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2016 for the cement multinationals
08 March 2017The publication of LafargeHolcim’s annual financial results for 2016 this week starts to give us a review of the year as a whole for the multinational cement producers. Of the larger producers, CNBM, Anhui Conch and Votorantim are expected to make their releases in April 2016, so we’ll focus here on the available data from LafargeHolcim, HeidelbergCement, Cemex and BuzziUnicem, with UltraTech Cement included for some regional variety.
Graph 1: Sales revenue from multinational cement producers in 2015 and 2016 (Euro millions). Source: Company financial reports.
As can be seen in Graph 1 currency exchange effects have caused problems for producers’ sales revenues, with LafargeHolcim, HeidelbergCement and Cemex all reporting falling sales on a direct comparison. Subsequently like-for-like adjustments have cropped up repeatedly on balance sheets to try and present a more investor-friendly picture, although even this has still seen LafargeHolcim and HeidelbergCement report small declines. In this sense it’s a little unfair to include India’s UtraTech Cement, given that the bulk of its business is in just one country. Operating in just one country though has its own risks, one of which we’ll discuss below.
Unsurprisingly, given the poor sales, the focus for the multinationals has generally been on earnings measures such as operating earnings before interest, taxation, depreciation and amortisation (EBITDA). Here, LafargeHolcim and Cemex have done far better as they have streamlined their businesses. For example, LafargeHolcim’s operating EBITDA rose by 12.9% year-on-year to Euro4.895bn in 2016.
Graph 2: Cement sales volumes from multinational cement producers in 2015 and 2016 (Mt). Source: Company financial reports.
Graph 2 looks at cement sales volumes. Most of the producers have made small gains or losses in 2016 with the stark exception of LafargeHolcim. Its cement sales fell by 12.9% to 233Mt in 2016. More alarmingly, for the fourth quarter of 2016 LafargeHolcim blamed an increased rate of declining cement sales volumes on demonetisation in India, tough trading conditions in Indonesia and a unusually good year (in 2015) to compare itself against in the US.
On that point about India, UltraTech may not have released any sales volumes figures but other larger Indian producers have experienced problems with the government’s decision to remove certain banknotes from circulation in November 2016. A report by HDFC Securities this week suggests that cement volumes fell by 13% year-on-year in January 2017 following a 9% decline in December 2016. The country may be facing its first decline in cement sales volumes since 2001. This is squarely down to government policy.
On a regional basis probably the most worrying theme has been an apparent slowdown in the US towards the end of the year. As mentioned above LafargeHolcim has blamed it on a good previous year and Cemex concurred. Buzzi Unicem also reported the same trend but didn’t attribute it to anything in paticular. President Donald Trump’s push for US$1tr investment on infrastructure in the US should help to reverse this along with anything that happens with his Mexican border wall plans.
The other area to pay attention to is Indonesia. Both LafargeHolcim and HeidelbergCement reported tough trading here prompted by production overcapacity. Locally, Semen Indonesia said this week that its sales revenue fell by 3% to US$1.95bn in 2016 and it still has new cement plants to be commissioned in 2017.
The overall picture for 2016 from these cement producers appears to be one of companies treading water and making savings as their sales were battered. As mentioned previously (The global cement industry in 2016, Global Cement Magazine, December 2016) the geographic spread of assets the multinationals own doesn’t seem to be protecting them from world events as well as they once did. On the plus side northern Europe seemed to pick up or at least hold steady in 2016 but various political shocks such as the UK departure from the European Union and elections in France and Germany may scupper this. In a similar vein India remains one of the key markets but government policy has potentially dented its growth this year. In the US cement volumes may be slowing but Donald Trump is riding to the rescue! With this continued high level of potentially disruptive events cement producers are probably hoping for a quiet year in 2017.
Mehmet Göçmen appointed new head of Sabancı Holding
08 March 2017Turkey: Mehmet Göçmen has been appointed as the new chief executive officer of Sabancı Holding, the owner of several Turkish cement companies including Çimsa and Akçansa. He replaces Zafer Kurtul, who will vacate his position from 30 March 2017. Göçmen currently serves as Sabancı Holding Energy Group Head.
Göçmen graduated from the Department of Industrial Engineering at the Middle East Technical University in 1981. He also holds an MS degree from the Department of Industrial Engineering at Syracuse University in the US. He worked in executive positions between 1983 and 1995 at Steel Wire & Rope Industry, at Lafarge between 1996 and 2003 and he was appointed as General Manager of Akçansa in 2003. He has served as Human Resources Group Head, Cement Group Head and Energy Group Head at Sabancı Holding since 2008.
Aalborg Portland orders two calciners from A Tec
08 March 2017Denmark: Aalborg Portland has awarded A Tec a contract to upgrade its Cement Kiln 87 in Aalborg. It has ordered two calciners for its 4500t/day semi-dry kiln system that was commissioned in 1988. The calciners will be designed and delivered during the kiln’s annual stop in February and March 2017. Commissioning is planned for the spring of 2017. The upgrades are intended to increase production of Ordinary Portland Cement on the line.
A Tec intends to adapt the flow pattern of the calciner system in a way to improve the operational behaviour of the system. The design will be configured for the usage of 100% solid alternative fuels with low emissions. Additionally, the number of kiln stops due fall through cyclone blockages should be reduced. A Tec will conduct the engineering, supply the equipment and will be responsible for errection and documentation.
The new calciner system will be equipped with the A Tec Post Combustion Chamber (PCC) for the optimised mixture of fuels and combustion air in the end section of the calciner. The PCC was specially developed for the achievement of complete combustion of alternative fuels at high substitution rates.
UK: Breedon Group’s sales revenue and profits have been expanded by its acquisition of Hope Construction Materials in 2016. Its revenue rose by 43% year-on-year to Euro523m in 2016 from Euro367m in 2015. Its profit before tax rose by 50% to Euro53.9m from Euro36m. The group also attributed its success to its aggregate business.
“2016 was arguably the most eventful year in the group’s history. We completed our largest acquisition to date, invested a record amount in our business, began supplying our biggest ever contract and delivered an excellent financial performance – all against the background of an uncertain economic environment and challenging trading conditions in many of our markets,” said executive chairman Peter Tom.
The building materials company added cement production to its portfolio when it purchased Hope in mid-2016. It added a cement plant, five new quarries, a network of concrete plants and eight rail-linked distribution depots. In November 2016 it bought Sherburn Minerals, including two terminals in northeast England and eastern Scotland, that are used to import cement and ground granulated blast-furnace slag (GGBS).
US: Orcem Americas, a subsidiary of Ireland’s Ecocem, has been refused planning permission to build a slag cement plant in Vallejo, California. The cement producer was hoping to build a US$50m grinding plant but it faced opposition from local residents on environmental grounds, according to the Irish Times. The issues for the planners was an anticipated increase in the number of trucks on local roads and pollution from the plant. Orcem Americas can now appeal the decision to Vallejo’s City Council if it chooses.
South Korea: SsangYong Cement has awarded a contract to Claudius Peters Projects for the supply of a grate cooler modification. The existing cooler at the Donghae cement plant will be upgraded by with an ETA 5th generation clinker cooler system. It consists of a fixed inlet, the High Efficiency module (HEM) and a moving floor ETA technology. It is designed for a stable production at 7600t/day.
SsangYong cement was established in 1962 and operates the world’s largest cement plant in Donghae with a capacity of 11.5Mt/yr of clinker. It employs around 400 workers.
South Korea: Voith has reported on a contract to engineer and install a belt conveyor drive and controller system for SsangYong Cement’s Donghae plant. Changes made by the engineering firm to two belt conveyors from the main limestone quarry to the plant managed to double the production of the quarry.
The engineering company installed new drive trains on the longer 12.8km SB500 belt conveyor, one of the longest single conveyors in the world. The installed power is now 2 x 1.2MW at the head and 1 x 1.2MW at the tail of the conveyor. The existing drives from the longer conveyor were used to double the number of drive trains on the shorter 2km SB200 conveyor. The new configuration of the SB200 drive system consists of 4 x 600kW installed power at the head equipped with new gearboxes. A Voith TurboBelt DriveControl system was also installed to reduce the start-up time of the longer conveyor by half, from originally over 10 minutes. The system includes active-load sharing, belt conveyor control, slip detection and remote service capability. It is also expected to extend the belt lifetime by reducing the mechanical stress as well as the dynamic impacts.
“Due to this retrofit project, we were able to reduce the working hours of plant workers, achieved cost savings, and a flexible operation is now possible. Thanks to Voith’s technical support and efforts, the plant will enjoy sustainable operations providing value to its community, its owner, and the employees,” said Dukgi Lee, General Manager of the plant.
Philippines: The Philippine Competition Commission (PCC) is preparing to investigate the cement industry for alleged violations of competitive practice. It says it has found reasonable grounds to proceed to a full administrative investigation on the cement industry for possible violations of Sections 14 and 15 of the Philippine Competition Act, according to the Philippine Star newspaper. This follows a legal statement by Victorio Dimagiba, a former trade undersecretary, in August 2016 accusing the Cement Manufacturers Association of the Philippines (CEMAP), LafargeHolcim Philippines and Republic Cement and Building Materials of engaging in anti-competitive agreements.
Dimagiba has accused the cement producers of striking illegal agreements including, “restricting competition as to price or components thereof or other terms of trade, abusing their dominant position by engaging in conduct that substantially prevents, restricts, or lessens competition, imposing barriers to entry, or committing acts that prevent competitors from growing within the market.” He has also alleged that Ernesto Ordonez, the head of CEMAP, has used the trade association to justify violating the Philippine Competition Act, as well as maintaining prices of domestic cement in the retail market ‘unreasonably’ high.
Ordonez responded to the claims saying that he was puzzled about the PCC’s decision and that CEMAP had not been informed about a preliminary inquiry.
FLSmidth awarded project by El Sewedy Cement
07 March 2017Egypt: FLSmidth has been awarded an order from El Sewedy Cement Company to build a cement production line at Ain Soukhna in Suez Governorate. The order is scheduled for completion in the fourth quarter of 2018.
The full scope of the order includes an OK 39-4 vertical mill for raw grinding, EV 250x300 Hammer Impact Crusher, stacker and reclaimer systems for storage, QCX quality control system, ECS/ControlCenter control system, Rotax-2 rotary kiln with low NOx ILC calciner, Jetflex burner and a FLSmidth Cross-Bar cooler. The OK mill and Rotax-2 kiln will be the first of these models to be installed in Egypt. Additional equipment in the order includes planetary gear units from FLSmidth MAAG Gear, electrostatic precipitators and fabric filters from FLSmidth Airtech, a control system and plant automation from FLSmidth Automation and weighing and metering systems from FLSmidth Pfister.
"This order reflects the strong relations we have had with one of the biggest industry groups in Egypt for almost a decade. Working closely with El Sewedy Cement Company, we assist them in improving productivity and operational excellence," said Group Executive Vice President, Cement Division, Per Mejnert Kristensen.
Demonetisation likely to deliver Indian cement industry first fall in volumes since 2001
06 March 2017India: A report by HDFC Securities suggests that the Indian cement industry will witness its first decline in cement sales volumes since 2001 due to demonetisation. The research by Ankur Kulshrestha and Sarfaraz Singh says that cement volumes fell by 13% year-on-year in January 2017 following a 9% decline in December 2016. They added that cement demand, although weak, is recovering from the shock with the south of the country least effected.
"Our channel checks across the country show cement demand, though still weak, is recovering from the effect of this move. Though states undergoing political processes (Uttar Pradesh and Punjab) are an exception to this recovery as of now, there is a possibility demand may pick up once the government formation is complete," said Kulshrestha and Singh. They added that energy prices contributed much of a surge of cement industry profitability in the last financial year or so.