Displaying items by tag: FLSmidth Cement

Kenya: East African Portland Cement (EAPC) has contracted a technical audit from Denmark-based FLSmidth Cement with a value of just under US$70m. EAPC’s acting managing director Mohamed Osman said the findings would guide a pending plant upgrade, to be funded by some of the proceeds from the land sale, according to the Star newspaper. It hopes to double capacity at the unit by the late 2020s without incurring debt. The cement producer is also considering its options to use alternative fuels such as macadamia husks and other agricultural biomass. The 10-week audit process is expected to end in early December 2024.

Osman said “We have tapped FLSmidth to undertake a comprehensive technical audit of the plant, which will assess how to maximise the capacity and inform the design and cost of a new one,'' Osman said. “The audit by FLSmidth will also look at the reserves of raw materials that it has and inform whether it needs to acquire more land that has adequate reserves.”

UK: FLSmidth Cement has entered a cooperation with Carbon Re, a UK-based climate tech company, to integrate FLSmidth Cement’s process control software, PXP, with Carbon Re’s AI-powered cloud platform. This integration will provide cement producers with access to new process optimisation capabilities.

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.”