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LafargeHolcim was the last major European cement producer to release its second quarter financial results last week. The collective picture is confused. Cement sales volumes have risen but sales revenue have fallen.

Most of the producers have blamed negative currency effects for their falls in revenue during the first half of 2016. Holding a mixed geographical portfolio of building materials production assets has kept these companies afloat over the last decade but this has come with a price. The recent appreciation of the Euro versus currencies in various key markets, such as in Egypt, has hit balance sheets, since the majority of these firms are based in Europe and mostly use the Euro for their accounting. Meanwhile, sales volumes of cement have mostly risen for the companies we have examined making currency effects a major contributor.

Graph 1 - Changes in cement sales volumes for major non-Chinese cement producers in the first half of 2016 compared to the first half of 2015 (%). Data labels are the volumes reported in 2016. Source: Company reports.

As can be seen in Graph 1, sales volumes have risen for most of the producers, with the exception of LafargeHolcim. Despite blaming shortages of gas in Nigeria for hitting its operating income, LafargeHolcim actually saw its biggest drop in sales volumes in Latin America by 13.2% year-on-year to 11.8Mt. The other surprise here was that its North American region reported a 2.7% fall to 8.8Mt with Canada the likely cause. Vicat deserves mention here for its giant boost in sales volumes due to recovery in France and good performance in Egypt and the US, amongst other territories.

Graph 2 - Changes in sales revenue for major non-Chinese cement producers in the first half of 2016 compared to the first half of 2015 (%). Data labels are the sales reported in 2016. Source: Company reports.

Overall sales revenue for these companies presents a gloomier scenario with the majority of them losing revenue in the first half of the year, with most of them blaming negative currency effects for this. Titan is included in this graph to show that it’s not all bad news. Its growth in revenue was supported by good performance in the US and Egypt. Likewise, good performance in Eastern Europe and the US helped Buzzi Unicem turn in a positive increase in its sales revenue. They remain, however, the exception.

Looking at sales revenue generated from cement offers one way to disentangle currency effects from performance. Unfortunately, only about half of the companies looked at here actually published this for the reporting period. Of these, LafargeHolcim reported a massive rise that was probably due to the accounting coping with the merger process that finalised in 2015. Of the rest - HeidelbergCement, Italcementi and Vicat – the sales revenue from each company’s cement businesses fell at a faster rate than overall sales. Like-for-like figures here would help clarify this situation.

Meanwhile, a mixed global patchwork of cement demand is focusing multinational attention on key countries with growing economies like Egypt and Nigeria. Both of these countries have undergone currency devaluation versus the Euro and are facing energy shortages for various reasons. The exposure of the multinational cement producers to such places may become clearer in the second half of the year.

Switzerland: Alain Bourguignon, region head for North America, and Ian Thackwray, region head for Asia Pacific will leave LafargeHolcim following a reorganisation of its executive committee. The group said the changes reflected an evolution of its portfolio following recent divestments and the closure of its integration phase following the merger between Lafarge and Holcim.

Pascal Casanova, currently responsible for the Latin America Region, will take responsibility for North America including Mexico. Roland Köhler, currently responsible for the Europe Region will add Australia, New Zealand and Trading to his responsibilities. Martin Kriegner, currently responsible for India, will join the Executive Committee and take additional responsibility for South East Asia. Oliver Osswald, currently responsible for our operations in Argentina, will join the Executive Committee with responsibility for Central and South America.

As of 5 August 2016, the executive committee, chaired by Eric Olsen, will be composed of the following members:

• Urs Bleisch, Group Head of Performance & Cost;
• Pascal Casanova, Region Head North America including Mexico;
• Roland Köhler, Region Head Europe & Australia / New Zealand & Trading;
• Martin Kriegner, Region Head India & South East Asia;
• Gérard Kuperfarb, Group Head of Growth & Innovation;
• Caroline Luscombe, Group Head of Organization and Human Resources;
• Oliver Osswald, Region Head Central & South America;
• Saâd Sebbar, Region Head Middle East & Africa and
• Ron Wirahadiraksa, Chief Financial Officer.

Egypt: Arabian Cement has appointed Sergio Alcantarilla as its CEO with effect from 3 August 2016. He succeeds Jose Maria Magriña Vadillo.

Alcantarilla was previously the Chief Operation Officer of Arabian Cement. He graduated from the Superior Industrial Engineering School at the University of Seville in Spain. After entering the cement industry in 2002 he worked for five years as a plant manager in Spain before moving to Egypt in 2009.

Nigeria: Production managers at Lafarge Africa’s cement plants at Ewekoro and Sagamu, Ogun State have complained about poor supplies of gas. Segun Shoyoye and Hannes Diedericks made comments to the Nigerian Guardian following a shutdown period of six weeks. They said that the situation started in early 2016 and has led to low production at the plants. The pair made their comments to the press in connection to an inspection of the two plants by officials from the Standards Organisation of Nigeria (SON), led by the Acting Director-General, Paul Angya.

"The major issue is lack of gas supply because of the blowing up of oil and gas pipelines by militants in the Niger Delta region. We are now using a mixture of gas and black oil for our operations, which is highly costly, and also drops our production from 100% to 75% at the Ewekoro plant. This has been going on since February 2016,” said Shoyoye. He added that production at Sagamu stopped for six weeks in May 2016. Production has dropped from 3000t/day to 1000t/day due to the issue. Lafarge Africa is currently sourcing alternative sources of energy for its cement plants.

Canada: McInnis Cement has commissioned NovaAlgoma Cement Carriers to supply it with a 15,000t deadweight cement carrier ship using a cement unloading system delivered by Van Aalst Marine & Offshore. The self-discharging dry bulk cement carrier will be time chartered by McInnis Cement under a long-term agreement. The ship, which was built in 2011, is currently undergoing conversion in China to a cement carrier by its owner NovaAlgoma. The conversion will include the installation of the cement unloading system and a hybrid exhaust gas scrubber system capable of operating in both fresh and salt waters. The ship is scheduled for delivery in early 2017.

“We are pleased to establish this new relationship with NovaAlgoma and Van Aalst that will allow us to take advantage of their cutting edge technology, attention to ecological details and their long-term marine transportation and cargo handling expertise,” said McInnis Cement Vice President Logistics and Distribution, Mark Newhart. The ship will be registered in Canada and use Canadian crew.

“The McInnis project will be a showcase of how the Van Aalst signature vacuum – pressure technology in cement carriers will result into high performance, low emissions and an unsurpassed reliability. The productive and professional partnership approach between McInnis, NovaAlgoma and ourselves has proven to be very successful in achieving and exceeding the requirements of the project,” said Wijnand van Aalst, CEO of Van Aalst Group.

The scrubber system will enable the ship to be fully compliant with the International Maritime Organization (IMO) Marpol Annex VI Sulphur Oxide (SO_x) regulations, regardless of the fuel being used within the North American ECA (emissions control area) which includes Canadian and US coastal waters and the Great Lakes.

The time charter agreement for the ship was brokered by Barry Rogliano Salles, a diversified global shipping services group offering a range of maritime activities. The company’s core business is ship brokering and has been active for over 150 years, operating 20 offices worldwide.

US: A person has died at the Kosmos Cement plant in Louisville, Kentucky. Local police told the WDRB local television station that the male victim was aged in his 30s or 40s and was pronounced dead on the scene. Officials say the death was a workplace accident involving a pulley system.

Sri Lanka: Tokyo Cement Group entered into a collaboration agreement with Ube Industries from 1 August 2016 for technical support services and to import raw materials from Japan, to manufacture ‘high quality’ cement.

Algeria: The CILAS Bikra cement plant started production in mid-July 2016, 11 days before the scheduled start of operations. The 2.7Mt/yr plant is a joint venture between Lafarge Algeria and Souakri Group. The project had an investment of Euro270m and it took 21 months to build, according to Le Matin newspaper.

Nigeria: Dangote Cement intends to start mining its own coal at Ankpa, Kogi State in order to cope with gas shortages in the country. The coal will be of a high enough quality to be used without blending. Most of the cement producer’s production lines in Nigeria will have operational coal mills by September 2016. At present the company is using locally purchased coal that is blended with imported coal to ‘assure optimal quality.’

“Our investment in coal is enabling us to reduce our dependence on both oil and gas as fuel sources, thus protecting our production from disruption and improving margins,” said chief executive Onne van der Weijde.

Bangladesh: Masud Sheikh, a technician working at Bashundhara Group's Meghna Cement Mills, has died from inhaling ‘poisonous gas’ in an abandoned barge owned by Meghna Cement Mills at the port of Mongla. Sheikh, aged 42 years and a Bangladeshi national, was attempting to rescue a Chinese national who also died in the incident, according to the Xinhua News Agency. The Chinese employee of Sinohydro supporting the construction of the Padma Bridge was checking the barge prior to its sale.