Displaying items by tag: CRH

Ireland: CRH has appointed Bank of America to sell its European Distribution business. The sale is valued at around Euro2bn and is expected to start in May 2019, according to sources quoted by Reuters. Private equity companies including Advent, Lone Star and CVC have been linked to the sale. CRH is due to issue a trading updating in late April 2019.

The European Union’s (EU) verified CO₂ emissions figures were released earlier this week on 1 April 2019. The good news is that no cement plant is within the top 100 largest emitters. All the top spots are held by power plants, iron and steel producers and the odd airline. Indeed, out of all of the verified emissions, cement clinker or lime production only represents 7% of the total emissions. Of course this is too much if the region wants to meet its climate change commitments but it is worth remembering that other industries have a long way to go as well and they don’t necessarily face the intrinsic process challenges that clinker production has. If the general public or governments are serious about cutting CO₂ emissions then they might consider, for example, taking fewer flights with airlines before picking on the cement industry.

The EU emitted 117Mt of CO₂ from its clinker and lime producers in 2018, a 2.7% year-on-year decrease compared to 120Mt in 2017. This compares to 158Mt in 2008, giving a 26% drop in emissions over the decade to 2018. However, there are two warnings attached to this data. First, there are plants on this list that have closed between 2008 and 2018. Second, there are plants that provided no data in 2018, for example, all the plants in Bulgaria. Climate change think tank Sandbag helpfully pointed out in its analysis of the EU emissions data that industrial emissions have barely decreased since 2012. The implication here being that the drop from 2008 to 2012 was mainly due to the economic recession. Sandbag also made the assertion that 96% of the cement industry’s emissions were covered by free allocations in the EU Emissions Trading Scheme (ETS) thereby de-incentivising sector willingness to decarbonise.

By country the emissions in 2018 from cement and lime roughly correspond with production capacity, although this comes with the caveat that emissions link to actual production not potential capacity. So, Germany leads followed by Spain, Italy, Poland and France. Of these Poland is a slight outlier, as will be seen below.

Table 1: Top 10 CO₂ emitting plants in the European Union in 2018. Source: European Commission.

Poland leads the count in the top 10 EU CO₂ emitting cement plants in 2018 with five plants. Greece follows with two plants. This list is deceptive as all of these plants are large ones with production capacities of 2Mt/yr and above. As it contains many of the largest plants in the EU no wonder the emissions are the highest. It is also worth considering that there are far larger plants outside of the EU.

In summary, as most readers will already know, the cement industry is a significant minority CO₂ emitter in the EU. Countries with larger cement sectors emit more CO₂ as do larger plants. So far, so obvious. Emissions are down since 2008 but this mostly seems to have stalled since 2012, bar a blip in 2017. The change though has been the rising carbon price in the EU ETS in 2018. Coincidentally the carbon price has been fairly low and stable since 2012. If the mechanism is working properly then changes should start to appear in 2019. Already in 2018 a few European cement producers announced plant closures and blamed the carbon price. Watch this space.

The Global Future Cement Conference & Exhibition on low and zero CO2 cement production will take place in Brussels, Belgium on 22 - 23 May 2019

All the major multinational cement producers reported growing sales in 2018. Yet, the big growth was found outside of Europe, with China Resources Cement (CRC), Ultratech Cement and Dangote Cement all posting sales revenue growth of above 10%. Similarly, cement sales volumes continued to rise. CRC and Ultratech Cement were the standouts here, with the latter benefitting from its acquisitions including, most recently, Binani Cement. Concrete sales volumes were the same, rising for all the companies with the exception of Buzzi Unicem. It suffered market issues in Italy and Germany.

Graph 1: Sales revenue from selected multinational cement producers in 2017 and 2018 (Euro billions). Source: Company financial reports.

Graph 2: Cement sales volumes from selected multinational cement producers in 2017 and 2018 (Mt). Source: Company financial reports.

Graph 3: Ready-mixed concrete sales volumes from selected multinational concrete producers in 2017 and 2018 (Mm³). Source: Company financial reports.

With the major Chinese producers, including CNBM and Anhui Conch, yet to release their annual results for 2018, CRC is included in this roundup to give an idea of how that market is performing. Both CNBM and Anhui Conch have released profit alerts anticipating bumper results in 2018 though. This is likely due to boosted local cement prices.

The major story for the European-based producers was one of asset sales and debt reduction. LafargeHolcim returned to positive income in 2018 with a focus on its Strategy 2022 programme. HeidelbergCement’s earnings were hit by poor weather in the US and insufficient divestments. Cemex, although based in Mexico, retains a significant European presence and so it included here. It suffered from poor sales outside of its base in Mexico and the US. CRH continued on its trajectory as the world’s biggest building materials company with solid sales and earnings growth. Interestingly though given its expansion strategy in recent years CRH’s debt to earnings before interest, taxation, depreciation and amortisation (EBTIDA) ratio remains better than the other three majors above, even after its purchase of Ash Grove Cement in mid-2018 taken into account. Although other financial comparisons are worth considering, such as EBITDA margin.

Despite Cemex’s relatively high net debt compared to its peers it has been cutting its debt the fastest, at 8% to US$10.4bn in 2018. Its current plan is to reach an ‘investment-grade’ balance sheet by 2020. LafargeHolcim and HeidelbergCement are in ‘cuts’ mode leading to all sorts of speculation about where they might sell next. The wilder rumours in the press include preparations by LafargeHolcim to sell its entire operation in the Middle East and Africa. Similar tales about a sale in the Philippines are more credible but remain unconfirmed. HeidelbergCement is keeping its cards closer to its chest but poor performing territories that might be up for sale include some of its Italian plants and parts of Africa.

Of the larger producers without a European presence, Ultratech Cement has been negatively effected by energy costs during the nine months to the end of 2018 with its income and EBITDA down. Dangote Cement’s performance in 2018 was driven by sales at home in Nigeria although earnings elsewhere continued to grow.

With all of this in mind the scene appears set for a breakout by a major Chinese producer to buy a big bolt-on acquisition or expansion by regional or national players along the lines of that seen by Semen Indonesia or UltraTech Cement. Taiwan Cement has been ahead here with its purchase of a 40% stake in Turkey’s Oyak Cement but what we’re really waiting for is a majority position within a country or territory. At which point CNBM and the like will have earned its place in the 2019 version of this article. Perhaps the age of truly multinational cement producer is coming to an end as regional players become more prominent.

Ireland: CRH’s sales revenue rose by 6% year-on-year to Euro26.8bn in 2018 from Euro25.2bn in 2017. Its earnings before interest, taxation, depreciation and amortisation (EBITDA) increased by 7% to Euro3.37bn from Euro3.15bn.

“2018 was another year of record profit delivery for CRH. We benefited from good demand and continued favourable market fundamentals in the Americas coupled with positive underlying momentum in Europe. Both were experienced against a backdrop of energy-related input cost inflation and significant weather disruption throughout the year but with a continued focus on performance improvement and operational delivery, margins were ahead of last year,” said group chief executive officer (CEO) Albert Manifold.

The group’s Europe Heavyside division, including European cement production, saw its sales grow by 10% to Euro7.61bn and EBITDA grew by 9% to Euro911m. Positive performances were noted in Ireland, Belgium, Netherlands, Luxembourg, Denmark and Poland. However, ‘challenging’ trading conditions were reported in the UK due to rising input costs and uncertainty about its departure from the European Union (EU). The Americas Materials division, which acquired Ash Grove Cement in mid-2018, saw its sales rise by 12% to Euro8.95bn and its EBITDA rise by 18% to Euro1.49bn.

Cemex was the first of the big multinational cement producers to release its fourth quarter results this week. Revenue, sales volumes of cement and gross profit were all up in single digits. Earnings growth was less impressive, with operating earnings before interest, taxation, depreciation and amortisation (EBITDA) rising by 1% year-on-year on a like-for-like basis to US$2.56bn in 2018. This was a decrease of 1% in real terms. Cemex blamed this on rising energy costs and on lower earnings from its territories outside of Mexico and the US.

Figure 1: Breakdown of Cemex’s net sales in 2018 by region: Source: Cemex.

As Figure 1 shows, over three quarters of Cemex’s sales come from Mexico, the US and Europe. Elsewhere its presence is smaller but it does have plants in key countries like the Philippines and Egypt. The former, for example, saw its cement sales rise by 7% in 2018 bringing along the rest of the Asia, Middle East and Africa region into volume growth.

Some other non-financial results to consider lead with the good news that 2018 was the first year ever that Cemex has had without any employee fatalities. This probably doesn’t include contractors or third parties, we’ll have to wait for the next sustainability report to find out for sure, but this is undoubtedly a milestone. Another point of interest was the growth of Cemex Go, its online sales platform. In 2018 it was responsible for around 40% of the company’s sales volumes. Around 85% of its recurring clients use it and it has nearly 30,000 customers. The analytics alone from the system and the potential for further tailoring it towards both customer and company objectives sound promising. Lastly, Cemex was also keen to note its alternative fuels substitution rate of 27% in 2018.

In recent years the other metric that the analysts have been watching is Cemex’s debt. It dropped by 8% year-on-year to US$10.4bn in 2018 compared to a high of US$17.5bn in 2013. Its plan is to reach an ‘investment-grade’ balance sheet by 2020.

In this way Cemex has been ahead of the curve of the major European cement multinationals like LafargeHolcim and HeidelbergCement that have taken on ‘indigestible’ acquisitions more recently. Possibly behind all of these companies is CRH, which has steadily been growing in recent years through acquisitions. It made the headlines this week on the corporate side when Swedish so-called ‘activist investor’ Cevian bought what is thought to be around a 3% stake in the Irish company. The financial press thinks it’s after a seat on the board to try and influence CRH to focus on margins rather than its acquisition strategy. CRH’s EBITDA margin was 12% in 2017 compared to 23%, 19% and 19% for LafargeHolcim, HeidelbergCement and Cemex respectively. This is just one way of comparing these companies. CRH, for example, might be keen to promote how its other metrics like cash generation and return on capital employed perform compare favourably to its competitors.

The point though is that it has taken Cemex over a decade since its acquisition of Rinker to rebuild its finances. All being well, it stands ready to take advantage of whatever the cement market holds in the 2020s.

Poland: Cement Ożarów has appointed Janusz Miluch as its chief executive officer (CEO). He succeeds Andrzej Ptak, who retired at the end of December 2018, according to Wirtualny Nowy Przemysl.

Germany: HeidelbergCement has been awarded ‘A-‘ in the climate change category of CDP’s Climate A List. It also received the same score in the water security category. The result marked it as the highest-scoring cement company on the list beating other major international producers such as LafargeHolcim, Cemex and CRH. Notably, these other cement companies each received ‘F’ for water security due to a lack of sufficient information available. CDP analyses data from over 6800 large companies around the world.

“This is a strong confirmation that we are on the right track with our Sustainability Commitments 2030. The excellent result encourages us to further reduce our ecological footprint across all business lines and on a global level,” said Bernd Scheifele, chairman of the managing board of HeidelbergCement.

Sweden: LafargeHolcim has been named by Sasja Beslik, the head of sustainable finance at Nordea, as the second worst company for increasing CO₂ emissions in the five years between 2011 and 2016. Other cement companies in the list that Beslik published via his Twitter account include CRH, HeidelbergCement and Shree Cement. The list, entitled ‘The CO₂ Culprits Top 100’, was assembled using data from financial services company MSCI.

UK: Tarmac has appointed Graeme Bride as the plant manager of its Aberthaw cement plant. He takes over the role from Chris Bradbury, who has been appointed Cement Plant Manager of Tarmac’s Tunstead operations.

Bride, aged 46 years, graduated as a mechanical engineer from the University of Birmingham and has an MBA from Manchester Business School. He has over 24 years of operational experience gained in the cement, sugar and power generation industries across Europe, Asia and Africa. His most recent role was Health and Safety Director in Lafarge Africa. He holds 19 years cement plant management experience from his time spent working in Nigeria and the Philippines.

Ireland: Irish Cement has been fined Euro4000 for dust emissions in December 2017. The subsidiary of CRH pleaded guilty at Limerick District Court to breaking the terms of the industrial licence at its plant in Limerick in early December 2017, according to the Irish Times newspaper. The cement producer reportedly unsuccessfully attempted to clear a build-up of dust in the plant’s kiln. A ‘significant’ amount of dust polluted the local neighbourhood subsequently leading to 21 complaints to the Environment Protection Agency. The cement producer was fined previously in mid-2018 for dust emissions occurred in April and May 2017.