Displaying items by tag: GCW625

The big US news this week has been that Summit Materials and Argos USA are planning to merge their operations. The new organisation will operate six integrated cement plants with a production capacity of 8.4Mt/yr, based on Global Cement Directory 2023 data. The companies say that this will make them the fourth biggest cement producer in the country, at 11.8Mt/yr, based on grinding capacity, and the largest domestically-owned operator. Additionally, the combined entity will also hold just under 5Bnt of aggregate reserves, 224 ready-mixed concrete (RMX) plants and 32 asphalt plants.

The deal is expected to close in the first half of 2024 subject to the usual regulatory clearances and shareholder approval. At this point Argos should own approximately 31% of the new company and Summit Materials’ shareholders will be the majority owner. Although, if we remember anything from the Lafarge-Holcim merger from nearly a decade ago, it is that if the share prices between the two companies diverge too much in the next six months then that proportion may change. In simple terms that split for Argos USA is in the region of where one might expect it to be given that Argos USA made 39% of the combined revenue for both itself and Summit Materials in 2022 and 28% of the combined earnings.

The two companies complement each other well for the purposes of forming a new heavy building materials concern. Summit Materials reported revenue of US$2.41bn in 2022, with 30% deriving from its aggregates businesses, another 30% coming from RMX and about 20% from paving. Cement generated US$341m, or 14%, of total revenue. By contrast Argos USA reported revenue of US$1.57bn in 2022 from a business just concerning cement and concrete. Geographically, Summit Materials’ integrated plants are in the Midwest, in Iowa and Missouri respectively, and its cement terminals follow the Mississippi River from Minneapolis to New Orleans. Notably, it made the point in the merger announcement that the deal would reduce the seasonality of its cement business. Argos USA’s plants and terminals are mostly spaced out in the Southern states with its plants in Alabama, Florida, South Carolina and West Virginia.

It goes against recent trends for a US-based company to be increasing its share in the domestic cement market, although it has resorted to teaming up with a Colombia-based one to do so. Usually it is foreign-headquarted companies making moves in the US. For example, Ireland-based CRH is in the final stages of switching its primary listing to the New York Stock Exchange. Its head Albert Manifold described the US construction market as going through a “golden age” earlier in the year whilst trying to sell the stock market move at the company’s annual general meeting. Meanwhile, there have been various smaller acquisitions such as Peru-based UNACEMs’ agreement to buy the Tehachapi cement plant in California from Martin Marietta Materials in August 2023.

Given the ongoing importance of the North American market for the international cement producers it is not surprising that merger and acquisition activity has been taking place. Each of the four largest US-based cement producers performed well in the first six months of 2023, increasing both revenue and earnings significantly. However, the picture is mixed. The Portland Cement Association (PCA) forecast at the start of 2023 that cement consumption would decline in the second half of 2023 due to a worsening general economic outlook. The downturn was estimated to be brief though as interest rates were expected to dip and infrastructure spending to rise in 2024. Half-year data from the United States Geological Survey (USGS) supported this view as shipments reached an estimated 51.0Mt, a slight decrease from the same period in 2022. The cement companies have made money so far in 2023 partly by raising their prices. Yet, some segments of the residential homebuilding market have also driven demand despite the general economic picture.

One last thing to consider is how much thought was given to the carbon risk of forming a new heavy building materials company in a developed economy in the 2020s. Sustainability receives a mention in Summit Materials’ investor presentation in the form of current achievements such as switching to blended cements or reducing fossil fuel usage but there is no suggestion that any serious investment to curtail process emissions is expected any time soon. However, one could make the case that the enlarged company might benefit from synergistic effects if it were forced to spend more on CO₂ emission reduction. This proposed merger concerns two existing organisations teaming up rather than new equity entering the arena. In this context it will be worth noting whether the next cement industry merger or acquisition in the US or Europe will involve existing companies or new entrants.

Spain: The Spanish cement association (Oficemen) has elected Alan Svaiter as its president. He will take charge of various cross-sectoral initiatives aimed at helping the local cement industry to meet present and future challenges. These include recovering its higher activity levels and advancing its net zero strategy. He succeeds Cemex’s director general of strategic planning, Europe, Middle East, Africa and Asia, José Manuel Cascajero, in the role.

Svaiter has held the position of chief executive officer (CEO) of Votorantim Cimentos España since January 2018. Prior to that, he worked in Brazil as Votorantim Cimentos’ supply chain director from 2014 and the CEO of its ready-mix concrete subsidiary Engemix from 2010. Earlier, he held management roles at logistics groups VarigLog and Vale.

Finland: Finnsementti has appointed Tommy Ranta as its Operations & Commercial Director.

Ranta has been employed by CRH and its subsidiaries since 2007. He originally started working for Finnsementti in 2007 as an Operating Engineer. He later worked for Jura Cement in Switzerland and then returned to Finnsementti from 2012 in a variety roles, including plant manager of the Parainen cement plant, before eventually becoming the company’s Production Director. He holds an undergraduate degree in economics and a master’s degree in science, economics and business adminsitrtion from Åbo Akademi University in Turku.

Zimbabwe: Khayah Cement has appointed Arnold Zivanayi Chikazhe as its Company Secretary and Legal Advisor. He has acted as the company secretary of the company since May 2022, according to the Sunday News newspaper.

Chikazhe is a registered legal practitioner with over 15 years experience in various sectors, including retail, energy, mining, manufacturing, insurance, construction, health, public and non-governmental organisations both in Zimbabwe and the US. He holds legal qualifications from the University of Texas and the University of South Africa.

US: Fortera has appointed Kas Farsad as its Chief Strategy Officer.

Farsad was the lead inventor of Fortera’s reactive calcium carbonate cement when he worked as the R&D Manager for Calera Corporation in the late 2000s. He worked for PAX Scientific in the 2010s amongst other roles before returning to the renamed Fortera in 2019 as Director, Strategic Development.

He holds a bachelor’s degree in Materials Science and Engineering from University of Michigan Ann Arbor, a master’s degree in Materials Science from San Jose State University and a master of business administration (MBA) from UC Berkeley Haas School of Business.

Argentina: Holcim Argentina has awarded a contract to 360Energy to supply 30,000MWh/yr of electricity from its solar power plants. La Voz del Interior newspaper has reported that 360Energy will supply the energy from its 200MW network via the Renewable Energy Term Market (MATER). This will cover 75% of Holcim Argentina’s power consumption, corresponding to the production of 2.7Mt of cement. This will eliminate 68,600t/yr of CO₂.

Holcim Argentina chief executive officer Christian Dedeu said “I am very happy because we are taking a new step in our commitment to zero emissions in Holcim's operations, and we will continue working every day to build progress for people and the planet.”

India: Shree Cement is reportedly planning to raise US$84.4m through the sale of bonds. Reuters has reported that the bonds will mature in five years from their date of issue.

US: Terra CO₂ plans to build its first commercial-scale supplementary cementitious materials (SCM) plant in Texas. The plant will have a production capacity of 240,000t/yr. Asher Materials secured an exclusive market license to operate the plant. Terra CO₂’s SCM can replace up to 40% of cement content in concrete. Asher Materials will produce the materials from silicate rock from existing local aggregates operations.

Terra CO₂ chief science officer DJ Lake said "From start to finish, we've designed a system to create large-scale impact in the real world. Our game-changing production process converts affordable, abundant and local raw materials to cementitious material that meets rigorous performance standards.” Lake continued “True sustainability will come from deep innovations in materials and technology and not from incremental improvements to the existing cement supply chain."

Nigeria: Dangote Cement plans to raise its alternative fuel (AF) substitution rate across its Nigerian operations to 25%. The Punch newspaper has reported that the producer consumed 34,800t of AF during the first half of 2023.

Obajana cement plant head of sustainability Eseosa Ighile said “We are working towards installing AF feeding systems in all our operation lines by 2024.”

Belarus: Belarusian Cement Plant produced 940,000t of cement during the first half of 2023. The figure corresponds to a year-on-year rise of 3.1%. The Respublika newspaper has reported that the company more than doubled its exports of cement to 719,000t – 76% of its production. Russia was the main destination for the producer’s cement exports. Belarusian Cement Plant recorded a capacity utilisation rate of 94% throughout the six-month period.