Displaying items by tag: Cemex
UK: Cemex has announced the proposed mothballing of the 0.8Mt/yr South Ferriby integrated plant in Lincolnshire. It says that the move would lead to the redundancy of all staff employed at the plant except cement delivery drivers in the third quarter of 2020. A review of the optimal haulage provision will follow. Cemex says that the proposal is the outcome of ‘an analysis of the company’s European cement supply chain.’ Its final decision will follow ‘a process of collective consultation with affected employees.’ It says that the decision was unaffected by the coronavirus outbreak.
The group said that, “Cemex remains committed to the UK and its European business.” It added that the mothballing of the South Ferriby plant will ‘optimise the network it has available across the region.’ Cemex will continue to supply customers from its existing cement network, maintaining customer service and ‘high-quality products in line with customer expectations.’ Its strategic growth will focus on ‘larger metropolitan markets where demand and profitability will be strongest.’
Spain: Cemex has supplied concrete made with barite (BaSO4)-containing cement for the construction of a bunker at the Carlos III Hospital in Madrid where radiological coronavirus treatments will be carried out. Alimarket Construction News has reported that the facility will have walls 2m thick. Cemex Spain Operations said, “Cemex is an expert company in the supply of special concretes for this type of hospital facilities. Proof of this is that it has already carried out more than a dozen actions of this type throughout the country.”
Trinidad Cement to resume operations
12 May 2020Trinidad & Tobago: Trinidad Cement has been granted permission by the government to resume operations at its Claxton Bay integrated plant. It closed production in early April 2020 due to coronavirus-related government advice. General manager Guillermo Rojo said that the subsidiary of Cemex has implemented multiple protocols, including temperature testing at all access points and the activation of a local Rapid Response team.
Cemex’s net income falls in January - March 2020
01 May 2020Mexico: Cemex has recorded a consolidated net income of US$47.2m in the first quarter of 2020, down by 13% year-on-year from US$54.1m in the same quarter of 2019. Net sales rose by 6% to US$260m from US$245m. Cemex said, “The world is going through an unprecedented time due to the COVID-19 pandemic. Construction activity across most of our markets is being impacted to varying degrees.”
In 2019 Cemex’s net income was US$179m, down by 69% year-on-year from US$570 in 2018. Net sales were US$13.1bn, down 3.0% from US$13.5bn in 2018.
Colombia: Cemex Latam Holdings (CLH)’s net sales in the first quarter of 2020 were US$214m, down by 11% year-on-year compared to sales of US$240m in the same period of 2019. Operating earnings before interest, tax, depreciation and amortisation (EBITDA) throughout the quarter declined by 12% year-on-year to US$46.0m from US$52.3m. Cement volumes over the period were 11% below their first-quarter 2019 level, however prices were 3% higher. Total debt decreased by 8% year-over-year, reaching US$766m as of March 2020.
Cemex Latam Holdings CEO Jesus Gonzalez said, “We came into 2020 with favourable demand momentum in Colombia, Nicaragua, Guatemala and El Salvador, and a stabilising trend in Costa Rica. The coronavirus outbreak began to impact on this in March 2020. With respect to capex, US$20.0m has been postponed until 2021. Also, members of CLH’s Board and senior leadership have agreed to voluntarily waive a percentage of their second quarter salaries. Other employees voluntarily deferred a percentage of their salaries for the period. I would like to thank my colleagues for their support in these challenging times.”
Cemex implements new coronavirus protocols
27 April 2020Mexico: Cemex has implemented more than 50 new safety protocols to minimise the risk of coronavirus spread in its cement, ready-mix concrete and aggregates operations. Cemex said that it recognised ‘the importance of the construction industry in supporting the maintenance and service of essential infrastructure required to face the pandemic and contribute to the economy,’ and would resume or continue all possible operations in line with the regulations of the countries in which it operates.
“The health and safety of its employees is the company’s number one priority,” said Cemex. “Among the protocols implemented are the company’s Personal Hygiene Protocol, Physical Distancing Protocol, Screening at Workplace Protocol, Cemex Truck Drivers Protocol, Workplace Cleaning Protocol, and Commuting To and From Work Protocol,” all developed in line with advice from national and international bodies such as the World Health Organization (WHO).
Cemex has leveraged its Cemex Go digital platform to limit physical contact and ‘protect employees, customers and suppliers.’
Cemex plant emits cloud of dust
27 April 2020US: A cloud of dust from Cemex’s 3.3Mt/yr Victorville, California plant caused the fire brigade to be called to the site at 17:00 on 24 April 2020. Victor Valley News has reported that what onlookers believed to be smoke was indeed escaped dust from silo refilling. Locals reported that dust frequently covers their cars.
A short look at cement company debt
15 April 2020Yesterday, on 14 April 2020, the International Monetary Fund (IMF) forecast a 3% gross domestic product (GDP) growth contraction in 2020 due to negative economic effects from the coronavirus outbreak and its containment. Most regions around the world may experience negative growth in 2020 with exceptions only in so-called Emerging and Developing Asia and Low-income Developing Countries. This is just one projection among many coming out at the moment but the prognosis is downward. This begs the questions: how will cement companies cope?
Markets for building materials are not going to disappear in these conditions but demand looks likely to be reduced. Added to this, an industry that’s been facing increasing production overcapacity over the years may be challenged by additional competition effects. Here we will look at the debt profile of some of the major multinational cement producers outside of China. Please note that this is a cursory examination of corporate debt that only looks at simple financial indicators. Company financial officers want to present themselves in best possible light and will have alternatives that point to their strengths. For a detailed view we refer readers to the credit rating agencies and the companies’ published financial information directly.
Graph 1: Net debt and EBITDA for selected multinational cement companies in 2019. Source: Company financial reports and investor presentations. Note, Conversion for reporting currencies to US$, HeidelbergCement uses Result from Current Operations Before Depreciation and Amortisation (RCOBD) and UltraTech Cement results from 2018 – 2019 financial year.
Graph 1 presents a comparison between net debt and earnings before interest, taxation, depreciation and amortisation (EBITDA) in real terms. The bigger the gap between debt and earnings then the more one starts to wonder how it can be repaid. One feature to note in this graph is the size of the debt of the three largest producers – LafargeHolcim, HeidelbergCement and Cemex – despite the fact that the companies are of different sizes. Cemex’s high debt to earnings ratio has been much commented on previously following its acquisition of Rinker just before the financial crash in 2007 and 2008. Unfortunately though, despite strenuous mitigation efforts, it remains prominent. Other positions to note are those of Buzzi Unicem and Dangote Cement, which have higher earnings than debts. These are envious positions to be in.
Graph 2: Net debt/EBITDA and EBITDA Margin for selected multinational cement companies in 2019. Source and notes as in Graph 1.
Graph 2 shows the ratio of net debt and EBITDA and the EBITDA Margin, a company’s earnings divided by its revenue. This graph better shows the relationship between debt and earnings. This can be seen well in a comparison between LafargeHolcim and HeidelbergCement. The latter has higher debts with respect to its earnings. Its debt jumped in 2016 following its acquisition of Italcementi. LafargeHolcim’s debts ballooned followed its formation by merger in 2015 but this was in line with the jump in its equity. Where it struggled was with slow earnings in the years afterwards. However, bold divestments in South-East Asia in 2018 and 2019 appear to have fixed this.
Other companies to watch in the higher Net debt/EBITDA category include India’s UltraTech Cement and both of the large Brazilian multinationals, Votorantim and InterCement. In recent years UltraTech Cement has been busy buying up other cement producers in India. The difference between the Brazilian companies may reflect the fallout from their fight to buy Cimpor back in 2012. InterCement and its parent company Camargo Corrêa won the battle to acquire the Portuguese company but Votorantim was given selected international assets outside of Brazil. Unfortunately, the Brazilian market then collapsed and Camargo Corrêa has reportedly been trying to sell some or all of its cement assets ever since.
The other financial indicator in Graph 2 is EBITDA margin or earnings/operating profit as a percentage of revenue. Higher is generally seen as better here in comparison to other companies in the same sector. Note how LafargeHolcim is ahead of HeidelbergCement and Cemex, possibly due to its cost cutting and synergies since the merger. InterCement also has a relatively high EBITDA margin, boosted by a pickup by the Brazilian economy in 2019. Again, Buzzi Unicem and Dangote Cement stand out. Both of these are public companies but are associated with family or individual ownership, although in very different markets. Neither has really indulged in any large-scale acquisitions in recent years. Dangote Cement has been steadily expanding but through building its own plants and distribution networks.
We’ve not mentioned CRH as its figures seem ‘average’ compared to the other cement producers discussed here. Average is of course relative for one of the world’s biggest building materials manufacturers with a net of debt of US$7.4bn in 2019! Yet, despite battles with activist investors over board member pay aside, CRH might be the rare producer that knows when to stop expanding. Notably in 2018 after an expansion phase, including acquisitions of Ash Grove Cement and LafargeHolcim assets previously, it publicly decided in 2018 to take a pause. There may be weaknesses in the company’s balance sheets yet to be revealed but they are not apparent using these metrics.
In summary, we’ve focused on corporate acquisitions here as the main source of debt in cement producers. This is simplistic but timing is everything when taking on a large amount of debt. Cemex is still carrying the scars from buying Rinker over a decade ago and InterCement and HeidelbergCement, to a lesser extent, are ones to watch through the next bad patch. Other things to consider are a general move to a more regional model for these producers away from a global one. UltraTech Cement’s focus on the Indian sub-continent or Dangote Cement’s work in Africa are examples of this. This approach could go wrong if the sole regions they operate in suffer disproportionately from the economic fallout from coronavirus. Or, if any producer, even one with high debts, has the good fortune to be present in a territory that suffers less from the downturn it may benefit. On a final note, it is worth mentioning that government data reports that China’s domestic cement production capacity utilisation in the two-week period ending on 10 April 2020 bounced back to 95% following the relaxation of the lockdown.
Cemex resumes Colombian production
14 April 2020Colombia: Mexico-based Cemex has announced the resumption of operations at its 2.8Mt/yr Caracolito plant in Ibagué, Tolima Department on 13 April 2020. Noticias Financieras News has reported that Cemex Colombia will resume the supply of its products to ‘infrastructure and public works that cannot be suspended, as well as for emergency care projects and road projects.
Cemex will have to wait for the Colombian government to lift its coronavirus lockdown to restart supplies to customers.
Cemex resumes operations in Mexico
07 April 2020Mexico: Cemex has announced that will resume operations in Mexico, just hours after announcing that it would halt all operations in the country. The turnaround was due to new government guidelines regarding essential business operations during the coronavirus outbreak.
"In accordance with the technical guidelines published today in the official Mexican gazette, the company will resume operations in Mexico to support the development and the economy of the country during the COVID-19 contingency," said Cemex in a statement on 6 April 2020. Earlier the same day it had announced that it would halt all Mexican operations until at least 30 April 2020.