs. It is also considering selling part or all of its lime business.

Holcim New Zealand's managing director, Jeremy Smith, will be made redundant, with Holcim announcing that it will combine its New Zealand and Australian operations. Three other management jobs will also be axed, although the head office in Christchurch will remain open.

"Other than the four senior roles announced as being dis-established in 2015, no other changes are planned in the near future," said Smith. Commenting on the status of other staff numbers once all the plans come into play, Smith said, "That is not known and it is too early to even discuss. The changes to the business model will eventually reduce the scale and scope of the New Zealand business over the coming years and it will require a smaller corporate management operation after 2016." Holcim currently employs 420 staff in New Zealand.

Holcim announced in 2013 that it was halting cement manufacturing in New Zealand and replacing it with bulk importing of cement for the New Zealand market. As such, Holcim has gained final approvals for construction to begin on its two new import cement terminals at Timaru and Auckland. Planning work is already underway on the Timaru project, where two 30,000t cement terminals are to be built. The terminals are part of Holcim's US100m investment in its New Zealand operations.

Australia: Boral will cease clinker production at its Maldon cement plant in New South Wales on 31 December 2014, axing up to 28 jobs in the process. Boral Cement's executive general manager, Ross Harper, said that a decline in demand for off-white clinker, which forms the basis of a range of specialty cement products, was behind the decision.

"Unfortunately, demand has declined sharply as consumers switch to products made from imported white clinker," said Harper. "This decline has coincided with a downturn in demand, rising costs of production, the availability of cheap imported clinker and the slow recovery of the building and construction industry." He said that the combination of these factors, plus the Maldon kiln's high cost and sub-scale output, rendered off-white clinker production unsustainable at Maldon. Harper added that Boral would maintain its Maldon grinding mill, packaging and associated logistics on site.

Australia: After being mothballed in 2012, the disused Hydro Aluminium plant on Kooragang Island could soon be operational again. The site is set to be reincarnated as a cement-mixing plant. Vue Australia has lodged a US$3m plan with Newcastle council to change the site's use from an aluminium transfer, storage and dispatch facility to a cement storage and transfer plant.

Under the plan, Vue will transfer, store and dispatch an estimated 300,000t/yr of Portland cement, utilising the site's existing three large silos and overhead conveyor. Much of Vue's US$3m investment will be spent on installing dust-control measures, particularly in truck-loading areas.

Vue is also seeking approval to operate 24hr/day, every day, because it needs to do so when a ship arrives with raw materials to unload. "This is expected to occur some 16 times a year," said a company spokesperson. The conveyor to the silos would carry raw products delivered by ship. The cement products would be dispatched via road tankers to customers.

Dust-emission reports and environmental reports have been submitted. An environmental impact statement concluded that potential environmental impacts associated with the upgrade are negligible and could be managed through the implementation of the mitigation measures identified by the study.

Vue said that it hopes to have the new cement plant operating within months. While the project would only create a small amount of jobs, the company said that it would help to diversify the port's industry, put mothballed infrastructure to work and 'increase competition within the New South Wales cement market and related construction industry.'

Australia: Fibre cement producer James Hardie Industries said on 22 May 2014 that it expects the US housing construction market to improve in 2014 as it posted a more than doubling in annual net profit. "The company continues to expect improvement in the US operating environment," said James Hardie.

James Hardie, which generates two-thirds of its revenue in Europe and the US, said that its annual net sales in those markets grew by 19%, helped by strong rises in US single-family building permits. James Hardie posted a net profit of US$99.5m for the year to 31 March 2014, up from US$45.5m in the previous year. Net operating profit, which excludes charges for asbestos liability, asset impairments and regulatory charges, was US$197.2m compared with US$140.8m in the prior year. Overall net sales grew by 13% to US$1.49bn.

James Hardie has been compensating Australian victims of asbestos-related illnesses such as mesothelioma and said that its asbestos liability grew by US$186.18m to US$1.44bn by 31 March 2014, after the number of claims were higher than expected for a second consecutive year.

Australia: Len Buckeridge, Australia's 19th richest person, died of a heart attack at the age of 77 on 11 March 2014. The billionaire owner of Buckeridge Group of Companies (BGC), was a well-known and long-standing character in the Australian construction industry. The group has interests in gypsum wallboard, bricks and cement as well as residential construction.

Buckeridge built up BGC, which turns over US$2.25bn/yr, from humble beginnings in the 1960s following his training as an architect at Perth Technical College. Hard-but-fair in business, his determined approach saw him amass a personal fortune of over US$1.5bn via the group. Despite his success he retained a down-to-earth approach to the company's day-to-day operations, latterly running the business from the dining room table in his house at Mosman Park, near Perth.

His hard-nosed stance, which helped him in some aspects of his business life, also made him a controversial figure. Buckeridge was involved in a number of deeply-entrenched confrontations with construction unions in Australia. He also attempted to sue the Government in the Supreme Court over a stalled private port project. Upon his death, Buckeridge was described by former construction union boss Kevin Reynolds as 'a formidable opponent.' "People will remember Len as a person who was prepared to take on anyone and everyone whether it would be the unions, government, other employer groups or other builders," said Reynolds. "If Len believed in something he would take them on."

Buckeridge, who had been contemplating succession plans for BGC without coming to a conclusion prior to his death, owned 100% of the group. The Australian business world and the global cement and gypsum industries is awaiting news on how the future ownership of the company will look. Buckeridge is survived by his wife, six children and eight grandchildren.

Cement cartels (or at least cases of cartel-like behaviour) have reared their ugly heads this week... again. In two different markets, Australia and Brazil, competition authorities are at various stages of taking major action against large proportions of their respective cement industries. In another, Europe, it is the cement producers that are taking on the authorities.

This week, the Australian Federal Court has found five producers guilty of agreeing anti-competitive contracts with regard to fly-ash supply contracts from power stations in the state of Victoria. Only Cement Australia Holdings was not accused. Penalties are to be determined at a later date – watch this space.

As drastic as the Australian situation may be, it is Brazil's anti-trust authority Cade that looks set to make the biggest 'splash' in a cement industry in 2014. On 13 March 2014 it was reported that a US$1.32bn fine, split over six cement producers, has been put on hold after the producers disputed a ruling that would see them lose an average 24% of their cement assets each. So big is this fine that it actually eclipses the US$1.1bn fine seen in India in 2012. In light of the amount of influence that they look set to lose, it now looks extremely likely that the producers will appeal. This sets the scene for indeterminably long waits for legal proceedings and more evidence to be collected. Whatever happens in Brazil, there will be major implications for its increasingly-concentrated cement market.

Elsewhere, in a strange inversion of the normal situation, in Europe it is the cement producers that are taking action. This week the European Court has rejected an appeal from eight major cement producers including Holcim, HeidelbergCement and Cemex subsidiaries with respect to the European Commission's handling of an anti-cartel investigation that began in 2008. That case saw anti-trust investigations start in 2010. Proceedings continue.

As stated previously in this column, cartel-like behaviour is not necessarily indicative of a formal cartel. There are innumerable factors that make every case different and, in each, proving actual collusion is very hard indeed. In the cement industry however, it appears that 'convictions' in cartel cases are easier to spot than in other sectors.

"The first thing for any new competition regulator is to go out and find the cement cartel. My experience of this subject is, it is always there, somewhere," wrote Richard Whish, a Professor of Law at King's College London in 2001. "The only countries in which I had been unable to find the cement cartel is where there is a national state-owned monopoly for cement."

The authorities will keep looking and producers, guilty or not, will continue to wait for their call.

Australia: The Federal Court in Brisbane has found five cement producers guilty of anti-competitive practices in relation to contracts entered into between 2002 and 2006 to acquire flyash from various power stations in South East Queensland.

The case was brought to the court by the Australian Competition and Consumer Commission (ACCC), which cited five corporate respondents including Cement Australia, Cement Australia Holdings, Cement Australia Queensland, Pozzolanic Enterprises and Pozzolanic Industries. Findings were made against all but Cement Australia Holdings.

Justice Greenwood found that the respondents had purposely prevented competitors from entering the market. ACCC chairman Rod Sims said, "Anticompetitive conduct remains an enforcement priority for the ACCC. The ACCC took action in this matter originally due to its concern that a dominant player in a market appeared to be foreclosing and preventing competition. The declarations and findings made by the court demonstrate that this concern was warranted." Penalties will be determined at a later date.

Australia: Cockburn Cement has cut 44 jobs at its Munster cement plant and intends to cut another 20 jobs over the next 18 months at it restructures its operations. The company said it was restructuring the plant in the face of high-energy costs associated with the production of clinker, according to Western Australia Business News.

Under the restructure, Cockburn Cement will use imported clinker, which it will mill into cement at its Munster and Kwinana facilities. By 2016, all of the 400,000t of clinker previously produced at Munster will be replaced by imported materials. The lime kiln at Munster will remain operational following a US$41m investment, including the installation of dust filters, that increased its production capacity by around 250,000t/yr.