Displaying items by tag: ESSROC

Cementos Argos’ deal to buy the Martinsburg cement plant in West Virginia from HeidelbergCement makes a lot of sense. After all, the Colombian-based cement producer has seen its US cement assets perform well so far in 2016 with a cement sales volumes increase of 29% year-on-year to 1.99Mt and an overall sales revenue boost of 19.7% to US$700m. Compare that to the challenges the company has faced so far this year on its home turf in Colombia. There, cement sales volumes fell by 15.5% to 2.47Mt and sales revenue fell slightly to US$465m.

Argos has picked up the Martinsburg cement plant and eight cement terminals in the surrounding states for US$660m. The sale was mandated by the US Federal Trade Commission as one of the conditions of HeidelbergCement’s purchase of Italcementi including its US subsidiary Essroc, the current owner of the plant.

Symbolically, the purchase takes Argos right up to the Mason–Dixon line, the old survey line sometimes used to describe the dividing line between the so-called ‘north’ and ‘south’ in the US. The cement plant is south of the line in West Virginia but some of the cement terminals are firmly in the north-east. Outside of the company’s home turf in Colombia it has a maritime presence around the Gulf of Mexico. Although Martinsburg is inland, the new terminals in Norfolk, Virginia and Baltimore push Argos’ distribution network up the east coast. This could potentially push Argos into conflict with the subject of last week’s column, McInnis Cement, a Canadian cement plant under construction with eventual aspirations to sell its cement to the US.

Back in the US specifically the new plant will bring Argos’ total of integrated cement plants to four, joining Roberta in Alabama, Newberry in Florida and Harleyville in South Carolina. All together the producer will have a production capacity of around 6Mt/yr in the US following the acquisition. Back in 2014 when Global Cement visited Martinsburg the plant was distributing its cement about 60:40 via truck and rail. At that time the plant was shifting cement in an area from central Ohio eastwards to western Pennsylvania and south to southern Virginia, as well as in North Carolina.

Argos has paid US$300/t for Martinsburg’s production capacity of 2.2Mt/yr. As ever determining the cost of the terminals proves difficult. This compares to the US$267t/yr that Grupo Cementos de Chihuahua (GCC) paid to pick up two plants from Cemex in May 2016 or the US$375/t that Summit Materials paid Lafarge for a cement plant and seven terminals in July 2015. Previous Argos purchases in the US were around US$220 – 250/t for deals with Lafarge and Vulcan in 2011 and 2014 respectively. It is also worth considering that Essroc upgraded Martinsburg significantly in 2010 to a dry-process kiln and that the site has a waste-to-solid-fuel plant from Entsorga due to become operational in 2017.

The purchase of Martinsburg by Argos seems like an obvious move. It predicts a compound annual growth rate of 5.4% for cement consumption in the American states it operates within between 2016 and 2020. However, this may be optimistic given that the Portland Cement Association’s chief economist Ed Sullivan has downgraded his consumption forecasts for the US as a whole to 3.4% from 5% as he waits for the recovery to really kick in. The southern US states have also recovered faster since a low in 2009 than the northeastern ones. The purchase marks a new chapter in Cementos Argos’ expansion strategy

The Federal Trade Commission (FTC) gave HeidelbergCement permission to complete its acquisition of Italcementi assets in the US on 17 June 2016. This was the second and final major competition body that could have challenged the purchase, following approval by the European Commission in late May 2016. Although the FTC consent now faces a month for comment the deal is looking likely to complete towards the end of the summer.

HeidelbergCement and Italcementi have gotten away with having to sell just one cement plant and 11 terminals in the US. The Lafarge-Holcim merger in 2015 had it tougher. Those companies were forced to sell two cement plants, two slag grinding plant and a host of terminals. Admittedly LafargeHolcim is now the biggest cement producer in the US (and the world) but HeidelbergCement will hold more integrated cement plants in the US following its acquisition.

As predicted the FTC took exception with the proximity of the company’s assets in West Virginia and Pennsylvania following the acquisition. So the parties have agreed to sell the Essroc Martinsburg integrated cement plant in West Virginia. When Global Cement visited the plant in late 2013 the staff told us that cement from the plant was distributed from central Ohio eastwards to western Pennsylvania and south to southern Virginia. The plant also switched over to a FLSmidth dry production line in 2010 giving it a clinker production capacity of 1.6Mt/yr, making it one of the newer plants in the Essroc stable.

The FTC also flagged up competition concerns in five metropolitan areas: Baltimore-Washington, DC; Richmond, Virginia; Virginia Beach-Norfolk-Newport News, Virginia; Syracuse, New York; and Indianapolis, Indiana. In light of this the proposed consent agreement requires the merged company to divest seven Essroc terminals in Maryland, Virginia and Pennsylvania and a Lehigh terminal in Solvay, New York. Two additional Essroc terminals in Columbus and Middlebranch, Ohio are to be sold at the option of the buyer and subject to FTC approval. Finally, Essroc’s terminal in Indianapolis is to be sold to Cemex.

Funnily enough, the FTC took about a year to approve both the merger of Lafarge and Holcim and HeidelbergCement’s purchase of Italcementi. This compares to the European Commission which took nine months to approve the Lafarge-Holcim deal but which took 11 months to clear the HeidelbergCement-Italcementi one. Given the greater overlap of assets of the Lafarge-Holcim merger in both Europe and the US one might have thought that the approval process would have taken longer. Or maybe bureaucracy moves at a speed all of its own. Read into this what you will. The creation of the world’s second largest multinational cement producer draws closer.