Displaying items by tag: Cemex
Cemex proceeds with sale of stake in Grupo Cementos de Chihuahua
26 January 2017Mexico: Cemex has said that it will start selling its 23% minority stake in Grupo Cementos de Chihuahua. The cement producer previously announced its intent to sell its stake but it sought permissions from the regulators first. It intends to sell its shares via a public offering authorised by the Comisión Nacional Bancaria y de Valores and conducted through the Mexican Stock Exchange. It will also run a private placement to eligible investors outside of Mexico.
Trinidad & Tobago: The directors of Trinidad Cement have once again advised shareholders to reject an offer by Cemex to buy the company. In a circular to shareholders the cement producer said that the amended offer made by Cemex in early January 2017 was still below the value its auditors had calculated. Cemex previously made an offer to Trinidad Cement in December 2016.
The other side of the wall
18 January 2017With president-elect Trump due to take office this week we wonder what this means for the cement industry in Mexico. In 2016 this column looked a couple of times at the implications of Trump upon the US cement industry. First, we looked at who might benefit if he builds his wall along the Mexican border and then we wondered what his policies might mean for the US industry. To answer the latter first, the main issues for the US industry are infrastructure, changes to the Environment Protection Agency (EPA) and the repercussions if Trumps serious about a trade war with China. So long as a trade war doesn’t happen then Trump is probably good news for the US cement industry. As for Mexico, the joke has been that Trump will be good for the construction business ever since market analysts Bernstein’s passed a note around in the summer of 2016 about that wall.
Graph 1: Breakdown of Mexican cement industry by production capacity. Source: Global Cement Directory 2017.
The makeup of the domestic Mexican cement industry hasn’t changed too much in the last decade, even with the merger between Lafarge and Holcim, preserving the same market share in production capacity between the companies. Most of the producers have reported growth in 2016. Cemex reported that its cement sales volumes rose by 3% for the first nine months of 2016 and by 10% in the third quarter of that year. Overall though, its net sales fell slightly to US$2.16bn in the first nine months, alongside a fall in ready-mix concrete sales volumes. Cemex, crucially, also seems to have taken charge of its debts in 2016, saying that it was on track to meet its targets and that it had announced nearly US$2bn worth of divestments in that year. Currently the company is trying to buy out Trinidad Cement in the Caribbean, which may be a sign that it has turned a corner.
Grupo Cementos de Chihuahua’s (GCC) cement sales volumes rose in the first three quarters of 2016, in its case by 4%. Its overall net sales in Mexico rose by 4.2% in Mexican Pesos for the same period but fell when calculated in US Dollars due to currency variations. GCC attributed its sales growth to better pricing environment and increased cement volumes, mainly for projects in the commercial and industrial sectors that compensated for a decline in the public sector, following the culmination of two major urban paving and highway construction projects in 2015. At the smaller end of the market, Elementia reported that its cement sales skyrocketed by 30% to US$104m in the first nine months of the year aided by higher prices and volumes.
The major Mexican cement producers all have a presence in the US with the exception of Cruz Azul. Cemex has held assets north of the border for years, Cemento Portland Moctezuma has links to Buzzi Unicem, GCC bought US assets from Cemex in 2016 and Elementia completed its purchase of Giant Cement also in 2016. These companies have clinker in their kilns in plants on US soil manned by US citizens. This represents investment in local industry and it is exactly the kind of thing that appeals to the rhetoric of Trump’s approach so far. If the new president builds his wall then Mexican producers will probably be producing much of the cement that builds it. Even the Mexican Peso’s slow decline since 2014 could help the local cement industry, as it will cut the cost of moving exports and materials north of the border. Indeed, Enrique Escalante, the chief executive officer of GCC said in late 2016 that his company was ‘ready to build’ Trump’s wall.
However, the sheer uncertainty factor of an incoming president with as little experience of public office as Donald Trump must be giving chief executives pause for thought. After all, Trump's tweets before he has assumed office have forced car manufacturers to change policy. If he manages to disrupt the North American Free-Trade Agreement (NAFTA) in order to protect US jobs then the repercussions for the Mexican economy will be profound. It sends nearly three quarters of its exports to the US. Local cement producers would surely suffer in the resulting economic disruption.
So, currency devaluations aside, Mexican producers are making money from their cement operations at home and they are increasingly hedging their bets by operating or buying units in the US. Some, like GCC, are even being ebullient about the benefits that might come their way. It may be a bumpy ride but the Mexican industry is ready. However, it may wish to avoid appearing in any of Donald Trump’s tweets anytime soon.
Cemex increases offer to buy Trinidad Cement
10 January 2017Trinidad & Tobago: Cemex has increased its offer to buy a controlling stake in Trinidad Cement. The cement producer has instructed its subsidiary Sierra Trading to make a higher offer and take-over bid with a value of US$101m with a deadline of 24 January 2017. Previously, in early December 2016 it offered US$89m. The amended offer is dependent on Cemex acquiring control of Trinidad Cement, among other conditions. In late December 2016 the directors of Trinidad Cement advised shareholders to reject Cemex’s offer because it was seen as poor value.
Trinidad & Tobago: The directors of Trinidad Cement have advised shareholders reject an offer by Cemex to take over the company. The cement producer issued a circular to its shareholders in late December 2016 advising them that the offer by Cemex’s subsidiary Sierra Trading was ‘not fair’ from a financial point of view. Cemex released plans in early December 2016 to present an offer and take-over bid to Trinidad Cement’s shareholders that would, if successful, give it control of the company. The value of the offer was placed at US$89m and it expires on 10 January 2016.
Colombia: Cemex has received a subpoena from the US Securities and Exchange Commission (SEC) seeking information to determine whether there have been any violations of the US Foreign Corrupt Practices Act (FCPA) in relation to a new cement plant being built by Cemex Colombia at Maceo in Antioquia.
In late September 2016 Cemex fired several senior staff members in relation to the Maceo project and its subsidiary’s chief executive resigned. This followed at internal audit and investigation into payments worth around US$20.5m made to a non-governmental third party in connection with the acquisition of the land, mining rights, and benefits of the tax free zone for the project. Cemex referred the situation to the Colombian Attorney General at the same time. The group has also confirmed that it maintains an anti-bribery policy applicable to all of its employees and subsidiaries.s
Update on the Philippines
07 December 2016Construction firm DMCI Holdings announced plans this week to enter the Philippine cement market. The company intends to build one cement plant on Semirara and three cement grinding plants elsewhere – at Batangas, Iloilo and Zamboanga – to give it a national presence. DMCI’s managing director Victor Limlingan admitted to local press that his company was taking a gamble on spending US$368m in this way.
It has staked its money on the Duterte Infrastructure Plan, a scheme from the new administration that was elected in June 2016 to target US$165bn (!) towards infrastructure spending until the early 2020s. Even if a portion of this money makes it from political hyperbole to the diggers then it is likely to mean a sustained construction boom for an economy that is already growing at around 6%/yr. DCMI’s excitement was almost palpable in mid-November 2016 when it put out a press release calling for potential partners to help it benefit from the rush when it comes. Although the company did add that all the discussions were at the exploratory stage at this time because it was still awaiting bidding documents.
DMCI’s project joins six plants in various stages of planning and construction from San Miguel, Northern Cement, Eagle Cement and LafargeHolcim. In addition four existing plants are carrying out upgrades to increase their production capacity. Clearly, things are looking up for the local cement industry. DMCI follows San Miguel which announced that it was going to spend US$1bn on building five cement plants around the country in mid-2015.
In line with this kind of investment the Cement Manufacturers Association of the Philippines (CEMAP) said that cement sales had risen by 10.1% year-on-year to 20.1Mt in the first three quarters of 2016. This follows annual sales growth of 8.7% to 21.3Mt in 2014 and of 14.3% to 24Mt in 2015. CEMAP’s data for 2015 also shows that local demand overtook the country’s kiln capacity in 2014. Subsequently imports peaked to 314,000t in 2014, the highest level since 2002.
The country’s second largest producer Republic Cement, a joint venture between CRH and Aboitiz, reported sales growth similar to CEMAP’s one for the first three months of the year. LafargeHolcim, the largest producer, didn’t reveal any figures in its third quarter report but it marked the Philippines as one of its key contributors in the quarter. By contrast, Cemex noted lower growth in its third quarter report at 4% for the nine months to September 2016. It also said that the government transition following the election had slowed cement consumption, especially from infrastructure projects.
The Philippine cement industry is in the enviable position of being in a boom. The kind of problems it has to cope with includes provincial cement shortages, lobbying to increase usage of blended cements, scrutiny of prices by the government and a rise in technical smuggling. Once the new plants and upgrades start becoming operational the true nature of the market should become more apparent. At present it looks likely that DCMI gamble may turn out to be a wise one. The next question will be how many more companies want a piece of the piece too?
Cemex to meet debt reduction target in 2016
07 December 2016Mexico: Cemex says that it has made progress towards reducing its debts in 2016. So far it has announced divestments of close to US$2bn, it has reduced its total debt plus perpetual securities by more than US$2bn and says it is on target to reach its leverage ratio target of about 4.25 times by the end of the year. Cemex is also on track to reach its debt reduction target of US$3 - 3.5bn by the end of 2017.
“Despite challenging market conditions, working on the variables we can control has allowed us to be well on our way to significantly strengthen our capital structure, and we expect to continue to be able to do so in the near future,” said Fernando A Gonzalez, chief executive officer of Cemex.
Cemex to take over Trinidad Cement for US$89m
06 December 2016Trinidad and Tobago: Cemex plans to takeover Trinidad Cement by increasing its share in the cement producer through its subsidiary Sierra Trading. It will present an offer and take-over bid to Trinidad Cement’s shareholders, which if successful, will increase its share of the company to 74.9% from the 39.5% that it holds at present. The value of the offer has been placed at US$89m. The offer is reliant on Sierra acquiring at least enough of Trinidad Cement’s shares to give it control. The offer period is expected to close on 10 January 2017.
If the offer is successful, Trinidad Cement will continue operating as previously. Trinidad Cement’s main operations are in Trinidad and Tobago, Jamaica and Barbados. It is the majority shareholder of Caribbean Cement Company.
Colombia: Cemex Latam, the Latin American subsidiary of Cemex, intends to enter dialogue with the Regional Autonomous Corporation of Antioquia (Corantioquia) to revoke its environmental permit for Maceo cement plant project. Corantioquia has requested that the permit from Central de Mezclas, a subsidiary of CHL, be returned to the CI Calizas y Minerales, according to the El Colombiano newspaper. The government agency has removed the clearance on procedural grounds and over the mining rights in the area.