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Today HeidelbergCement publishes its financial results for the first quarter of 2017, giving us an idea of how the year is shaping out for the major cement producers outside of China. Looking at graphs 1 and 2 below of cement production volumes and sales revenue gives the initial impression of a reversal of fortunes for the two leading multinational companies. LafargeHolcim’s production and sales are declining as HeidelbergCement races to catch up, boosted by its acquisition of Italcementi in 2016.

This interpretation would be misleading, however, given that LafargeHolcim has been steadily whittling down its assets to become more profitable and because HeidelbergCement has just taken on a raft of production units. The real figures to look at might be the like-for-like changes with adjustments made for currency, consolidation effects and suchlike. Under these conditions each of the three leading cement producers, with the addition of Cemex, have reported stagnant cement sales in the period. Yet the surprise comes from an analogous look at sales. LafargeHocim and Cemex both reported sales revenue increases of 5 – 6% on a like-for-like basis, whilst HeidelbergCement reported no change. This is further backed up by operating earnings before interest, taxation, depreciation and amortisation (EBITDA) figures that rose significantly on a like-for-like basis for LafargeHolcim at 8.8%, more modestly at 2% for Cemex but fell by 3% for HeidelbergCement.

Graph 1: Cement sales volumes at selected multinational producers in Q1 2016 and Q1 2017. Sources: company reports.

Graph 2: Sales revenue at selected multinational producers in Q1 2016 and Q1 2017. Sources: company reports.

The tragedy of the picture above appears to be that Eric Olsen, the chief executive officer of LafargeHolcim, has started to turn the company around following the merger between Lafarge and Holcim in 2015, just as he is leaving the company. This week Olsen denied that his departure was related to the Syria scandal but that it was related to ‘tensions’ at the group. The lesson that HeidlebergCement can take from this is that enlarging a building materials company in a supressed global market requires decisive action to maintain profitability. Certainly, if it doesn’t go HeidelbergCement’s way in future months and years then the stability of its management and major shareholders may become apparent. Although it doesn’t mention internal matters, HeidelbergCement does flag up higher geopolitical and macroeconomic risks in its outlook for 2017 as well as a ‘shift of political measures towards protectionism.’ That last one is potentially bad news for a multinational cement producer looking to move excess clinker around as it downsizes towards profitability.

Of the rest of the producers included in the graphs above Dangote Cement is worth some attention. The production and sales figures show a company evolving from a national player into an international one. Challenged by economic problems and a market contraction at home in Nigeria the company is exploding internationally in sub-Saharan Africa. Roughly, it sold a third of its cement outside of Nigeria in the period but only made a quarter of its revenue outside of its home turf. This has interesting implications for the international future of the company. However, it will be a big moment for the firm once it finally builds a plant in Nepal outside of Africa.

Italy’s Buzzi Unicem and the Brazilian operators Votorantim and InterCement are due to release their first quarter results in the coming weeks which will flesh out the international picture. Already there are lots of fascinating regional trends emerging that require discussion, such as the Philippines that we looked at last week and a ‘back to business’ feeling in China. Next week in the run up the IEEE/PCA Cement Industry Technical Conference in Calgary, Canada we’ll look at the US.

Ukraine: The supervisory board of Podilsky Cement has appointed Leonard Barry as its supervisory board chairperson. Previously, he was the director of CRH in the country, according to the Ukrainian News Agency. Barry, aged 52 years, is an Irish national. He joined Irish Cement in 1989 as a process engineer before becoming its managing director in 2011. He trained as a chemical engineer at University College Dublin and holds an MBA from the University of Limerick.

Other personnel changes include the appointment of Declan Maguire, CRH’s chief operational director for Eastern Europe, as deputy supervisory board chairperson. Alan Connolly has also been appointed as secretary of the supervisory board.

China: Chong Cha Hwa has resigned as a non-executive director from China Shanshui Cement due to physical trauma suffered during the ‘illegal’ occupation of the Jinan properties of its Shandong Shanshui in early April 2017. Chong said that the occupation had impeded him from carrying out his duties.

Nigeria: Mallam Suleiman Yahyah has resigned as chairman from AshakaCem. Yahyah joined the board of directors of the subsidiary of LafargeHolcim in 2010 and became its chairman in 2015.

Germany: Peter Feldhaus has been appointed as the new chief executive officer (CEO) of the Industrial Solutions business division of ThyssenKrupp. Feldhaus, aged 50 years, succeeds Stefan Gesing, who was the acting CEO of the division. Gesing remains as the chief financial officer of the group. The new CEO of ThyssenKrupp Marine Systems will be Rolf Wirtz, currently CEO of Atlas Elektronik. Jens Bodo Koch, member of the management board of Atlas Elektronik, is to take over as acting CEO.

Germany: Susanne Fuchs has been elected to the supervisory board of Fuchs Petrolub in place of her father Manfred Fuchs. Manfred Fuchs, aged 78 years, resigned as deputy chairman of the board at the end of the group’s annual general meeting. The company’s chairman of the executive board is Manfred Fuchs’s son, Stefan Fuchs. Susanne Fuchs holds a doctorate in veterinary medicine and successfully completed her MBA at the Open University in the UK in 2016.

France: Julien Soum has been appointed as the European business development manager at Anderman Ceramics. Soum has worked as a commercial engineer in Europe for the last five years with knowledge of the refractory markets for cement and steel working for Refractaria and Hepha. He was educated at the University of Montpellier and the Kedge Business School in Marseille.

Germany: HeidelbergCement has suffered from poor sales in Asian and African markets as it continues to integrate assets from Italcementi into the group. Its pro forma sales revenue remained stagnant on a like-for-like basis at Euro3.78bn in the first quarter of 2017. Its cement sales volumes also remained static on a like-for-like basis at 27.8Mt. Although the group described its fortunes as ‘mixed’ in its emerging markets it reported sales declines in Thailand, Bangladesh and Egypt.

“We were able to almost offset the effect of higher energy costs, bad weather conditions and increased competition in some emerging countries in the most seasonally weak quarter of the year,” said Bernd Scheifele, chairman of the managing board. He added that the overall outlook for the global economy is positive despite ‘major’ macroeconomic and geopolitical risks. The group derives about 60% of its revenue from the US, Canada, the UK, Germany, countries in Northern Europe and Australia. As such it relies on the ‘good and stable economic development’ of these territories.

Overall the group’s cement sales volumes grew by 58% to 27.8Mt from 17.6Mt due to the acquisition of Italcementi in mid-2016. Its sales revenue from its cement business grew by 49% to Euro1.9bn from Euro1.3bn.

By region, sales in Europe and North America rose in the reporting period despite a strong comparison quarter in 2016 and poor weather. Falling prices in Indonesia and Ghana were described as the main cause for falling revenue in Asia and Africa. Results in Western and Southern Europe were also damaged by higher maintenance costs year-on-year.

US: The Portland Cement Association (PCA) has announced the winners of its Chairman’s Safety Performance, Safety Innovation and Energy and Environment Awards. The awards recognise outstanding safety performance in the manufacturing of Portland cement, creative safety-enhancing projects in the cement industry and outstanding environmental and community relations respectively.

“The facilities recognised today are to be congratulated for their safety achievements,” said Allen Hamblen, PCA chairman and president and chief executive officer of CalPortland, in relation to the Safety Performance Awards.

Winners of the 2017 PCA Chairman’s Safety Performance Awards:

Category: Less than 226,000 hours
Buzzi Unicem USA – Chattanooga, Tennessee
LafargeHolcim US – Morgan, Utah
Lehigh Hanson, Inc. – Tehachapi, California

Category: 226,001 - 289,000 hours
Ash Grove Cement – Foreman, Arkansas
GCC Permian – Odessa, Texas
Lehigh Hanson, Inc. – Leeds, Alabama

Category: 289,001 - 563,000 hours
Cemex USA – Brooksville, Florida
Cemex USA – New Braunfels, Texas
Martin Marietta Materials – New Braunfels, Texas

Winners of the 2017 Safety Innovation Awards:

Milling/Grinding
Ash Grove Cement, Montana City, Montana

Pyroprocessing
Cemex USA, Balcones, Texas

Distribution
CalPortland Cement Terminal, Portland, Oregon
LafargeHolcim US, Corporate Program, Chicago

Winners of the 2017 Energy and Environment Awards:

Energy Efficiency
Cemex USA Construction Materials, Pacific, LLC, Victorville, California

Environmental Performance
Cemex USA Construction Materials, Pacific, LLC, Victorville, California

Land Stewardship
Continental Cement Company/Green America Recycling, Hannibal, Missouri

Outreach Winner
Mitsubishi Cement Corporation, Lucerne Valley, California

Oman: Raysut Cement has confirmed its plans to build a new cement plant via a joint venture with Oman Cement. The cement producer announced its plans in its first quarter financial report for 2017. The new company will be called Alwasta Cement Company. As announced previously the new project will be dependent on a feasibility report. It also announced that its project with Barwaaqo Cement Company to build a terminal in Somaliland, an autonomous region of Somalia, is progressing and that work on a new packing plant in underway.