Displaying items by tag: Forecast
Valderrivas predicts swing to profit in 2013
23 May 2012Spain: The Spanish cement producer Cementos Portland Valderrivas (CPV) has announced that it expects to swing to profit in 2013 thanks to its 'Plan NewVal' launched recently. Plan NewVal 2012-2013 is focused on cost reduction and securing new sources of revenue.
CPV's new chairman and CEO, Juan Bejar, said that CPV's earnings before interest, tax, depreciation and amortisation (EBITDA) are now expected to reach Euro200m in 2013.
Speaking more widely, Bejar noted that cement consumption in Spain came to just 20.4Mt in 2011, down a massive 64% from the 2007 high. Worse is expected in 2012, when consumption is expected to fall another 20% to just 16Mt.
PCA revises forecast upwards
02 May 2012US: Stronger than expected job creation and the beginning of a construction industry recovery mean gains in real construction spending will materialise in 2012, according to a new forecast from the Portland Cement Association (PCA). The PCA says that increases in cement consumption will follow.
The PCA revised its autumn forecast upward, anticipating a modest 3.7% increase in cement consumption in 2012, followed by a 7.6% jump in 2013 and a 14.1% increase in 2014. The forecast includes marginal improvements to non-residential construction, an upward revision to housing starts and an aggressive cement intensity gain, which is the amount of cement used per dollar of construction activity.
"Cement usage is greatest at the early stages of construction with foundation work. The retreat of building starts during the recession had a huge impact on consumption and intensity," said Ed Sullivan, chief economist at the PCA. "A construction start rebound in 2012 coupled with concrete's competitive price compared to other building materials translates to increases."
Sullivan said that, with successive years of economic and employment growth, the structural issues facing the construction industry will diminish. For example, the adverse impact of foreclosures will fade and return on investment for non-residential investments will improve.
The PCA forecasts that all sectors of construction will be positive during 2014-2015, which typically results in large gains in cement consumption.
Indonesia – How high can you go?
18 April 2012Indonesia: It seems that not a week goes past without a forecast, announcement or other report about the continued boom in the Indonesian cement industry. Similarly, there is a steady stream of expansion announcements to accommodate the future demand. In light of another round of impressive cement statistics, what's the story for Indonesia in 2012 and beyond?
In the three months to 31 March 2012 Indonesia produced 12.5Mt of cement, an 18% rise on the first quarter of 2011. In the whole of that year, the cement industry turned out a massive 17% more cement than in 2010. These headline increases are certainly impressive and show that if the first quarter of 2012 was repeated three more times throughout the rest of the year, Indonesia would hit its 53Mt production forecast. This is more than double the cement production of 1998 (22Mt/yr in the midst of the Asian banking crisis) and, while from a low base, the values represent incredible sustained year-on-year demand growth.
But what is the potential of the Indonesian cement industry? This can be assessed by looking one of Indonesia's neighbours, namely Malaysia, and doing a quick thought-experiment. What would the Indonesian cement industry look like if the country were to suddenly develop demands and cement consumption patterns like Malaysia does today? Indonesia has a population 8.3 times higher than Malaysia1 and a cement consumption/capita rate approximately 2.4 times lower.2 Assuming current Indonesian cement consumption to be 50Mt, if all of the people in Indonesia were to suddenly start using cement like Malaysia does today, the country's cement industry would have to be nearly 1000Mt/yr to support demand!
While this is clearly not the case today and is unlikely to be fully realised, Indonesia will continue to develop economically. As it does, the world's fourth most populous nation will need more cement. How much is open to debate, but even if a small percentage of that hypothetical 1000Mt can be realised, it will certainly justify the current rush to add extra capacity. This is now especially likely in light of the December 2011 relaxation of land acquisition rules, which will make it easier to build both cement projects and the large construction projects that need cement.
Click here for much more on the cement industries of Indonesia and Malaysia (as well as Vietnam) from the April 2012 issue of Global Cement Magazine.
1. CIA World Factbook website, https://www.cia.gov/library/publications/the-world-factbook.
2. Cement consumption per capita data for Malaysia taken from Lafarge 2010 Annual Report. (http://www.lafarge.com/04112011-customers_activities-cement_market_2010-uk.pdf). Malaysia is a representative comparison for Indonesia based on its GDP to cement consumption ratio.
March results raise jitters in Indian business
11 April 2012India: Growth in the Indian cement industry for March 2012 was 12%, the lowest figure since November 2011, causing some analysts to fear that there may be a slowdown ahead.
Despatches for the four main Indian companies, namely ACC, Ambuja, UltraTech and JP Associates, peaked at 21% in November 2011. Subsequent growth has averaged out at 13% for the December 2011 to February 2012 period. The high growth since November 2011 has been attributed to an increase in demand during the Uttar Pradesh legislative assembly elections and an addition of new capacity. Subsequently, industry growth estimates for 2013 were increased from 7-8% to 10%. However, with March 2012 witnessing the lowest growth in five months, a few analysts are cautious about this. The industry growth is now expected to be around 6.5%.
Pinakin Parekh and Neha Manpuria, JP Morgan analysts, commented, "The big four companies have seen a year-on-year growth come to an average 12%, among the lowest over the last five months." They added that growth slowdown in March 2012 could be due to decline in despatches by JP Associates.
An analyst from a domestic brokerage said, "A good amount of capacity was added by these players in 2011. The rise in demand growth rates in November 2011 and its slowing down in March 2012 could be due to this. Some of these months are being compared with months a year ago when these capacities were still being commissioned." The analyst expects demand growth for the rest of 2012 to average 6-7% with a high possibility of an upside.
However, a few have turned bullish on the sector. Anand Agarwal and Rahul Kumar, analysts with international brokerage Jefferies, said, "Strong despatches by major cement companies in March confirm our belief of a revival of cement demand and we expect overall industry despatches to clock a double-digit growth for a fifth consecutive month in March 2012. We expect the strong demand momentum to sustain throughout 2012." Mihir Jhaveri, Prateek Kumar and Suhas Harinarayan from Religare Research see a 9-10% despatch growth for the 2013 fiscal year.
Holcim Croatia posts loss in 2011
05 April 2012Croatia: The CEO of Holcim Croatia has said that the company expects flat revenues in 2012 compared to 2011, while it expects to maintain its capacity utilisation rate of 80%. "The last three years were extremely difficult for the construction sector in Croatia," explained Mario Grassl. "Annual cement consumption in Croatia has contracted by 40% compared to 2008. The lack of investment in the construction sector and an unfavourable ratio of fixed costs compared to sales volumes are the main reasons for the loss of around Euro2.5m that Holcim Croatia posted in 2011."
To make matters worse, the overcapacity of local and international producers has depressed sale prices while input costs, mainly those related to fuels, raw materials, energy and distribution, have increased significantly. On top of that, the recent increase in Croatia's VAT rate from 23% to 25% is an additional burden for the end user.
Demand for construction materials in Croatia is still declining. Grassl said that he thinks that a full recovery to pre-crisis levels is still at least three years away. The customer base has been shrinking due to bankruptcy and liquidation procedures and although expectations for improved liquidity in the business sector are high, they will have to be underpinned by stimulus measures at government level. "Based on data from the Croatian Bureau of Statistics, the number of finished residential construction projects in 2011 was around 23% lower than in 2010. Looking ahead, there are no major projects that could be realistically expected to get underway in the next six months. Therefore we expect demand this year to stay at the 2011 level with consumption of cement flat at around 1.8Mt," Grassl said.
Despite the sharp drop in domestic demand over the last few years, Holcim has managed to maintain a share of around 20% of the Croatian market.The company's revenue grew by around 6% in 2011 and Grassl said that he expects a flat performance in that respect in 2012 in a 'best-case' scenario.
In 2011 Holcim Croatia managed to post a growth in exports to Italy and to Bosnia and Herzegovina in the low single digits and expects exports to be similar in 2012. The company exports approximately 20% of its output to Italy which is its largest export market, followed by Slovenia and Bosnia and Herzegovina. "Due to logistic bottlenecks and costs we do not plan to enter new markets," Grassl said.
On all three segments of the building materials market where Holcim Croatia is active, investment activities in 2012 will be mainly related to maintenance and better cost management. "For example, in the first quarter of the year we invested Euro1m at the Koromacno cement plant in the reconstruction of a clinker cooler. This will increase thermal energy efficiency and decrease maintenance costs," said Grassl.
Chinese producers face profit drop in 2012
28 March 2012China: Analysts expect the profitability of China's leading cement producers to weaken in 2012 due to slowing demand and falling prices.
SWS Research analyst Ye Rong expects the earnings of China's second-biggest cement producer, Anhui Conch Cement, to plummet by half in the first quarter, because the Yangtze River Delta, where most of Anhui Conch's sales are based, has seen cement price drops of 5% to 20% since the Lunar New Year, on 23 January 2012. Citic Securities forecasts the Hong Kong-listed firm's net profit will drop by 40% in the first quarter.
The net profit of Anhui Conch soared by 88.1% to US$1.84bn in 2011, while revenue surged by 41% to US$7.71bn. The state-owned enterprise's results for 2011 were in line with market expectations, wrote Luo Yang in a Nomura report. However, Anhui Conch's profit margin was likely to deteriorate in 2012, due to downward pressure on selling prices, rising costs and decelerating productivity, Luo wrote. "Under severe overcapacity, the company is subject to higher price risk in comparison with most of its peers."
Anhui Conch chairman Guo Wensan said the industry would face unfavourable factors in 2012, such as a slowdown in investment growth, regulation of the real-estate sector and rising energy prices. Anhui Conch plans a capital expenditure of US$1.27bn in 2012 less than the US$1.44bn in 2011.
In an exception to this trend, mainland China's biggest cement producer, China National Building Materials, announced it expected net profit to jump more than 100% from 2011. However, JP Morgan expects prices and profit per tonne for most mainland cement producers in 2012 to be up to 10% lower than 2011, and has trimmed its earning estimates for most listed cement companies. The growth in the mainland's cement consumption would be 5% to 8% in 2012, against 11% in 2011, the China Cement Association said.
The net profit of China National Materials (Sinoma) rose by 32.78% to US$231m in 2011, while turnover grew by 14% to US$8.04bn. The Hong Kong-listed firm's cement sales surged by 40% to US$3.21bn in 2011, while sales of its hi-tech materials increased by 7.7% to US$981m and its cement equipment business dipped by 0.1% to US$3.85bn.
Sinoma's net profit in 2011 was 10% below market consensus and 11% below Nomura's estimate. This was mainly due to much lower top-line growth and a disappointing margin performance. The state-owned firm's biggest business sector, cement equipment, suffered a small drop in 2011, because China's fixed-asset investment in cement fell by 8.3% in 2011, Luo wrote. "We expect it to further decrease by 15% in 2012." Sinoma's cement prices were under significant downward pressure, especially in Xinjiang province, due to worsening overcapacity, Luo warned.
Taiheiyo aims for big operating gains
19 March 2012Japan: Taiheiyo Cement is aiming for a group operating profit of around US$600m in the 2014 fiscal year, an increase of 90% on its projection for the current fiscal year, which ends on 31 March 2012. The target will be included in an upcoming midterm business plan that runs through to March 2015. The underlying assumptions include total domestic demand rising by 4% to 43Mt/yr. Taiheiyo Cement anticipates a 2Mt/yr boost from earthquake rebuilding.
In its domestic business, the Japanese market leader is likely to seek a 10-20% increase in its profit that will be underpinned by reconstruction demand. The operations are expected to give a profit of more than US$360m for the current fiscal year.
Taiheiyo has reported that cement production at its Ofunato plant in Iwate Prefecture has returned to about 70% of the levels seen before the 11 March 2011 earthquake and tsunami disaster. The company is scrambling to repair the production base with an eye toward returning the facility to full capacity at the end of June 2012. In the autumn the firm will start producing high-tensile cement for use in repairing infrastructure in the disaster-hit Tohoku region.
Taiheyo Cement will also shake up its sluggish US business, which is on track for an operating loss of US$108m in the current fiscal year. On top of personnel reductions, the company will continue to sell land and make other downsizing efforts. An operating profit of US$120m for US operations is targeted by the 2014 fiscal year.
Taiheiyo results highlight 'attractive' Japanese cement industry
09 February 2012Japan: Taiheiyo Cement Corp. has released interim results for the first nine months of its current fiscal year, which ended on 31 December 2011. The results showed a group revenue of US$7.0bn, slightly up on the first nine months of the previous fiscal year.
Its operating profit was reported as US$242m, more than double the US$111m seen in the previous fiscal year. Its pretax profit was US$134m and its net profit for the period was US$14.2m, a turnaround from a US$72.1m loss made in 2010.
Taiheiyo forecast that the whole of the 2012 fiscal year (ending 31 March 2012), would see a revenue of US$9.3bn, an operating profit of US$350m and a net profit US$146m.
Taiheiyo's results come after a decision by Morgan Stanley MUFJ Securities to increase its rating for the Japanese cement sector to 'attractive,' the highest ranking on its three-tier scale. Shares in major companies such as Taiheiyo and Sumitomo Osaka Cement jumped sharply with the new rating.
Analysts at the brokerage said that profits at cement firms will rise in line with their ongoing efforts to cut costs. It also said that higher prices, an increasingly balanced supply and demand relationship and rising demand related to earthquake reconstruction efforts will also support profits in the cement industry.
The analysts also said that investors have undervalued shares of Sumitomo Osaka Cement and Taiheiyo Cement despite expectations that their earnings will improve in the 2012 fiscal year.
Report points to potential US cement growth
21 December 2011US: According to the latest research report by RNCOS, US Cement Industry Analysis, an improvement in infrastructure spending along with growing domestic demand from almost all the prominent industry verticals will enable the cement consumption to grow at a compound annual growth rate of around 8% during 2011-2015. The cement industry in the US forms an important part of its economy and although recent years have been quite discouraging for the industry, the country sustained its position as the third largest cement consumer globally.
The RNCOS report highlights that the US will remain as one of the world's largest markets for OPC, with imports to fulfil the shortfall between domestic capacity and total US consumption. It expects that housing construction will boost cement demand in the US over the period to 2015 and says that biogas fuel is fast emerging as an alternative fuel for reduction of carbon dioxide emissions in the country.
PCA expects minimal cement growth until 2013
28 July 2011US: Despite recovery momentum in late 2010, the US economy is again in a slowdown, according to the most recent economic forecast by the Portland Cement Association (PCA), which says that the slowdown will weaken construction activity and restrain gains in cement consumption until 2013.
The PCA downgraded its cement consumption growth forecast to 0.2% for 2011, 0.4% in 2012 with a significant 16.4% increase in 2013. According to the report, uncertainty regarding highway spending legislation and government policy related to the debt crisis will cause a negative drag on construction activity for the next few years.
"Our previous forecast had assumed the new highway bill would be 20% higher than existing levels but we now believe the funding will remain at current levels," said PCA chief economist Edward Sullivan. "A lack of highway funding and reduced consumer, business and bank confidence due to the debt crisis will all slow down construction recovery."
According to Sullivan, economic recovery from the recession will be led by a strengthening of confidence in these areas. Without a sustained improvement, private sector fundamentals such as job creation, investment and ease in lending standards will not be released in full force and commit the economy to a path of improvement.