Displaying items by tag: Denmark

Denmark: Aalborg Portland has appointed Ignacio Arroyo as its plant director.

Arroyo started his career working for Holcim in 1998 as a project manager at the Carboneras Plant in Spain. Other roles in Spain followed before he became the Operation Manager at the Yeles plant in 2012. He then worked as Technical Director and Plant Manager at Holcim’s National Cement Factory in Abu Dhabi, UAE. Subsequent roles included Plant Manager positions in Holcim Romania and Lafarge Canada.

There have been two major announcements in the cement sector this week. The first was that Holcim is preparing to divest its business in the US via a spin-off and full capital market separation. The second was that FLSmidth is thinking about selling its cement equipment business. Both stories are huge so we will cover them both. This week we will focus on FLSmidth and Holcim will follow next time.

Both news stories came as something of a shock. Yet FLSmidth’s plans were not surprising given the divestment of MAAG gears and drives business earlier in January 2024 and several years of tough trading conditions in the sector generally. Yet, as one commentator on the Global Cement LinkedIn Group put it, it feels like “the end of an era.”

First a little history. FLSmidth has been in business for over 140 years and has been indelibly linked to the cement market throughout this time. Its first big cement order was in 1887, it built its own plant in Aalborg in 1889 and it started selling rotary kilns in 1899. By 1957, at the time of its 75th anniversary, it was estimated that 40% of the world’s cement was manufactured in equipment supplied by FLSmidth. Many other advancements and milestones followed but signs of the modern business’ focus on mining can be detected in the acquisition of US-based Fuller Company in 1990, the sale of Aalborg Portland in 2002 and the purchase of ThyssenKrupp Industrial Solutions’ mining business in 2021.

FLSmidth described its reasoning for a potential divestment of its cement business and focusing on mining as follows: “our industries, and in turn, the appropriate operating models which best serve them, have diverged. Consequently, combining our two organisations under one ownership is now forcing more operational friction than benefit.” It took pains to state that it hopes to sell its cement business in one piece whereupon it can continue to grow under new ownership and “maximise its full potential.”

FLSmidth’s strategy for selling its cement equipment business appears to have taken the form of separating out the cement business, making it look as strong as possible and then publicly announcing that it is “exploring divestment options.” This is different from many other corporate divestments that only become public once a deal with a prospective buyer has been secured. FLSmidth has been preparing for a potential divestment of the division internally through its ‘pure play’ strategies and focusing more recently on product, services and technology rather than project risks. It said that the MAAG sale had shown it that there was interest in buying the cement business. However, no potential buyers have been disclosed at this time. In a conference call the company said that it was hoping for five to 10 interested parties and it would expect these to be either industrial buyers or financial entities.

One of the callers homed in on the attempts by ThyssenKrupp to sell the cement division of its subsidiary ThyssenKrupp Industrial Solutions (TKIS) in 2020 following a restructuring drive. It changed its mind in 2021 and ended up selling its mining division to FLSmidth instead. In response to any comparison, FLSmidth asserted that it was preparing to sell a significantly different asset to TKIS, not least due to its careful steering away from project-based risk.

The wider business backdrop to this decision has been the rise of the Chinese cement sector since the late 1990s, persistent global production overcapacity, the setting of net zero CO₂ emission targets globally and, more recently, logistic and economic shocks arising from the Covid-19 pandemic and geopolitical events. New cement production line projects are now frequently managed by China-based equipment suppliers in many territories, with the exception of North America. It is worth noting here that some of the largest China-based cement equipment suppliers are subsidiaries of the government. The Chinese government has also supported the construction of new plants outside its borders through its Belt and Road initiative. Protectionist investment policies implemented by western governments to support industry transitioning to net zero is in part a response to this in the general economy. Cement equipment suppliers from outside of China can and do build lines on a regular basis but they tend to concentrate on parts of plants, such as mills, or specific technologies and services. FLSmidth is a good example of this transition with its renewed focus on the green transition.

The decision by FLSmidth to consider selling its cement business marks another sign that the cement industry is changing. The transition to net zero puts Europe-based suppliers in a good position given that the region is currently leading with carbon capture projects. A retrofit boom for cement plants (and customers) being made to pay for CO₂ emissions could change the dynamic for the cement equipment sector as the focus shifts from building kilns to capturing CO₂. And companies like FLSmidth are well placed to benefit from this. Then again it may just end up being business as usual. Either way, any eventual change in the ownership of FLSmidth’s cement division does indeed mark the end of an era.

Next week: Holcim’s plans in the US

Denmark: FLSmidth has discussed its decision to sell FLSmidth Cement. The company said that the cement and mining industries it serves have diverged, along with the appropriate operating models which best serve them. The continuing combination of FLSmidth Cement and FLSmidth’s mining business now presents ‘more operational friction than benefit.’ The supplier took ‘careful consideration’ of the best interests of all parties affected by the separation.

FLSmidth built its first cement plant in 1887, and pioneered the use of optimisation software in 1969. The FLSmidth Cement digital leadership team will now focus on delivering cement-specific smart and connected services for its customers.

FLSmidth Cement president Christopher Ashworth said “We have proven our ability to embrace change, and the prospect of new ownership will be no different. Working together as a team, we will ensure continued success by staying focused on our customers. Furthermore, our core mission remains: driving the green transition with both new technologies and helping existing plants optimise their operations.” Ashworth added “FLSmidth made its name as a full flowsheet provider of cement plants. It is a history that we value and will continue to build on. But today’s cement market is a vastly different world with vastly different challenges than what has gone before. It therefore requires a different operating paradigm that moves away from a projects-based approach to focus on specific products and services. The pure play strategy thus frees us to adapt to the specific market challenges facing our industry and prioritise the supply of core offerings. The prospect of operating under new ownership only reinforces our current transition.”

Denmark: FLSmidth says that its plans to sell its cement business. The business provides FLSmidth’s processing equipment and services for cement plants around the globe. FLSmidth will now explore its possible divestment options in order to ‘maximise’ the business’ ‘full potential,’ while also serving to strengthen the supplier’s remaining mining business’ market-leading position in its sector.

Chair Tom Knutzen said “I am truly proud of what we have achieved with our cement business for more than 140 years. I firmly believe the business is well positioned for future success and that it has a significant role to play in the decarbonisation of cement. However, when reviewing the long-term options for FLSmidth as a business, for our customers and for our shareholders, we have concluded that a separation of ownership could be beneficial for both the mining and cement businesses. Unlocking the full potential of the cement business requires substantial investments and dedicated management attention, which we believe will be more easily achieved under a different ownership than FLSmidth’s.”

Chief executive officer Mikko Keto said “Our cement business has shown robust performance and good strategic progress over past years. This gives me great comfort in the cement business’ ability to continue its positive journey, also – and maybe even more so – under another ownership than FLSmidth’s. We have a clear ambition of further strengthening our market-leading position in mining, and we see tremendous long-term opportunities for the business backed by strong industry fundamentals and a positive long-term market outlook. Consequently, today’s decision of exploring divestment options for our cement business constitutes a key step in unlocking the full long-term potential of both the mining and cement businesses.”

Denmark: FLSmidth's cement business recorded preliminary, unaudited sales of US$871m in 2023, down by 59% year-on-year from US$2.14bn in 2022. The business contributed 25% of the group’s consolidated sales of US$3.5bn. FLSmidth had a total order intake for the year of US$3.11bn, toward which the cement business contributed US$711m (23%). The supplier said that its results were in line with guidance. It now expects its cement business to generate US$580 – 653m (19 – 23%) of total group sales of US$2.9 – 3.12bn in 2024.

FLSmidth said “We expect the short-term outlook for the cement industry to remain impacted by macroeconomic uncertainty. The guidance for 2024 reflects the ongoing execution of the GREEN’26 strategy, continued business simplification and product portfolio pruning, including the expected closing of sale of the MAAG gears and drives business during the first quarter of 2024.”

Denmark/Sweden: FLSmidth Cement has sold its MAAG gears and drives business to the Sweden-based investment company Solix Group for an undisclosed sum. The transaction is expected to close during the first quarter of 2024 and includes all related assets, including intellectual property, technology, employees and customer contracts. FLSmidth said that the divestment was is in line with its Green'26 strategy, which in combination with a greater strategic focus on the service business includes focusing the product portfolio on the core technologies required for a potential green transition in the cement industry.

The MAAG product range includes a wide range of industrial gear solutions for all types of mills and kilns, gear solutions for bucket-wheel excavators and belt conveyors, as well as many other heavy-duty applications used in the cement, mining and other industries. The business has an average turnover of around Euro55 – 65m/yr.

Christopher Ashworth, the president of FLSmidth Cement, said “The divestment is fully aligned with our ongoing transformation efforts and supports our Green'26 strategy. I would like to extent my gratitude to the dedicated employees in the MAAG business for their unwavering commitment to supplying high-quality solutions and services. I wish all the MAAG employees and Solix the very best going forward."

Denmark: Crown Prince Frederik of Denmark will today inaugurate the ConsenCUS CO₂ capture pilot unit at Aalborg Portland Cement’s Rørdal plant. Kadri Simson, the European Union (EU) Energy Commissioner, and Lars Aagaard, the Danish Minister for Climate, Energy and Supply Minister, will also attend the event. A European Commission-run carbon capture, utilisation and storage (CCUS) forum will take place in Aalborg at the same time.

Aalborg Portland Cement first established a CCUS pilot project called CORT at its cement plant in 2022 in collaboration with the Technical University of Denmark (DTU) with support from the EU Innovation Fund. This is now being replaced by the ConsenCUS pilot. The new project will test a more energy-efficient CCS technology that can potentially halve the energy consumption compared to traditional CO₂ capture methods by driving the process exclusively via electricity. The project partners will also investigate converting the captured CO₂ into potassium formate, a valuable resource for the chemical industry. The ConsenCUS project is supported by the EU's Horizon 2020 research and innovation program.

Denmark: The first nine months of 2023 brought 1.8% year-on-year growth in FLSmidth’s consolidated sales, to Euro767m. The contribution from its cement business declined by 17%, however, to Euro188m, 24% of total sales. The division’s order intake dropped by 24% to Euro164m.

The group said “Our cement business continued to be adversely affected by the global slowdown in market demand. Consequently, we continue to take the steps necessary to preserve the long-term profitability of the business, including a significant rightsizing of the organisation. Further, our pure play strategy is progressing according to plan, and the ongoing operational and legal separation of the cement business is expected to be finalised towards the end of 2023.”

Last week the US General Services Administration (GSA) announced that it was investing US$2bn on over 150 construction projects that use low-embodied carbon (LEC) materials. The funding is intended to support the use of US-manufactured low carbon asphalt, concrete, glass and steel as part of the Inflation Reduction Act. For readers who don’t know, the GSA manages federal government property and provides contracting options for government agencies. As part of this new message, it will spend US$767m on LEC concrete on federal government buildings projects following a pilot that started in May 2023. The full list of the projects can be found here.

This is relevant because the US-based ready-mixed concrete (RMX) market has been valued roughly at around US$60bn/yr. One estimate of how much the US federal government spent on concrete was around US$5bn in 2018. So the government buys a significant minority of RMX in the country, and if it starts specifying LEC products, this will affect the industry. And, at present at least, a key ingredient of all that concrete is cement.

This isn’t the first time that legislators in the US have specified LEC concrete. In 2019 Marin County in California introduced what it said was the world’s first building code that attempted to minimise carbon emissions from concrete production. It did this by setting maximum ordinary Portland cement (OPC) and embodied carbon levels and offering several ways suppliers can achieve this, including increasing the use of supplementary cementitious materials (SCM), using admixtures, optimising concrete mixtures and so on. Unlike the GSA’s approach in November 2023 though, this applies to all plain and reinforced concrete installed in the area, not just a portion of procured concrete via a government agency. Other similar regional schemes in the US include limits on embodied carbon levels in RMX in Denver, Colorado, and a reduction in the cement used in RMX in Berkeley, California. Environmental services company Tangible compiled a wider list of embodied carbon building codes in North America that can be viewed here. This grouping also includes the use of building intensity policies, whole building life cycle assessments (LCA), environmental product declarations (EPD), demolition and deconstruction directives, tax incentives and building reuse plans.

Government-backed procurement codes promoting or requiring the use of LEC building materials for infrastructure projects have been around for a while in various places. The general trend has been to start with measurement via tools such as LCAs and EPDs, move on to government procurement and then start setting embodied carbon limits for buildings. In the US the GSA’s latest pronouncement follows on from the Federal Buy Clean Initiative and from when California introduced its Buy Clean California Act in 2017. Outside of the US similar programmes have been introduced in countries including Canada, Germany, the Netherlands, Sweden and the UK. On the corporate side members of the World Economic Forum’s First Movers’ Coalition have committed to purchasing or specifying volumes of LEC cement and/or concrete by 2030. Examples of whole countries actually setting embodied carbon emissions limits for non-government buildings are rarer, but some are emerging. Both France and Sweden, for example, introduced laws in 2022 that start by analysing life-cycle emissions of buildings and will move on to setting embodied carbon limits in the late 2020s. Denmark, Finland and New Zealand are also in the process of introducing similar schemes. The next big move could be in the EU, where legislators are considering embodied carbon limits for building materials as part of its ongoing revisions to its Energy Performance of Buildings Directive or the Construction Products Regulation legislations. Lobbying, debate and arguing remains ongoing at present.

To finish, Ireland-based Ecocem spent a period in the 2010s attempting to build a slag cement grinding plant at Vallejo, Solano County, in the San Francisco Bay Area of California. The project met with considerable local opposition on environmental grounds and was eventually refused planning permission. The irony is that slag cement is one of those SCM-style cements that Marin County, also in the San Francisco Bay Area, started encouraging the use of just a few years later. Ecocem held its inaugural science symposium in Paris this week. A number of scientists who attended the event called for existing low carbon technologies to be adopted by the cement and concrete sectors as fast as possible. One such approach is to lower the clinker factor in cement through the use of products that Ecocem and other companies sell. A point to consider is, if Marin County’s code or the GSA’s recent procurement directive came earlier, then that slag plant in Vallejo might have been built. Encouraging the use of LEC building materials by governments looks set to proliferate but it may not be a straightforward process. Clear and consistent policies will be key.

Italy: Cementir Holding raised its sales by 0.5% year-on-year during the first nine months of 2023, to Euro1.3bn. It sold 7.93Mt of cement, down by 3.1% year-on-year from 8.19Mt in the corresponding period of 2022. Cementir Holding attributed the decline to reduced demand, primarily in Belgium, Denmark, Egypt, Malaysia and the US. This offset an increase in consumption in China and Türkiye. The group’s operating costs dropped by 6.6% to 1.01bn, while its earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 33% to Euro321m.