
Displaying items by tag: GCW105
Building a better Lafarge
19 June 2013Lafarge's decision to expand in Zimbabwe adds to the mix in sub-Saharan Africa.
As we discussed in Global Cement Weekly #104, Dangote and PPC (formerly Pretoria Portland Cement) may be facing off as the biggest local cement producers in the region but the influence of the European-based producers should not be dismissed too readily. Investing US$200m over the next 10 years matches PPC's similarly sized investment announced in November 2012. According to Lafarge, the spend will help maintain the cement producer's market share in the country.
The other point of note from Lafarge's Zimbabwe announcement is the emphasis on the multinational's 'Building Better Cities' campaign in the story. This is unsurprising given that that Lafarge Zimbabwe Managing Director Jonathan Shoniwa made the comments about Lafarge Zimbabwe at a branding event for the campaign. Similar events are happening around the world. However, looked at overall, the decision to place cities at the heart of its marketing makes an increasingly compelling case for a variety of markets.
Some commenters on the Global Cement LinkedIn Group discussed this very issue recently in response to a news story on Lafarge's next set of expansion plans for China. Specifically, someone asked why would Lafarge want to expand in a market suffering from overcapacity!
The Building Better Cities campaign offers one answer. As China prepares to shut down excess capacity, Lafarge's strategy to be in place once the dust settles (perhaps literally in some places) starts to make sense. As a marketing tagline 'building better cities' works well because who doesn't – from Zimbabwe to China to even France – want better cities with better transport links through price, planning, technical and aesthetic innovations.
To give a sense of the environmental zeitgeist happening in China right now, this week we carry a news story on the Chinese Institute of Public and Environmental Affairs reporting 17 Chinese cement companies for environmental misdemeanours. Elsewhere, we can see evidence of continued foreign enthusiasm for investment in the Chinese cement market from Japan's Sumitomo Osaka Cement, despite fears of overcapacity. Lafarge is saying the right things at the right time but it may not be alone in its strategy.
US: Texas Industries (TXI) has announced that its board of directors has named Tom Ransdell as its chairman of the board effective from 18 June 2013. Ransdell has been an independent director of TXI since 2005 and has many years of experience in the construction materials industry. Ransdell now fills the position of chairman created by the untimely death of Bob Rogers on 11 June 2013.
Rogers was the son of the founder of TXI, Ralph Rogers, and was CEO of the company from 1970 until 2004 when he retired. From 2004 until 11 June 2013 he served as chairman of the board of TXI.
TXI is the largest producer of cement in Texas and a major cement producer in California. TXI is also a major supplier of construction aggregate, ready-mix concrete and concrete products.
China: 17 cement companies have been found to regularly violate environmental protection laws by illegally discharging airborne pollutants, according to a report led by the Institute of Public and Environmental Affairs (IPEA). The report, conducted by the IPEA with several independent institutes and environmental non-government agencies (NGO), also accused the companies of failing to disclose environmental information as required.
The 17 cement companies have about 170 recorded environmental violations between them. Violations listed in the records include the lack of denitrification facilities, faulty monitoring appliances and excessive emissions.
"The State Council recently released 10 measures to control airborne pollution and achieve energy and emissions reductions. The extremely energy-intensive cement, steel and thermal energy production industries, especially those leading listed companies, need to share the heavy responsibility of reducing emissions and not disappoint the public," said Ma Jun, director of the IPEA.
The cement industry is among the six most heavily polluting industries that were required by the Environmental Protection Ministry to meet international emission limits from March 2013. Dust emissions from the cement industry accounted for about 30% of total industrial emissions in 2009.
"We found that this industry has shocking problems with dust and waste gas emissions. The cement industry's violations have deeply harmed the living environment and health of those who live near the factories," said Fang Yingjun from environmental NGO Green Jiangnan.
The environmental NGOs said that they have contacted the 17 listed companies to inform them of the aforementioned pollution problems, but most of the alleged offenders took an evasive stance.
Sumitomo Osaka Cement ups cement production in China
19 June 2013China: Sumitomo Osaka Cement intends to increase cement production by 80% in China's Yunnan Province by 2016. The Japanese cement producer has been making cement in Yunnan Province since 2007 in partnership with a local steelmaker and a Hong Kong construction materials company. That operation involves four plants, each run by a separate joint-venture firm.
With infrastructure investment still active in Yunnan, the plan is to build two more cement plants with a combined production capacity of 6.4Mt/yr. This will make the operation the province's largest, with a capacity of 14.6Mt/yr.
The first new plant will be built in December 2014 and the second in 2016. Sumitomo Osaka Cement will invest around US$42m for its share of the project.
Rumours that Votorantim will halt IPO
19 June 2013Brazil: Votorantim Cimentos, Brazil's largest cement producer, and its shareholders have cancelled a US$4.8bn initial public offering (IPO) that had been scheduled, according to a report from Reuters. Controlling shareholder Votorantim Participações was unwilling to sell its stock of Votorantim Cimentos below the suggested price range of US$7.34-8.71, according to a source reported by Reuters.
The news-wire service also reported that a second source had said that potential investors would take part in the IPO provided that shares offered a 'large discount' when viewed against the US$7.31/share price at the bottom of the potential price range. Any such discount would value Votorantim significantly below its rivals in the Brazilian cement market. Votorantim Cimentos has not confirmed the suspension of the IPO plan.
Austrian cement industry hit by pressure on prices
19 June 2013Austria: Price pressure is becoming an ever-greater problem for the cement industry in Austria, according to the head of an industry group.
"In 2012 the volume of sales remained the same, but revenues dropped substantially", the chairman of the management of the Association of Austrian Cement Industry (VÖZ), Rudolf Zrost, said on Tuesday.
Cement sales in 2012 remained almost unchanged at 4.46Mt, compared to 4.43Mt in 2011. However, revenues slumped by 4.7% to Euro375m.
China cement news in brief
19 June 2013National: China saw cement output increase by 8.9% year-on-year to 866Mt for the first five months of 2013, according to the recent data released by the National Bureau of Statistics. Cement output grew to 224Mt in May 2013, a year-on-year increase of 8.5%.
Regional: Shanghai saw cement output slide by 4.1% year-on-year to 0.77Mt in May 2013, according to the local statistics bureau. However, the municipality's cement output grew by 2.4% year-on-year to 3.05Mt for the first five months of 2013.
Hubei Province, in central China, saw cement output edge down by 0.6% year-on-year to 40.7Mt in the first five months of 2013, according to the Commission of Economy and Information Technology.
Corporate: Asia Cement (China) has said that it has agreed to provide US$68m in loans to Far Eastern New Century (China) Investment Limited from 17 June 2013 to 16 June 2014. The loans will be used for working capital by the borrower.
Jiangxi Wannianqing Cement posted a revenue of US$9.6m from product rebates, government grants and investment returns over the first five months of 2013, according to a company announcement. The company will count the revenue to its total profit for the first half of 2013.
India: HeidelbergCement India sold a grinding plant in Raigad, Maharashtra to JSW Ispat Steel for an undisclosed sum. The announcement was made at the Indian cement producer's annual general meeting on 16 May 2013.
HeidelbergCement India also announced that its shareholders have given it approval for raising funds of up to US$340m through borrowings.
Al Jouf spends two weeks offline
19 June 2013Saudi Arabia: Al Jouf Cement, which operates in the east of Saudi Arabia, announced on 17 June 2013 that it has been forced to stop cement production until 30 June 2013 for unscheduled maintenance work to be carried out. Al Jouf said that the maintenance would cost around US$1.6m and would be reflected in its second quarter results for 2013.
Zimbabwe: Lafarge Cement Zimbabwe has announced plans to invest US$200m within the next 10 years towards setting up a new cement manufacturing plant. Lafarge Managing Director Jonathan Shoniwa told local press at the company's launch event for Lafarge's 'Building Better Cities" branding campaign that Lafarge Zimbabwe would add 1Mt/yr of cement capacity to its current 0.45Mt/yr. He said the move would also increase its market share from its current level of 38%.
In 2013 Lafarge Zimbabwe is targeting a market share of 40% on account of its strong branding in the country and expects to continue to benefit from the continued growth in demand for cement. In 2012 local demand grew 10%. Growth of 5% is expected in 2013.
Like many other local manufacturing firms, cement producers are facing competition from imports. Recently, PG Industries indicated plans to import cement after seeing an opportunity in the market. "I think competition is always there and you can't shut it out completely," said Shoniwa. "You need to just play the game but we have a strong brand. Other players can import cement, but it takes time to build a brand. They can push volumes but it's not an overnight job to build a brand," Shoniwa said.
Shoniwa also took advantage of the Building Better Cities branding campaign to also announce plans for a multi-million US Dollar low-cost, high-density residential housing scheme. He said the cement producer would partner with banks, local authorities and other relevant players to see the project through.
"We are at the design stage. We are having discussions with possible partners and so far it's looking very positive," Shoniwa said, adding Lafarge's target was to bring the cost of constructing a standard high-density residential housing unit to US$10,000. When people talk of affordable housing, the thing that comes to mind is cheap. It does not necessarily have to be cheap in terms of quality so there is that innovation to say we should come up with new building materials that are
cost-effective."
Authorities are expected to provide land parcels while banks are expected to provide long-term and affordable funding for the scheme to enable beneficiaries to build houses at their own pace. Lafarge Zimbabwe is targeting a 29% increase in the top line in the current financial year after reporting revenue inflows of US$69.9m in the year to December 2012, an increase of 41% from 2011.
Shoniwa said that Lafarge Zimbabwe's full-year revenue is expected to rise to US$90m in 2013, with individual home builders expected to continue supporting the upward trend.