Displaying items by tag: Heidelberg Materials

Europe: Germany-based Heidelberg Materials has announced the launch of evoZero carbon captured net zero cement. The company produces evoZero cement at its Brevik cement plant in Norway. It says that this is the first cement to achieve net zero CO₂ emissions through the use of carbon capture and storage (CCUS), without relying on other methods of compensation in its carbon accounting.

Heidelberg Materials chair Dominik von Achten said “The launch of our unique evoZero products is a paradigm shift in the decarbonisation of our sector. Carbon capture and storage is a breakthrough technology for the building materials industry and we are frontrunners in deploying it at scale. With evoZero, we are offering the industry’s most innovative, globally unique product for our customers, enabling them to drive cutting-edge, environmentally friendly construction projects. I am very proud of the dedication and passion of everyone involved in our pioneering project in Brevik.”

Norway: Heidelberg Materials Northern Europe inaugurated its Slemmestad cement terminal in Asker on 17 November 2023. The terminal’s equipment includes 12,000t-capacity cement silos. It cost US$13.3m to build and has a loading rate of 390t/hr.

Germany: Heidelberg Materials raised its sales by 1.8% year-on-year to Euro16.1bn in the first nine months of 2023. Regionally, sales rose by 7.5% to Euro3.69bn in North America, by 2.6% to Euro2.76bn in Asia-Pacific by 3.5% to Euro4.94bn in Western and Southern Europe, by 2.5% to Euro2.74bn in Northern and Eastern Europe and Central Asia, but fell by 10% in Africa-Eastern Mediterranean Basin to Euro1.41bn. Cement volumes fell across all of the group’s business lines, as ‘solid developments’ in infrastructure and industrial commercial construction failed to offset locally ‘massive’ declines in residential construction. Heidelberg Materials raised its 2023 outlook based on anticipated continued moderate revenues growth to a full-year result of Euro2.85 – 3bn, from Euro2.7 – 2.9bn previously.

Chair Dominik von Achten said “We have closed the first three quarters of 2023 with a strong result, despite declining demand for our building materials. On a like-for-like basis, all group areas have contributed to this result. I would like to thank the entire Heidelberg Materials team for their outstanding performance in what continues to be a very challenging business environment.” Von Achten continued “In the third quarter, we were able to further strengthen our pioneering role in the decarbonisation of the building materials sector. Our activities have gained further momentum with the installation of the core equipment of the carbon capture, utilisation and storage (CCUS) plant in Brevik, Norway, and the start of construction of a CCUS pilot plant in Bulgaria. This brings us much closer to our goal of offering our customers climate-friendly products on a large scale.”

Cementos Molins has been celebrating the first anniversary this week of its alternative raw materials unit at its Sant Vicenç dels Horts plant near Barcelona. It has processed 75,000t of waste since September 2022 when the site started up. More is yet to come as the unit has a production capacity of up to 200,000t/yr. The facility receives waste in coarse, granular, powder and sludge formats. Waste from concrete plants is crushed and screened to produce recycled aggregate. Industrial and construction waste is dosed and homogenised to produce alternative raw materials for cement production.

Global Cement Weekly has covered construction and demolition waste (CDW) a couple of times already so far in 2023. A number of cement producers are investing in the sector - including Holcim, Heidelberg Materials, CRH, Cemex – by developing technology, buying up other companies, setting up internal CDW divisions and so on. Holcim and Heidelberg Materials have been the more obviously active participants over the past six months based on media coverage. In September 2023 Holcim France commissioned the Saint-Laurent-de-Mûre alternative raw materials plant and Holcim Group invested in Neustark, a company promoting technology to sequester CO₂ in CDW. In August 2023 Lafarge Canada also completed the first stage of a pilot project to use CDW in cement production at its St. Constant plant in Quebec. Heidelberg Materials meanwhile announced in October 2023 that a forthcoming upgrade to its Górażdże cement plant in Poland would include a new CDW recycling unit and in September 2023 it launched a CDW division for its subsidiary Hanson UK.

Previously we have described how the European Union (EU) has set recovery targets for CDW. However, McKinsey & Company published research in March 2023 setting out the economic case for cement and concrete companies looking at CDW. It estimated that “an increased adoption of circular technologies could be linked to the emergence of new financial net-value pools worth up to roughly Euro110bn by 2050.” It is not a certainty and there is risk involved, but adopting circular practices is one way to reduce this risk. It then went on to predict that recirculating materials and minerals could generate nearly Euro80bn/yr in earnings before interest, taxation, depreciation and amortisation (EBITDA) for the cement and concrete sectors by 2050. The biggest portion of this could come from using CDW in various ways such as a clinker replacement or as an aggregate in concrete production, or the use of unhydrated cement ‘fines.’ Capturing and using CO₂ and increasing alternative fuels (AF) substitution rates would have a financial impact but not to the same scale.

Graph 1: CO₂ abatement cost via circular technologies for cement and concrete sectors. Source: McKinsey & Company.

Graph 1 above puts all of the McKinsey circular technology suggestions in one place with the prediction that all of these methods could reduce CO₂ emissions from cement and concrete production by 80% in 2050 based on an estimated demand of 4Bnt/yr. The first main point they made was that technologies using CO₂, such as curing ready-mix or precast concrete, can create positive economic value at carbon prices of approximately Euro80/t of CO₂. Readers should note that the EU emissions Trading Scheme CO₂ price has generally been above Euro80t/yr since the start of 2022. The second point to note is that using CDW could potentially save money by offering CO₂ abatement at a negative cost through avoiding landfill gate fees and reducing the amount of raw materials required. This is dependent though on government regulation on CO₂ prices, landfill costs and so on.

Cement producers have been clearly aware of the potential of CDW for a while now, based on the actions described above and elsewhere, and they are jockeying for advantage. These companies are familiar with the economic rationale for AF and secondary cementitious materials (SCM) in different countries and locations. CDW usage is similar but with, in McKinsey’s view, existing CO₂ prices, landfill costs, and regulatory frameworks all playing a part in the calculations. Graph 1 is a prediction but it is also another way of showing the path of least resistance to decarbonisation. It is cheaper to start with AF, SCMs and CDW rather than barrelling straight into carbon capture. The beauty here is that cement and concrete sold, say, 50 years ago is now heading back to the producers in the form of CDW and it still has value.

US: Heidelberg Materials is rumoured to have hired advisors for a possible attempt to acquire Summit Materials. Bloomberg has reported that the company made two approaches to Summit Materials ‘in recent weeks.’ Meanwhile, the Colorado-based producer revealed in a statement that it has rejected two takeover bids from an unnamed party, the more recent on 18 October 2023.

Summit Materials previously agreed to merge with Cementos Argos subsidiary Argos USA in early September 2023.

Germany: Heidelberg Materials preliminary reported a 4% year-on-year decline in its sales during the third quarter of 2023, to Euro 5.6bn. Its earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 17% to Euro1.39bn from Euro1.28bn. The group succeeded in raising its profit in the quarter, by 24% year-on-year to Euro1.08bn.

Heidelberg Materials says that it expects to record a ‘moderate increase’ in its revenues in full-year 2023. The company raised its profit target range for the year to Euro2.85 – 3bn from Euro2.7 – 2.9bn.

Heidelberg Materials reversed the prevailing wisdom for western multinational cement companies this week when it said it was preparing to buy a cement plant in Indonesia. It announced on 17 October 2023 that its Indonesia-based subsidiary Indocement had signed a deal to acquire all the shares of Semen Grobogan’s integrated cement plant in Central Java for an undisclosed sum. This challenges the trend since the mid 2010s of the likes of Holcim and CRH selling up in the developing world and concentrating instead in markets in North America and Europe.

The decision to buy a cement plant in Indonesia raises eyebrows because the country can produce far more cement than it needs at present. Its cement capacity utilisation rate has been below 60% since 2020 and Central Java has the most plants out of all the nation’s regions. Indocement’s own investor relations presentation for the first half of 2023 laid out data from the Ministry of Industry and internal sources forecasting that the utilisation rate would only reach 57% in 2025. National production capacity meanwhile is around 117Mt/yr at present and expected to reach just below 120Mt/yr in 2025.

Before this latest agreement, Indocement operated four integrated plants in the country and it was the country’s second largest cement producer after Semen Indonesia. Heidelberg Materials bought the company in 2001 and currently owns a 55% share in it. Three of these plants it owns directly, with a capacity of around 25Mt/yr across 14 production lines. One of these is the 18Mt/yr Citeureup plant, one of the world’s largest cement plants. However, in 2022 the company leased the Maros integrated cement plant in South Sulawesi, the Banyuwangi grinding plant in East Java and several cement terminals owned by Bosowa Group, including terminals in Makassar, Barru and Garongkong, via production facility lease agreements. It said this was part of a plan to reduce logistics costs and target the east of the country better. The integrated plant has been leased for three years from March 2022 and the grinding plant and terminals for five years from September 2022.

Semen Grobogan’s plant started commercial production in 2022, has a cement production capacity of 2.5Mt/yr and limestone reserves of over 50 years. Germany-based Heidelberg Materials was keen to point out that the acquisition would reward it with “significant synergies with Indocement’s existing plants in Indonesia” such as in logistics, alternative fuels, and transfer of technical and sustainability knowledge.

It is worth noting financially that Indocement suffered a couple of bad years during the Covid-19 pandemic with revenue and profit down. However, the situation improved in 2022 with both net revenue and earnings before interest, taxation, depreciation and amortisation (EBITDA) for the year up by 11% year-on-year to US$1.04bn and 4% to US$220m respectively. Despite the company’s sales volumes falling by 2% to 17.6% and energy prices increasing it was able to raise its prices. The first half of 2023 has seen the improvements accelerate with more price rises, higher domestic sales volumes from the new leased operations and increased clinker exports to Bangladesh and Brunei.

The improving financial outlook for Indocement and the new condition of many of its clinker production lines may help to explain what is going on here. The Citeureup plant started up in late 2016 and, combined with the Semen Grobogan plant that started up in 2022, both plants cover three-quarters of the company’s production capacity. In a highly competitive market such as Java this may make a significant difference. Consider also the leased plant at Maros, in the less well-served Sulawesi region, and that focus on terminals elsewhere. Here one might be able to view another approach to coping with overcapacity, by targeting different markets either directly or via exports.

It won’t be clear how well Heidelberg Material’s strategy in Indonesia is working until like-for-like financial figures start to be released. The company itself has warned of various risks such as the country’s impending ban on overloaded trucks and the potential effects of a proposed carbon tax on electricity prices. Another thing to consider are last week’s rumours in the press about Heidelberg Materials selling up in India. If this did happen then the proceeds might well help advance the company’s plans in Indonesia. All of this goes to show that one doesn’t always have to copy one’s corporate peers. The retreat by the western multinationals to safer havens has slowed… for now at least.

Indonesia: Heidelberg Materials subsidiary Indocement has bought the 1.8Mt/yr integrated Grobogan cement plant in Central Java from Semen Grobogan. The plant commands sufficient limestone reserves for the next 50 years and has 700,000t/yr of additional cement grinding capacity.

Heidelberg Materials chair Dominik von Achten said “As part of our ongoing portfolio optimisation, we are making an exciting step in the growth market of Indonesia. Heidelberg Materials has been active in Indonesia for more than 20 years. With this investment, we are now strengthening our presence in one of the most populated regions in Indonesia, where we expect further market growth driven by the growing retail market, developing industrial areas and major infrastructure projects. As frontrunners of decarbonisation in emerging markets, we continue to drive our ambitious CO₂ reduction targets at all our sites in Indonesia, including the new cement plant.”

Bulgaria: Heidelberg Materials subsidiary Devnya Cement has commenced construction of the ANRAV.beta carbon capture pilot unit at its Devnya cement plant near Varna. Construction will take ‘a few months,’ followed by a pilot trial lasting 12 – 24 months. The ANRAV system will rely on OxyCal oxygen-enriched burner technology to eventually capture 800,000t/yr of CO₂ from 3Mt/yr of plant flue emissions. The project has Euro190m in grants from the EU Innovation Fund and is scheduled for delivery in 2028.

Heidelberg Materials’ Northern and Eastern Europe-Central Asia regional director Ernest Jelito said “The OxyCal technology we will be trialling in Devnya is a crucial addition to our portfolio of capture technologies. Obtaining solid operational data from industrial pilots like this is essential to ensure the successful implementation of projects under our comprehensive CCUS investment programme. At the same time, we can demonstrate an economically feasible way to decarbonise carbon-intensive industries in Eastern Europe.”

The Indian corporate rumour mill ramped up this week with speculation that UltraTech Cement and Adani Group might possibly be interested in buying Heidelberg Materials' assets in India. This follows the story broken by the Economist newspaper last week that JSW Cement had made an unsolicited offer to buy them. However, when HeidelbergCement India was asked by the Bombay Stock Exchange what exactly was going on, it replied that it was unaware of any such development and that it did not comment on market speculation.

A week later though and now another related story has popped up. In this case it is unclear exactly what the Hindu newspaper actually knew. The country’s two largest cement producers are locked in a battle for capacity expansion and any opportunity is likely to be of interest to them both. Yet the newspaper did quote a source who said that any divestment by HeidelbergCement India (HCI) would involve a “full-fledged bidding process,” implying that something may be going on.

Germany-based Heidelberg Materials operates four main subsidiaries in India: Gulbarga Cement; HC Trading (India); HCI; and Zuari Cement. HCI and Zuari Cement are the main two in terms of cement production. Heidelberg Materials entered the market in 2006 via a number of purchases and a joint-venture. It then acquired Zuari Cement via its takeover of Italcementi in 2016. Between them the two subsidiaries operate four integrated plants, three grinding plants and one terminal in Central and Southern India. Altogether the company says it has a total cement production capacity of 14Mt/yr. Gulbarga Cement, meanwhile, is a long running project via Zuari Cement to build a new integrated plant at Gulbarga in Karnataka. As of mid-2021 at least the company was still finalising planning and permitting requirements.

HCI’s income fell by 3% year-on-year to US$275m in the financial year to the end of March 2023 from US$282m in the same period that ended in 2022. Its earnings before interest, taxation, depreciation and amortisation (EBITDA) dropped by 39% to US$35.4m from US$58.2m, its lowest figure since at least its 2017 financial year. The company blamed this on higher fuel prices, although it has been trying to offset this by optimising its fuel and power mix. Unfortunately, it was not able to pass these costs on to its customers through price rises due to competition and new cement plants being commissioned in its market areas. Its revenue and profits improved somewhat in the quarter to July 2023. Recent financial data on Zuari Cement appears to be unavailable, possibly in part due to the company changing the dates of its financial year in 2020. However, it reported revenue of US$249m in its 2021 financial year, a broadly comparable figure to HCI’s. When asked during the company’s earnings call in July 2023, HCI’s managing director Joydeep Mukherjee did confirm that the company was looking at a potential merger with Zuari Cement. However, the company was waiting for the right time before it would consider actually doing it.

The Indian cement market has been consolidating in recent years. Companies have been increasing their production capacity, competition has been intensifying and the spike in fuel prices in 2022 battered profits. Adani Group’s acquisition of Holcim’s businesses in 2022 has probably been the most visible example of this trend towards mergers and acquisitions. It follows UltraTech Cement’s acquisition of Jaiprakash Associates in 2017. Heidelberg Materials has been steadily selling off bits and pieces of its cement business since the mid 2010s but at a slower pace than Holcim. Selected sales have occurred in Italy, Spain, Georgia, Ukraine and various countries in Africa, but the biggest was the sale of its US West region to Martin Marietta Materials for US$2.3bn in 2021. It reinforced this process with its ‘Beyond 2020’ strategy with the stated aim to simplify its country portfolio and prioritise its strongest market positions. A large-scale divestment of its operations in India would certainly fit with this plan. Whether the current reporting is accurate or not, Heidelberg Materials’ intentions for its Indian operations are certainly worth keeping an eye on.