Displaying items by tag: GCW196

This week saw the announcement that Cemex and Holcim are both upping their stakes in Nicaragua to increase production. The companies have stated that they expect cement demand to grow significantly in the near future.

Holcim has started work on a US$10m project to increase production by 30% to 400,000t/yr at its Nagarote grinding plant. A second expansion phase will see production raised another 30%. Cemex, for its part, is building a US$55m, 440,000t/yr grinding plant in Ciudad Sandino. Completion is expected by 2017.

These new developments will make significant additions to Nicaragua's cement industry. Currently, it consists of one Cemex-owned 600,000t/yr integrated plant and one Holcim-owned 300,000t/yr grinding plant.

Nicargua has the dubious honour of being Central America's least developed economy and one of the poorest among all of the Americas. In recent years, however, its economy has grown dramatically, with significant expansion in the construction and mining sectors, indicating that Holcim and Cemex are right to bet on Nicargua. Indeed, late in 2014 president of the High Council of Private Enterprise, José Adán Aguerri said that the country had a significant cement shortage and was currently importing from Mexico and Colombia to meet its needs.

Driving cement demand in Nicaragua is the residential housing sector boosted by the growing population, much-needed infrastructure projects and the country's most controversial project, the Nicaragua Grand Canal. The canal will be, according to local media, a 'commercial waterway that will reshape commercial shipping, reap a windfall for investors and haul one of the hemisphere's poorest nations out of poverty.' Heavily backed by Chinese investors, it is deeply unpopular with industry experts and locals alike. There have been lots of questions as to whether there is enough demand for the canal, while its construction will divert scant resources, particularly water, away from agriculture, the country's main industry. The project will, however, contribute significantly to cement demand until its completion, which is expected in 2019.

So is Nicaragua the place to be? Its near-future economic and construction sector outlooks certainly look strong, but the cement industry relies heavily on long-term infrastructure plans, which are sorely lacking. Additionally, none of Nicaragua's neighbouring countries have noteworthy cement deficits. This means that export market opportunities from Nicaragua are in short supply. Nicaragua's future depends overwhelmingly on its leaders' long term-planning abilities...

Europe: In the framework of their proposed merger of equals, the boards of directors (BoD) of Holcim and Lafarge have nominated their candidates for the future BoD of LafargeHolcim, subject to closing of the transaction. The designated BoD will consist of 14 members due to be elected at the Holcim Extraordinary General Meeting on 8 May 2015.

The candidates are:

• Wolfgang Reitzle, Co-Chairman (currently Chairman of the BoD of Holcim);
• Bruno Lafont, Co-Chairman (currently Chairman of the BoD and Chief Executive Officer of Lafarge);
• Beat Hess, Vice-Chairman (currently Deputy Chairman of the BoD of Holcim);
• Bertrand Collomb (currently Honorary Chairman of Lafarge);
• Philippe Dauman (currently member of the BoD of Lafarge);
• Paul Desmarais Jr. (currently member of the BoD of Lafarge);
• Oscar Fanjul (currently Vice-Chairman of the BoD of Lafarge);
• Alexander Gut (currently member of the BoD of Holcim);
• Gérard Lamarche (currently member of the BoD of Lafarge);
• Adrian Loader (currently member of the BoD of Holcim);
• Nassef Sawiris (currently member of the BoD of Lafarge);
• Thomas Schmidheiny (currently member of the BoD of Holcim);
• Hanne Birgitte Breinbjerg Sørensen (currently member of the BoD of Holcim);
• Dieter Spälti (currently member of the BoD of Holcim).

Subject to the execution and completion of the merger project, Anne Wade and Jürg Oleas will resign from their office as members of the BoD at Holcim with effect as of the completion of the merger project.

Europe: The boards of directors of Lafarge and Holcim have approved the appointment of Eric Olsen as future Chief Executive Officer of LafargeHolcim, to be in office as from the closing of the merger project.

At present Eric Olsen is Lafarge Executive Vice-President of Operations. He has been a member of the Group's Executive Committee since 2007. Aged 51, Olsen has dual American and French nationalities. He has extensive international experience and has held senior positions in operations and in the fields of finance, human resources and strategy.

Commenting on the appointment, Wolfgang Reitzle, Chairman of the Holcim Board and future co-Chairman of LafargeHolcim, said, "I very much welcome Eric Olsen as future CEO for LafargeHolcim. With his broad international experience and insights in key markets, he is best positioned to lead the combined company for the benefit of employees, shareholders and customers. Bruno Lafont and I will support Eric in creating a new joint culture that will be the key driver for our premier competitive position."

Lafarge Chairman and CEO, and future LafargeHolcim co-Chairman, Bruno Lafont, added, "I have every confidence in his ability to deliver the synergies announced and ensure the development and the success of LafargeHolcim."

India: The Cement Manufacturers Association (CMA) is seeking a tax on cement imports to provide a level playing field to the industry.

In a memorandum to various Union Ministries on 10 April 2015, the CMA said that cement was allowed to be imported into India at zero import duty, whereas all the major raw materials required to make cement such as limestone, gypsum, pet coke and packing bags attract import duties.

"To provide a level playing field, the basic customs duty should be levied on imports of cement into India and import duties on goods required for the manufacture of cement be abolished and freely allowed without levy of duty," said the CMA. The CMA also said that there is a case for rationalisation of domestic taxes on the cement sector in order to make it competitive.

"The value-added tax (VAT) on steel is only 4% whereas it is 12.5 – 15% on cement and clinker in different states. Thus there is a need to slash the tax burden by 20 – 25% through rationalisation and lowering of the excise duty to 6 – 8% without the addition of any specific duty," said the CMA. It also demanded that cement be stipulated as 'declared goods' to put it on equal footing with goods like coal and steel and an element of royalty be included in the calculation of drawback rates.

India: ACC has reported a 40.8% drop in its consolidated net profit to US$37.9m for the quarter that ended on 31 March 2015 owing to slack demand in the domestic market. It had posted net profit of US$64.1m during the same period of 2014.

"With slack demand for cement from infrastructure and the general construction sector in the January - March quarter, the overall cement sales volumes registered a decline compared with the corresponding period of 2014," said the company in a statement. "The overall operating costs for cement business registered an increase of 3.6% year-on-year."

The company's total consolidated turnover for the quarter saw a 2.75% decline to US$462m compared with US$475m in the same period of 2014. Sales volumes declined to 5.82Mt as against 6.48Mt in 2014. Its total income from operations increased by 1.75% year-on-year to US$493m. Earnings before interest, taxes, depreciation and amortisation (EBITDA) grew by 18.3% to US$79.7m. "EBITDA for the quarter reflects continued margin improvements," said ACC's statement. During the quarter, ACC also received US$22.4m as an incentive from the Jharkhand government following a high court order, which helped push up its EBITDA.

ACC is hopeful that cement demand will improve in the next two quarters and said that its focus will continue to be on performance. "We see a modest but steady revival for the Indian economy in 2015. This will have a positive impact on infrastructure, housing and construction sectors and will increase the demand for cement," said ACC chairman NS Sekhsaria. The company is now looking forward to commission its clinker plant and allied grinding plant at its Jamul plant in Durg, Chhattisgarh by the end of 2015.

Brazil: Brazilian steelmaker CSN is considering a merger with its cement producing subsidiary CSN Cimentos. CSN said that it would present the proposal to shareholders for approval.

The merger would help CSN achieve synergies and economies of scale. It would result in 'process optimisation and maximised results,' with all business and administrative activities carried out via a 'single organisational structure,' according to CSN. The merger would cost US$544,758 and be effective from 1 May 2015.

CSN entered the cement market in 2009 and claims to have 2.4Mt/yr of production capacity. Its 2014 capex was US$705m, with 23% directed toward cement operations, which generated 3% of the company's revenue in the year. Its cement sales increased by 7% to 2.18Mt in 2014.

Spain: Spanish competition regulator CNMC has included Lafarge and Holcim in the proceedings for alleged cartel agreements brought up against a number of sector players at the end of 2014. Additionally, the CNMC has extended the proceedings to Materiales y Hormigones and Hormibusa. The move was based on information gathered during several inspections carried out in September 2014 for alleged exchange of information, price fixing and market division practices in the cement and concrete sector. The CNMC will complete the investigation and produce a resolution within 18 months.

Uganda: National Cement is set to invest US$198m in a new plant in Uganda, its first plant outside of Kenya. Construction of the 1Mt/yr capacity plant, located in Mbale, will start in May 2015 and is expected to be completed by the end of 2016.

The project is the first in National Cement's regional expansion plan. The company also intends to venture into South Sudan in the next three years. "The first phase of the project is expected to commence in May 2015, after which we will continue expanding the plant over a three-year period," said Narendra Raval, the chairman of Devki Group, the parent company of National Cement. "Once the main plant is operational, we will expand it to include a clinker plant, which will ensure that we are self-sufficient." The Uganda project is being funded by loans from the International Finance Corporation (IFC) and two local banks.

The plant signals increased competition in the regional cement market, which is grappling with price wars brought about by the entry of new players and expansion of established firms. Indian conglomerate Cemtech and ARM Cement, for instance, plan to set up new plants in Pokot and Kitui respectively. Nigeria's Dangote Cement has also announced plans to build a 3Mt/yr plant in Kitui.

The increased investment is set to worsen the glut and force further price cuts, placing more emphasis on volume growth and efficiency as the major profit drivers for individual companies. The increase in output is set to offset the projected 12% increase in consumption in the region over the next three years.

Iran: Iran produced roughly 60Mt of cement in the last Iranian calendar year, which started on 21 March 2014. Of the total, 18Mt was exported, of which 80% went to Iraq, according to Shahriar Geravandi, a member of Iran's Cement Industries Association Board of Directors. He added that Iran is seeking new export markets. According to Geravandi, there are 68 cement plants in Iran.

US: A series of scattered fires that erupted on 11 April 2015 at Essroc Cement in Nazareth, Pennsylvania have been deemed accidental by the Vigilance Hose Co.

The initial fire began shortly after 16:00 on an underground conveyor belt that transports stone from Essroc's plant II to plant I in Nazareth, said fire chief Danny Keenhold. He said an unidentified malfunction on the belt caused the fire, which began underground. The fire then ignited a separate above-ground portion of the conveyor belt. It took firefighters from seven different agencies about two hours to extinguish the fire from both ends.

There were no reported injuries to Essroc crews or firefighters. The conveyor belt will now need to be repaired. Keenhold said that in the interim trucks will transport stone between the plants.