Displaying items by tag: Cemex

US: Eagle Materials has received clearance from the Federal Trade Commission for its November 2019 acquisition of Kosmos Cement, which operates the 1.7Mt/yr integrated Louisville plant in Kentucky, as well as raw materials reserves and seven cement terminals, from Mexico-based Cemex and Italian Buzzi Unicem for US$665m. Eagle Materials board chair Mike Nicolais said the acquisition was ‘timely in light of our plans to separate our Heavy Materials and Light Materials businesses into two independent, publicly traded corporations.’ It will pay using existing funds and a loan withdrawn for the purpose.

UK: Cemex has entered a conditional agreement with Breedon Group for the divestment of certain UK assets, including 49 ready-mix plants, 28 aggregate quarries and a cement terminal for Euro211m including Breedon Group’s assumption of Euro27.3m lease liability. Cemex UK retains the 1.2Mt/yr Rugby cement plant in Warwickshire. Breedon Group CEO Pat Ward said, “We expect the deal to be accretive to both earnings and free cash flow in the first full year, with a positive ongoing impact on the cash generation of the enlarged Group.” Cemex CEO Fernando Gonzalez said that the transaction ‘further rebalances our portfolio into our core markets, enhances our profitability and enables us to continue to focus on deleveraging.’

The businesses being handed over also include concrete products operations, depots and asphalt plants and fall under all six of Breedon Group’s regional divisions. Ward has said the acquisitions will significantly enlarge the group’s footprint in underrepresented divisions, implying that the cement terminal in question may be the Leith terminal in Scotland or the Newport terminal in Wales, two regions in which the company currently has no terminals to receive cement produced at its 1.5Mt/yr integrated Hope cement plant in Derbyshire. Breedon Group will seek to hire employees working on the operations from Cemex and expects to bring its total UK personnel to 3600 people as a result. It says its mineral reserves will exceed 1.0Bt.

Cemex UK retains 259 concrete plants and 36 aggregates quarries and dredging operations. Cemex said it ‘will retain a substantial integrated business in the UK encompassing cement production.’

It’s the end of the year so it’s time to look at trends in the sector news over the last 12 months. It’s also the end of a decade, so for a wider perspective check out the feature in the December 2019 issue of Global Cement Magazine. The map of shifting production capacity and the table of falling CO₂ emissions per tonne are awesome and inspiring in their own way. They also point towards the successes and dangers facing the industry in the next decade.

Back on 2019 here are some of the main themes of the year in the industry news. This is a selective list but if we missed anything crucial let us know.

European multinationals retreat

LafargeHolcim left the Philippines, Malaysia and Indonesia, HeidelbergCement sold up in Ukraine and reduced its stake in Morocco and CRH is reportedly making plans to leave the Philippines and India, if local media speculation can be believed. To be fair to HeidelbergCement it has also instigated some key acquisitions here and there, but there definitely has been a feel of the multinationals cutting their losses in certain places and retreating that bit closer to their heartlands.

CRH’s chief executive officer Albert Manifold summed it up an earnings meeting when he said, “…you're faced with a capital allocation decision of investing in Europe or North America where you've got stability, certainty, overlap, capability, versus going for something a bit more exotic. The returns you need to generate to justify that higher level of risk are extraordinary and we just don't see it.”

The battle for the European Green Deal

One battle that’s happening right now is the lobbying behind the scenes for so-called energy-intensive industries in Europe as part of the forthcoming European Green Deal. The cement industry is very aware that it is walking a tightrope on this one. The European Union (EU) Emissions Trading Scheme (ETS) CO₂ price started to bite in 2019, hitting a high of Euro28/t in August 2019 and plant closures have been blamed on it. The rhetoric from Ursula von der Leyen, the new president of the European Commission, has been bullish on climate legislation and the agitation of Greta Thunberg internationally and groups like Extinction Rebellion has kept the issue in the press. Cembureau, the European Cement Association, is keen to promote the industry’s sustainability credentials but it is concerned that aspects of the proposed deal will create ‘uncertainty and risks.’ Get it wrong and problems like the incoming ban on refuse-derived fuel (RDF) imports into the Netherlands may proliferate. What the Green Deal ends up as could influence the European cement industry for decades.

The managed march of China

Last’s week article on a price spike in Henan province illustrated the tension in China between markets and government intervention. It looks like this was driven by an increase in infrastructure spending with cement sales starting to rise. Cement production growth has also picked up in most provinces in the first three quarters of 2019. This follows a slow fall in cement sales over the last five years as state measures such as consolidation and peak shifting have been implemented. The government dominates the Chinese market and this extends west, as waste importers have previously found out to their cost.

Meanwhile, the Chinese industry has continued to grow internationally. Rather than buying existing assets it has tended to build its own plants, often in joint ventures with junior local partners. LafargeHolcim may have left Indonesia in 2018 but perhaps the real story was Anhui Conch's becoming the country's third biggest producer by local capacity. Coupled with the Chinese dominance in the supplier market this has meant that most new plant projects around the world are either being built by a Chinese company or supplied by one.

India consolidates but watches dust levels

Consolidation has been the continued theme in the world's second largest cement industry, with the auction for Emami Cement and UltraTech Cement’s acquisition of Century Textiles and Industries. Notably, UltraTech Cement has decided to focus its attention on only India despite the overseas assets it acquired previously. Growth in cement sales in the second half of 2019 has slowed and capacity utilisation rates remain low. Indian press reports that CRH is considering selling up. Together with the country's low per capita cement consumption this suggests a continued trend for consolidation for the time being.

Environmental regulations may also play a part in rationalising the local industry, as has already happened in China. The Indian government considered banning petcoke imports in 2018 in an attempt to decrease air pollution. Later, in mid-2019, a pilot emissions trading scheme (ETS) for particulate matter (PM) was launched in Surat, Gujarat. At the same time the state pollution boards have been getting tough with producers for breaching their limits.

Steady growth in the US

The US market has been a dependable one over the last year, generally propping up the balance sheets of the multinational producers. Cement shipments grew in the first eight months of the year with increases reported in the North-Eastern and Southern regions. Imports also mounted as the US-China trade war benefitted Turkey and Mexico at the expense of China. Alongside this a modest trade in cement plants has been going on with upgrades also underway. Ed Sullivan at the Portland Cement Association forecasts slowing growth in the early 2020s but he doesn’t think a recession is coming anytime soon.

Mixed picture in Latin America

There have been winners and losers south of the Rio Grande in 2019. Mexico was struggling with lower government infrastructure spending hitting cement sales volumes in the first half of the year although US threats to block exports haven’t come to pass so far. Far to the south Argentina’s economy has been holding the cement industry back leading to a 7% fall in cement sales in the first 11 months of the year. Both of these countries’ travails pale in comparison to Venezuela’s estimated capacity utilisation of just 12.5%. There have been bright spots in the region though with Brazil’s gradual return to growth in 2019. The November 2019 figures suggest sales growth of just under 4% for the year. Peru, meanwhile, continues to shine with continued production and sales growth.

North and south divide in Africa and the Middle East

The divide between the Middle East and North African (MENA) and Sub-Saharan regions has grown starker as more MENA countries have become cement exporters, particularly in North Africa. The economy in Turkey has held back the industry there and the sector has pivoted to exports, Egypt remains beset by overcapacity and Saudi Arabian producers have continued to renew their clinker export licences.

South of the Sahara key countries, including Nigeria, Kenya and South Africa, have suffered from poor sales due to a variety of reasons, including competition and the local economies. Other countries with smaller cement industries have continued to propose and build new plants as the race to reduce the price of cement in the interior drives change.

Changes in shipping regulations

One of the warning signs that flashed up at the CemProspects conference this year was the uncertainty surrounding the new International Maritime Organistaion (IMO) 2020 environmental regulations for shipping. A meeting of commodity traders for fuels for the cement industry would be expected to be wary of this kind of thing. Their job is to minimise the risk of fluctuating fuel prices for their employers after all. Yet, given that the global cement industry produces too much cement, this has implications for the clinker and cement traders too. This could potentially affect the price of fuels, input materials and clinker if shipping patterns change. Ultimately, IMO 2020 comes down to enforcement but already ship operators have to decide whether and when to act.

Do androids dream of working in cement plants?

There’s a been a steady drip of digitisation stories in the sector news this year, from LafargeHolcim’s Industry 4.0 plan to Cemex’s various initiatives and more. At present the question appears to be: how far can Industry 4.0 / internet of things style developments go in a heavy industrial setting like cement? Will it just manage discrete parts of the process such as logistics and mills or could it end up controlling larger parts of the process? Work by companies like Petuum show that autonomous plant operation is happening but it’s still very uncertain whether the machines will replace us all in the 2020s.

On that cheery note - enjoy the winter break if you have one.

Global Cement Weekly will return on 8 January 2020

Cemex pushed ahead yesterday and announced that it had sold the Kosmos Cement Company to Eagle Materials for around US$665m. It owns a 75% stake in the company, with Italy’s Buzzi Unicem owning the remaining share, giving it roughly US$449m once the deal completes. Proceeds from the sale will go towards debt reduction and general corporate purposes. The sale inventory includes a 1.7Mt/yr integrated cement plant in Louisville, Kentucky as well as seven distribution terminals and raw material reserves.

The decision to sell assets makes sense given Cemex’s financial results so far in 2019. It reported falling sales, cement volumes and earnings in the first nine months of the year although much of this was down to poor market conditions in Mexico. However, the US, along with Europe, was one of its stronger territories with rising sales. Earnings were impaired in the US, possibly due to bad weather in the southeast and competition in Florida, but infrastructure and residential development were reported to be promising.

Graph 1: Portland & Blended Cement shipments in 2018 and 2019. Source: United States Geological Survey (USGS).

Graph 2: Change in imports of hydraulic cement & clinker to the US in 2018 and 2019 from selected countries. Source: USGS.

United States Geological Survey (USGS) data also supports a picture of a growing US market. Shipments of Ordinary Portland Cement and blended cements grew by 2.4% year-on-year to 66.9Mt for the first eight months of 2019 from 65.4Mt in the same period in 2018. By region growth can be seen in the North-East, South and imports. Declines were reported in the West and Midwest. The states of Alabama, Kentucky, Tennessee – the area where the Kosmos plant is located – saw shipments grow by 4% to 4.77Mt from 4.58Mt. It is worth noting that Louisville is in the north of Kentucky near the border with Indiana, where shipments also grew.

The Portland Cement Association’s (PCA) fall forecast may also have helped Cemex’s decision. Ed Sullivan, PCA Senior Vice President and Chief Economist, said that he expected cement consumption in the US to continue growing in 2019 and 2020 but with a slowing trend into 2021 following general gross domestic product (GDP) predictions. The PCA’s view is that pent-up demand following the recession in 2008 was gone and the economy was gradually weakening. Crucially though it didn’t think a recession was impending. In this scenario Cemex might be taking a medium-term view with regards to the Kosmos Cement Company.

Another more general interesting data point from the USGS was the change in import origins to the US. Imports grew by 11.3% to 66.9Mt in January to August 2019. The top five importing countries and their overall share remained the same but there was some movement between them. Turkish and Mexican imports surged at the expensive of Chinese ones as can be seen in Graph 2. The go-to explanation for this would be the on-going US - China trade war. Cemex is a Mexican company with a strong presence in both the US and Mexico. This change in the make-up of the import market in the US may also have informed its decision to sell Kosmos Cement as it looked at the macro scale.

More generally the US market is looking buoyant in the short to medium term. Plants are being sold like Kosmos Cement to Eagle Cement and the Keystone cement plant in Bath, Pennsylvania to HeidelbergCement and a major upgrade project is underway on the new production line at the Mitchell plant in Indiana. In Cemex’s case, as ever with asset sales, the seller sometimes has to make the hard decision of whether to divest a plant in a growing region to help the business in other places that might not be doing so well. The growth of America’s largest locally owned producer, Eagle Cement, may also give cheer to the US’ current ‘America First’ administration.

US: Cemex says it has agreed to sell the Kosmos Cement Company to Eagle Materials for around US$665m. The Mexican company owns a 75% stake in the company and Italy’s Buzzi Unicem manages the remainder. It expects to receive US$499m from the transaction. This will be spent on debt reduction and for general corporate purposes. The sale includes the 1.7Mt/yr Kosmos integrated cement plant in Louisville, Kentucky as well as seven distribution terminals and raw material reserves.

“This is another key milestone in achieving our ‘A Stronger Cemex’ objectives. Now, closed or announced asset sales are in excess of US$1.3bn under this program. We are pleased with the continued favourable asset-divestment dynamics in our industry,” said Fernando A Gonzalez, chief executive officer (CEO) of Cemex.

Completion of the deal is subject to regulatory approval. It is expected to complete in the first quarter of 2020.

US: The National Stone, Sand and Gravel Association (NSSGA) has honoured Cemex USA’s ‘exemplary use of environmental controls and systems’ at two quarries with its Environmental Excellence Gold Award. Its Center Hill quarry in Florida won a Community Relations Gold Award. Ten further aggregates operations won Silver or Bronze Awards in the Environmental Excellence or Community Relations categories. “We take pride in stewardship and serving as good neighbours in communities in which we operate and as examples others can emulate,” said Jaime Muguiro, Cemex USA president.

China: Cemex’s corporate venture capital subsidiary Cemex Ventures is preparing to enter the Chinese market offering innovations for the construction industry. It wants to build relationships with startups in order to do this and it has signed deals with local companies Glodon, a digital platform service provider in construction industry based in Beijing, and Interdream Ventures, a venture capital firm that focuses on the digitalisation of construction and decoration industry.

"This type of alliance between two segments that fit together, is key to finding new successful business models, and operate in the Chinese market. Glodon and Interdream Ventures also have a complete vision of the entire value chain and are good partners to drive the construction revolution,” said Juan Nieto, a representative of Cemex Ventures Asia.

Cemex Ventures is the corporate venture capital wing of Cemex that was launched in 2017. It invests in startups with potential in the construction industry and works with entrepreneurs, universities and other stakeholders.

US: Cemex is looking to sell its majority stake in the Kosmos Cement plant at Louisville in Kentucky. Sources quoted by the El Financiero newspaper said that the integrated plant could be valued as high as US$750m. Cemex is working with Bank of America and Citigroup on the potential sale. Buzzi Unicem, through its subsidiary Dyckerhoff, owns the remaining stake in the plant. Cemex’s decision to try and sell the plant follows falling sales and profits for the Mexican building materials producer so far in 2019.

As most of the larger cement producers have released their financial results for the third quarter of 2019 it’s time to see how they are doing so far this year.

Graph 1: Revenue from major cement producers, Q1 - 3 2019. Source: Company reports.

Graph 2: Cement sales volumes by major cement producers, Q1 - 3 2019. Source: Company reports.

LafargeHolcim is looking good, with rises in both its net sales and earnings on a like-for-like basis. The sale of its assets in South-East Asia earlier in the year and in 2018 may have appeared to reduce its figures, but the like-for-like growth suggests that the strategy its working. This has been driven by markets in Europe and North America as its other big market, Asia, has continued to slide. The latter vindicates the group’s decision to partly leave the region, in the short term at least. It’s also interesting to note that at the macro-scale LafargeHolcim’s ready-mixed concrete (RMX) sales fell by 1.3% on a like-for-like basis to 7.4Mm³ in the first nine months of 2019. What does this mean for a building materials company that has been moving towards the whole supply chain and concrete?

Anhui Conch Cement reported cement and clinker sales volumes of 202Mt in the first half of 2019, a 42% year-on-year growth for the same period in 2018. Its revenue increased by 42% year-on-year to US$15.9bn in the first nine months of 2019 from US$11.1bn in the same period in 2018, putting it ahead of Germany’s HeidelbergCement in sales terms. The group was coy on how it actually managed to boost its sales so fast in a country where cement sales only rose by 5% in the first half of the year. Yet, it did admit to slowing sales growth in West China in the first half. A 5% fall in fuel and power costs no doubt helped its profit margins also. Notably, its overseas sales nearly doubled to US$143m in the first half of 2019 or 2% of its total revenue.

HeidelbergCement’s financials were solid, with growing revenue, earnings and profits. This was balanced by falling cement and clinker sales volumes. Cement sales fell in all group regions with the exception of North America. However, it was able to boast about ‘positive results in all group countries in the third quarter except for Egypt’s. Company head Bernd Scheifele summarised the sitaution by saying that, “price increases and strict cost discipline more than compensated for the slightly weaker demand for our products in the third quarter.”

Of the building materials companies with larger revenues, Cemex has had a tougher time of it so far in 2019 with declining sales, cement volumes and earnings. In part this has been due to a poor market in Mexico, although chief executive officer (CEO) Fernando A Gonzalez said that the group believed that weak demand for their products was ‘bottoming out’ and that a new infrastructure program made them hopeful looking forward. The group’s Middle East and Africa region also caused concern with a 3% drop in sales volumes in the Philippines, one of its key South-East Asian territories.

Things to note from the smaller producers featured here are as follows. India’s UltraTech Cement says it is the world’s third largest cement producer outside of China. With an installed production capacity of over 100Mt/yr in India this may well be the case. The vast majority of this is based at home in India. Alongside this, its financial figures seem buoyant as it continues to integrate new acquisitions such as Century Textiles and Industries into the business. By contrast Africa’s Dangote Cement has endured mixed fortunes so far 2019 with a modest rise in cement sales volumes and small drop in revenue and a larger decline in earnings in both Nigeria and operations elsewhere in Sub-Saharan Africa. At home this has been attributed to a subdued economy and elsewhere it has pointed to poor markets in South Africa, Zambia and Ethiopia. On the positive side though promotional marketing activity at home in Nigeria helped support an improved third quarter.

Summarising all of this is difficult given the very different nature of these large companies. Generally most of these companies are growing. One takeaway to consider is the emergence of two types of cement producer models at the top end: multinationals and large-local players. In recent years the rise of the large-local player has been a story mirroring the economic prominence of China and India. One can also see it in places like Indonesia and Brazil. The worry is that these kinds of companies are more exposed to regional economic risks than multinational ones. Yet in 2019 some multinational cement producers are also having problems. Whatever else happens, if fears of a new global recession come true, then these larger scale producer models will be tested, possibly to breaking point. 

UK: A fire broke out at Cemex’s 1.8Mt/yr integrated Rugby plant at 02:00 on 6 November 2019. BBC News has reported that operations were unaffected and none of the plant’s 180 employees injured by the fire, which was caused by a mechanical malfunction in a machine belt conveying raw materials. The fire spread over three floors of the plant’s preheater tower.