Displaying items by tag: Cementos Argos

The creation of Lafarge Africa, the clearance of the Cemex West acquisition by Holcim in Germany and the sale of Lafarge's assets in Ecuador all hint at the scale of business that LafargeHolcim will command when it comes into existence. Despite the media saturation of coverage on the merger the implications in developing markets are still worthwhile exploring, especially in Latin American and Africa.

In sub-Saharan Africa, Lafarge is merging its cement companies in Nigeria and South Africa to create Lafarge Africa. Analysts Exotix have described the move as, 'the birth of a leading player on a continental scale'. Indeed, if Lafarge wanted to grow Lafarge Africa to encompass its many other African cement producing subsidiaries it could hold at least 17 integrated cement plants (including plants in north Africa) with a cement production capacity of at least 40Mt/yr in 10 countries and infrastructure in others. That puts it head-to-head with Dangote's plans to meet 40Mt/yr by the end of 2014 through its many expansion projects. Following these two market leaders would come South African-based cement producer PPC with its expansion plans around the continent.

Meanwhile across the Atlantic in Latin America the Lafarge-Holcim merger threatens Cemex. Unlike in Africa where Lafarge has a ubiquitous but disparate presence, Lafarge and Holcim's cement assets are more evenly scattered around the Caribbean, Central and South America. In terms of cement production capacity Cemex and Lafarge-Holcim will both have around 30Mt/yr, with Cemex just in front. The next biggest cement producers in Latin America will be Votorantim (present mainly in Brazil) with just over 20Mt/yr and Cementos Argos (Columbia) with about the same. This includes some new acquisitions in the United States for the growing Columbian producer. In Ecuador Lafarge and Holcim held over 50% of the market share, hence the sale by Lafarge of its assets to Union Andina de Cementos for US$553m.

Depending on how well the merger integrates the two companies, corals the various subsidiaries and implements strategic thinking the merger could just create business as usual with little disruption to the existing order. Yet in both continents the merger has the opportunity to shake up and reinvigorate the cement markets as existing players suddenly discover serious new competition and react accordingly.

Africa has a population of 1.1bn and it had a Gross Domestic Product (GDP) of US$2320/capita in 2013. South America had a population of 359m in 2010 and a GDP of US$8929/capita. This compares to US$27,250/capita in Europe and US$54,152/capita in the US. The economic development potential for each continent is humongous. Post-merger, LafargeHolcim will be first or second in line for some of this potential in Latin America and Africa.

Two stories from the US have drawn our attention this week, even with a US$1.3bn cartel fine in Brazil, more new business in Africa, the possible closure of CBR's white cement plant in Belgium and strange metrological goings-on in India also in the headlines.

Firstly, it was announced that Colombia's major cement producer Cementos Argos has agreed to acquire Vulcan Materials' building material assets in Florida. Argos, active in the US since June 2011 when it acquired its Harleyville and Roberta plants from Lafarge, will more than double its capacity in the country from 2.7Mt/yr to 6.2Mt/yr and go from a small player to a significant force in the western US.

Argos may have moved at just the right time. Despite suffering disproportionately in what is often termed the 'Great Recession' in the US, Florida's cement market is fundamentally solid, with significant residential construction and a good commercial construction baseline. If the PCA's expectations that the US will consume 80Mt/yr of cement in 2014 and a release of that much talked-about 'pent-up demand' are realised, Argos could be in a position to make good sales.

Indeed, Argos' move takes on even more significance in the light of the second US story from this week, which sees Texas Industries (TXI) taken over by Martin Marietta. The acquisition, which comes on the back of a failed bid by Martin Marietta for Vulcan Materials in 2012, also makes perfect sense for the company. Indeed, Martin Marietta's chief executive, C Howard Nye, said, "We like the Texas market a lot."

And well they should. Developments around the Eagle Ford shale gas reserves in the centre of Texas have led to a building boom in terms of both new constructions and oil well cement. Despite this, TXI announced a loss of US$17.6m in the quarter to 30 September 2013, although it saw higher sales. It blamed interest repayments. There are obviously clear gains for Martin Marietta in buying TXI, but it had better have a plan to sort out TXI's finances.

For all the talk of major restructuring in China , and mergers and acquisitions in India, it is the US cement industry that is showing the most movement so far in 2014. Could this be the year when things finally look up?

Dominican Republic: The Dominican Association of Cement Producers (Adocem) swore in Carlos Gonzalez as its president for 2013 – 2014. Gonzalez, who is also president of Cemex in the country, joins Gabriel Ballestas of Cementos Argos as treasurer and Jose Caceres of Cementos Cibao as secretary.

Eagle Materials has picked up two cement plants in the US from Lafarge with a combined capacity of 1.6Mt/yr for US$446m. The deal also included six distribution terminals, two aggregates quarries, eight ready-mix concrete plants and a fly ash business.

Following our column in August 2012 following an acquisition in India we decided to ask a similar question: how much are American cement plants worth?

Eagle's acquisition now increases its presence in the Midwest and South Central regions of the US, giving it a rough line of plants across the country nearly connecting Lake Michigan to the Gulf of Mexico. As shown in our industry report on the US between 2005 and 2011 cement consumption fell in both the states the plants are located in. Missouri's consumption fell by 45% from 2.82Mt to 1.56Mt, just above the US national average. By contrast Oklahoma's consumption only fell by 11%, from 1.6Mt to 1.43Mt, the fourth smallest decline in the country.

However, Eagle has demonstrated financial health in contrast to the US sector as a whole, reporting a 21% rise in total revenue in the quarter to 30 June 2012 and a 60% rise in operating earnings year-on-year in the quarter to 31 March 2012. The combined operations at the two plants generated about US$178m in revenue during the year ending in June 2012. By contrast Eagle Materials' revenue totalled US$529m during the same period. The plants' additional capacity will increase Eagle's total by about 60%.

Lafarge are still thinking big though, with the proviso that Eagle will supply certain Lafarge operations with cement for four to five years, as well as an agreement with a Lafarge affiliate to supply low-cost alternative fuels to the acquired operations. According to its 2011 annual report North America comprised 11% of Lafarge's cement sales. Lafarge's sales in the US remained flat in 2011. In that year the company's capacity was 12.8Mt with a 12% market share. This picture has started to change in 2012 with a reduced loss in earnings before interest, tax, depreciation and amortisation (EBITDA) in the first quarter followed by volume and sales increases of above 10% in the second quarter.

Back in June 2011 Cementos Argos picked up two plants from Lafarge in Roberta, Alabama and Harlyville, South Carolina for US$760m with a combined capacity of 2.7Mt/yr. As with the Eagle deal the sale included a number of peripheral assets including a clinker mill, cement mixer lorries and a marine port.

Cementos Argos recently put the world average at US$250m/t when publicising the expansion of its Rioclaro plant. The European Cement Association reports the figure at being above US$200m/t on its website. In August 2012, at the time of the potential CRH acquisition in India, the cost of Indian cement production capacity was placed at US$110/t-US$120/t.

Perhaps the question we should ask is how much is a US cement plant worth when it used to belong to Lafarge. Both the Cementos Argos sale and the Eagle deal worked out at US$280/t including all the ancillaries. The actual question we should ask is why has Lafarge chosen these specific plants to sell to a competitor in the US market?

Colombia: Cementos Argos has announced the appointment of four new vice-presidents following of internal reorganisation. Following the promotions Jorge Mario Velasquez, president of Argos, commented that the moves had met the right balance of youth and experience.

Juan Luis Munera, a commercial law attorney with seven years service with Argos, has been appointed to vice president for legal and sustainability. Carlos Horacio Yusty, an engineer specialising in industrial management systems with 16 years service with Argos, has been appointed to vice president of finance. Mauricio Ossa, a business manager with 15 years service with Argos, has been appointed regional vice president of the company's Caribbean operation. Tomas Restrepo, currently vice president of innovation with five years service with Argos, will serve as regional vice president of Argos' Colombian units.

Columbia: Columbia's largest cement company, Cementos Argos (Cemargos), has named Jorge Mario Velásquez as its chairman.

A civil engineer with over 30 years' experience in cement, Velásquez replaces José Alberto Vélez, who remains at the head of parent company Grupo Argos. The changes are part of the company's ongoing corporate restructuring process, which includes splitting off non-cement assets to its investment arm, Inversiones Argos.