Displaying items by tag: Buzzi

Brazil: Companhia Nacional de Cimento (CNC), part of Italy-based Buzzi Unicem’s 50% subsidiary BCPAR, has acquired CRH Brasil following approval by the Brazilian antitrust authority (CADE). The deal was originally agreed for US$218m although changes in the financial positions of the acquired companies changed this. Buzzi Unicem supplied CNC with US$242m to support the deal.

CRH Brasil’s assets included three integrated cement plants and two grinding plants in the south-east of the country. The company sold approximately 2.8Mt of cement in 2020.

LafargeHolcim’s financial results for 2020 arrived this week, giving us data on many of the larger multinational cement producers. The Chinese ones are yet to release their results and some of the larger other ones such as CRH, Votorantim and InterCement are pending too. Yet, what we have so far gives a selective view on an unusual year. Revenue was down for most producers year-on-year in 2020 due to the effects of the coronavirus pandemic upon construction activity and demand for building materials. There were large regional differences between how countries implemented different lockdowns, how markets responded and how they bounced back afterwards. Generally, the financial effects of this were felt in the first half of 2020 with recovery in the second.

Graph 1: Sales revenue from selected cement producers in 2019 and 2020. Source: Company reports. Note: Figures calculated for Indian producers.

Graph 2: Cement sales volumes from selected cement producers in 2019 and 2020. Source: Company reports. Note: Figures calculated for Indian producers.

LafargeHolcim’s figure in Graph 1 above is a little misleading given that it has divested assets. Its like-for-like reduction in net sales was more like 6%, a similar figure to HeidelbergCement’s. Both experienced mixed results in North America and Europe but not terribly so. LafargeHolcim did relatively well in Latin America. HeidelbergCement found growth in its Africa-Eastern Mediterranean Basin region. It’s also worth noting the comparative leverage of each company: 1.4x for LafargeHolcim and 1.86x for HeidelbergCement. Both are slimming down but the latter’s ongoing divestment plan (see GCW 494) can be seen in the context of its debt to earnings ratio and the cash crisis that coronavirus threw up in 2020.

The contrast between these companies and Cemex and Buzzi Unicem is striking. Both of these benefitted from operations in the North America and parts of Europe. In Cemex’s case sales in Mexico and the US, made the difference despite falling sales elsewhere. Buzzi Unicem’s sales also held up in the US especially in the second half of the year. Europe was more mixed for both producers with growth reported in Germany but losses elsewhere.

The Indian producers tell a different story but one no less notable. Despite a near complete shutdown of production for around a month from late March 2020, the regional market largely recovered. As UltraTech Cement told it in January 2021, “Recovery from the Covid-19 led disruption of the economy has been rapid. This has been fuelled by quicker demand stabilisation, supply side restoration and greater cost efficiencies.” It added that rural residential housing had driven growth and that government-infrastructure projects had helped too. It expects pent-up urban demand to improve with the gradual return of the migrant workforce.

Unfortunately, Semen Indonesia, the leading Indonesian producer, suffered as the country’s production overcapacity was further hit by scaling back of government-based infrastructure projects as it tackled the health situation instead. Its solution has been to focus on export markets instead with new countries including Myanmar, Brunei Darussalam and Taiwan added in 2020 joining existing ones such as China, Australia and Bangladesh. The company’s total sales volumes may have fallen by 8% year-on-year to 40Mt in 2020 but sales outside of Indonesia, including exports, grew by 23% to 6.3Mt.

On a final note it’s sobering to see that the third largest seller of cement in this line-up was UltraTech Cement, a mainly regional producer. Regional in this sense though refers to India, the world’s second largest cement market. By installed production capacity it’s the fifth largest company in the world after CNBM, Anhui Conch, LafargeHolcim and HeidelbergCement. This move towards regionalisation among the large cement producers can also be seen in the large western-based multinationals as they are heading towards fewer but more selective locations. More on the world’s largest producer, China, when the producers start to releases their financial results towards the end of March 2021. Whatever 2021 brings, let’s hope it’s better than 2020.

Italy: Buzzi Unicem’s net sales remained stable at Euro3.22bn in 2020. Cement sales volumes grew slightly to 29.3Mt and ready-mixed concrete sales fell by 3.1% year-on-year to 11.7Mm³ from 12.1Mm³. The group attributed this to growth in the US and stable markets in Russia and Germany, compensating for weaker trends in Eastern Europe and Italy.

US: The Portland Cement Association (PCA) has announced the winners of the 2020 Safety Innovation Awards. The awards recognise ‘creative safety-enhancing projects in the cement industry’ across five categories.

Buzzi Unicem USA’s Joliet, Illinois cement terminal won the distribution award for its barge entry ladder, which reduced fall hazards associated with unloading cement from barges. Ash Grove Cement’s Durkee, Oregon cement plant won the general facility award for its burner pipes cart upgrade, which reduced safety hazards associated with moving cement kiln burner pipes. Further hazard reductions were made by Buzzi Unicem USA’s Chattanooga, Tennessee cement plant’s finish mill access platform and the Monarch Cement Company’s Humboldt, Kansas cement plant’s noise reduction upgrade, which jointly won the milling/grinding award. The pyroprocessing award went to GCC of America’s Pueblo, Colorado plant for its semi-automated clinker feeding system, while the quarry award went to Ash Grove Cement’s Louisville, Nebraska plant for its dump box hardened material extraction tool.

PCA president and chief executive officer (CEO) Michael Ireland said, “Our industry prioritises the safety of its employees above all else. We are proud of our members’ efforts to pursue excellence in safety innovation for their company and their colleagues.”

Germany: Buzzi Unicem subsidiary Dyckerhoff has received general building inspection approval from the German Institute for Building Technology for the Portland composite cement CEM II / CM (S-LL) produced in the Amöneburg and Deuna factories. It is the first to receive approval to sell this class of cement, which contains both slag and limestone, in Germany.

The use of CEM II / C cements reduces CO₂ emissions from building with cement and concrete due to their lower clinker factor. CEM II / CM (S-LL) emits 39% less CO₂ per tonne of cement compared to CEM I cement. Compared to the current status quo of the binder mix, CEM II / C cements have the potential to reduce CO₂ intensity by 25%.

The CEM II / CM (S-LL) ‘Amöneburg’ and ‘Deuna’ is authorised for use in strength classes 32.5 N, 32.5 R, 42.5 N, 42.5 R, 52.5 N and 52.5 R. It may be used for the production of concrete, reinforced concrete and prestressed concrete in the following exposure classes: X0, XC1 to XC4, XD1 to XD3, XS1 to XS3, XF1, XA1 to XA3, XM1 to XM3.

US: The US Environmental Protection Agency (EPA) has awarded its 2020 Energy Star® certification to Buzzi Unicem USA plants in Chattanooga, Tennessee and in Festus, Missouri. This certification is awarded to a facility for superior energy performance in comparison to similar plants. This marks the 12th consecutive year that the Chattanooga and Festus plants have received certification.

In order to qualify for Energy Star® recognition, cement plants must score at least 75 on the Energy Performance Indicator (EPI) system used by the EPA to measure energy efficiency. In addition, the plant must have a satisfactory environmental compliance record for the past three years. Receipt of the Energy Star certification means these two plants perform in the top 25% of similar facilities in the US.

Germany: The Catch4Climate project has moved into the planning stage of its oxyfuel pilot plant at the Mergelstetten cement plant. The group, comprising Buzzi Unicem’s subsidiary Dyckerhoff, HeidelbergCement, Schwenk Zement and Vicat, signed a letter of intent with the state’s prime minister and transport minister in Stuttgart in mid-November 2020.

The consortium intends to build and operate its own demonstration plant on a semi-industrial scale, to use the oxyfuel process to capture CO₂. In the future, the captured CO₂ will be used to produce so-called ‘reFuels’, climate-neutral synthetic fuels such as kerosene for air traffic, with the help of renewable electrical energy.

The cement producers formed CI4C – Cement Innovation for Climate in late 2019. The aim of the Catch4Climate project is to create the basis for a large-scale application of CO₂ capture technologies in cement plants enabling the later use of CO₂ as a raw material in other processes such as a carbon capture and utilisation/storage.

2020 has been a year like no other and this clearly shows in the financial results of the major cement producers so far.

The first jolt is that several major Chinese cement producers have seen their sales fall. Following a tough first quarter due to coronavirus, the Chinese industry then overcame floods in the summer, to eventually report a decrease in cement output of 1.1% year-on-year to 1.68Bnt in the first nine months of 2020. The world’s largest cement producer, CNBM, reported a slightly smaller drop in sales year-on-year in the first nine months of 2020. This relatively small fall, just below 1%, may be due to CNBM’s size and diversity of business interests. Other large Chinese producers have noted bigger losses, such as Huaxin Cement’s 9% sales decline to US$3.04bn and Jidong Cement’s 5% sales fall to US$3.8bn. However, Anhui Conch actually saw a 12% rise in sales to US$18.7bn.

Graph 1: Sales revenue from selected cement producers, Q1 - 3 2020. Source: Company reports.

Graph 2: Cement sales volumes from selected cement producers, Q1 - 3 2020. Source: Company reports.

LafargeHolcim’s sales look worse in Graph 1 than they really are because the group was busy divesting assets in 2019. Its net sales fell by 7.9% on a like-for-like basis to US$18.7bn in the first nine months of 2020, a rate of change similar to HeidelbergCement’s. Being a properly multinational building materials producer brings mixed benefits given that these companies have suffered from coronavirus-related lockdowns in different times in different places but they have also been able to hedge themselves from this effect through their many locations. In the third quarter of 2020, for example, LafargeHolcim was reporting recovering cement sales in its Asia-Pacific, Latin America and western/central parts of its Europe regions but problems in North America. Again, HeidelbergCement noted a similar picture with cement deliveries up in its Africa-Eastern Mediterranean Basin Group area, stable in Northern and Eastern Europe-Central Asia and down elsewhere. How the latest round of public health-related lockdowns in Europe round off a bad year remains to be seen.

The other more regional producers are noteworthy particularly due to their different geographical distribution. Cemex has seen a lower fall in sales revenue and cement sales volumes so far in 2020, possibly due to its greater presence in North America. What happens in the fourth quarter is uncertain at best, with US coronavirus cases rising and the Portland Cement Association (PCA) expecting a small decline in cement consumption overall in 2020. Along similar lines, Buzzi Unicem appears to have benefitted from its strong presence in Germany and the US, leading it to report a below 1% drop in sales revenue so far in 2020, the lowest of the decreases reported here for the western multinational cement companies.

Looking more widely, UltraTech Cement, India’s largest producer, had to contend with a near complete government-mandated plant shutdown in late March 2021. The figures presented here are calculated for comparison with other companies around the world due to the difference between the standard calendar financial year (January to December) and the Indian financial year (April to March). However, they suggest that Ultratech Cement suffered a 14% fall in sales to US$3.9bn and an 8% decline in sales volumes to 56Mt, among the worst decline of all the companies featured here. This is unsurprising given that UltraTech mostly operates in one country. Sure enough it bounced back in its second quarter (June – September 2020) with jumps in revenue, earnings and volumes.

Finally, for a view of a region that hasn’t had to face coronavirus-related economic disruption of anything like the same scale, Dangote Cement has reported solid growth so far in 2020, with rises in sales and volumes both above 5%. Economic problems at home in Nigeria have seen relatively higher growth elsewhere in Africa in recent years but now the pendulum has swung back home again. The big news has been that the company has pushed ahead with plans to turn Nigeria into a cement export hub, with a maiden shipment of clinker from Nigeria to Senegal in June 2020. The vision behind this has expanded from making Nigeria self-sufficient in cement from a few years ago into making the entirety of West and Central Africa cement and clinker ‘independent.’

The big news internationally this week was of the reported effectiveness of a Covid-19 vaccine in early trials by Pfizer and BioNTech. It might not yet make it into people’s arms at scale but it shows that the vaccine appears to work and that others in development and testing may do too. Building material manufacturer share prices didn’t rally as much as airlines or cinema chains on the news, construction has carried on after all, but this is a positive sign that normality for both health and wealth is on the way back at some point in 2021. One point to consider, given the wide regional variation with the economic effects of coronavirus, is what effect a disjointed global rollout of a vaccine or vaccines might have. A building material manufacturer dependent on a region that stamps out the virus later than other places might face an economic penalty. Recovery seems likely in 2021 but it isn’t guaranteed and the implications of the coronavirus crisis seem set to persist for a while yet. Here’s hoping for a different outlook at this point in 2021.

Italy: Buzzi Unicem’s net sales fell slightly to Euro2.41bn in the first nine months of 2020 from Euro2.42bn in the same period in 2019. Its cement sales volumes declined by 1.8% to 21.7Mt from 22.1Mt. The group said that sales volumes recovered during the third quarter of 2020 due to a rebound of demand in Italy, stability in Germany and a ‘trend reversal’ in Russia. Net sales also increased in the US during the third quarter.

Eurocement changed owners this week when Sberbank took control of the company’s parent organisation. Due to a ‘difficult financial situation’ the state-owned bank said it had consolidated 100% of the shares of Eurocement’s parent company GFI Investment Limited. It’s uncertain quite how difficult this situation is but in 2016 the cement producer owed the bank Euro700m. Local media agency RosBiznesConsulting (RBC) reported in September 2020 that the ‘problem borrower’ that had caused a record increase in overdue debt at Sberbank in July 2020 was none other than Eurocement. Whilst Sberbank has said so far that it does not have operational control of the group, it is seeking a strategic investor for the asset.

This is a major story given that Eurocement is Russia’s largest cement producer and it operates 19 cement plants Russia, Ukraine and Uzbekistan. It said it produced 16.5Mt of cement domestically in 2019 but this compares to a production capacity of around 50Mt/yr suggesting a considerably low utilisation rate of just one third! The producer has embarked on a modernisation programme in recent years but many of its plants are old and use wet-process production lines.

2019 finally saw the Russian cement market turn around following decline since 2015. Unfortunately, CM Pro reports that cement production in Russia as a whole fell by 5% year-on-year to 25.1Mt in the first half of 2020. Cement shipments fell by a similar rate. This trend appears to have carried on through July and August 2020. Cement consumption has fallen fairly uniformly in most regions with the exception of the Northwestern Federal District, which has seen a modest increase. In the middle of the year, Soyuzcement - the Union of Russian Cement Producers, was expecting wildly different scenarios ranging from falls of up to 10% in a negative situation to rebound of up to 3% in a positive one. It was pinning its hopes on government support for the construction industry in various ways. With the trend to August 2020, record breaking numbers of new coronavirus cases in early November 2020 and the onset of winter, it seems unlikely that Soyuzcement’s positive thinking will come to pass.

With this in mind who might want to buy into Eurocement? No doubt various private equity firms and local producers are watching the oil price carefully while they plan their next move. Internationally, LafargeHolcim seems the obvious western multinational contender with a presence in the country. Yet it seems unlikely it would want to take the risk, following its departure from certain regions like South-East Asia in recent years and persistent rumours about other divestment targets. HeidelbergCement’s balance sheet, credit lines and appetite for risk might not yet withstand a major investment in Russia. Buzzi Unicem has actually been expanding recently with an acquisition in Brazil but whether it’s prepared to bet on another market disrupted by coronavirus is unknown. China National Building Materials Group Corporation (CNBM) was reportedly planning on becoming a shareholder of Eurocement Group in 2016 but this may have just been bluster surrounding geopolitical links between Russia and China, and general cooperation between the companies on upgrading Eurocement’s old production lines. However, Russia is the next location in China’s Belt and Road initiative so it’s not ridiculous. Whoever steps up can expect the Russian government to take a keen interest, depending on how much control Sberbank wants to offer up of Eurocement. The story continues.