Displaying items by tag: HeidelbergCement

Adani Group’s latest target for acquisition in the cement sector was revealed this week to be Heidelberg Materials’ India-based business. The Economic Times newspaper reported that talks have started between the companies with a tentative value of US$1.2bn. As might be expected, Adani Group is said to be keen to close the deal down quickly. It wants to avoid an auction situation where it might face competitors. However, there may be some disagreement about the actual production capacity of Heidelberg Materials’ companies in India. If a deal were finalised, it might be completed by early 2027.

Heidelberg Materials’ capacity in India was listed as 14Mt/yr by the press but this could include the company’s grinding plants as well as its integrated ones. Heidelberg Materials, itself, says it has a capacity of 12.1Mt/yr from three integrated cement plants, four grinding plants and a terminal across 12 states. Data from the Global Cement Directory 2024 suggests that this refers to the group’s integrated cement capacity. The plants are roughly split equally between subsidiaries Heidelberg Materials India and Zuari Cement. Heidelberg Materials entered the Indian market in 2006 when it acquired Mysore Cement, Cochin Cement and established a joint-venture with Indorama Cement. It later added Zuari Cement to its portfolio when it bought Italcementi in 2016. The group used to run four integrated plants in India until in May 2024, when it shut down clinker production at its Ammasandra plant in Karnataka, although grinding activity has continued at the site.

Back in 2021 Heidelberg Materials’ CEO Dominik von Achten said that the group had considered selling anything following a business review. "There are no sacred cows. Everything was on the table." Indonesia was generally perceived by analysts as a likely sale target in the developing markets but nothing happened in the end. India wasn’t mentioned at this time, although no doubt it was being considered. Yet Holcim divested its businesses there in 2022. These were picked up by Adani Group for US$6.4bn. This, in turn, kicked off the rivalry in the Indian cement sector between market leader UltraTech Cement and Adani Group. Both companies are now in a race to build production capacity through expansion, new plants and acquisitions.

One reason why Heidelberg Materials may have decided now in particular to talk to Adani Group can be seen in its recent financial reports. In 2023 it said that its “cement and clinker deliveries increased moderately, as massive excess capacities persist in our core markets.” It then followed this up in 2024 by noting that deliveries were slightly down year-on-year in the first half of the year. It blamed this on excess capacity in South India. The subsidiary reported a net loss of €6.3m in 2023. An article by Holtec Consulting in the October 2023 issue of Global Cement Magazine implied that capacity utilisation was 56% in 2023, the lowest of the country’s regions. This is a particular problem for the company given that Zuari Cement is based in the south.

Funnily enough, a sale of 12.1Mt/yr capacity for US$1.2bn suggests a price of US$99/t, a similar figure to what Adani Group paid to buy Holcim’s assets in India in 2022. This may explain why Adani Group is trying to avoid an open sale for the Heidelberg Materials assets. Then again, maybe the market in southern India really is suffering. By comparison, when Adani Group concluded a deal to buy Penna Cements in August 2024 it paid US$1.2bn for an integrated capacity of about 7Mt/yr or around US$170/t. Factor in the low capacity utilisation rate in south India and this potential Adani-Heidelberg Materials deal ends up at roughly the same price.

Something that may help Adani Group reach its goal might be a formal merger between its two main cement companies, Ambuja Cements and ACC. The Mint newspaper reported on it this week, saying that Jefferies and Axis Capital has been hired as an advisor. This certainly makes sense in synergy savings but moving all the mining and leasing rights around might prove cumbersome. Regardless, Adani Group is on an expansion drive, with a capacity of 140Mt/yr targeted by 2028. All the smaller cement companies in the country are potentially targets.

UK: Hanson has announced a 'carbon capture breakthrough' in its use of recycled concrete paste (RCP) in the wet scrubber of its Ribblesdale cement plant in Lancashire. In under 30 minutes, 15t of RCP was able to capture 1.5t of CO₂ from the plant's flue emissions. Carbonated RCP is suitable to replace limestone in cement production.

Hanson's sustainability director Marian Garfield said “The trial was carried out with our parent company Heidelberg Materials’ research and development team, and marks another important milestone in our carbon capture journey."

HeidelbergCement’s latest sustainability target has been to reduce the ‘cement’ footprint from its own name. From this week it has become Heildelberg Materials. Of the top ten global cement producers in Global Cement Magazine’s roundup in the December 2021 issue only three now have the word ‘cement’ in their names.

In Heildelberg Materials’ own words, the “new brand identity underlines the company's pioneering role on the path to carbon neutrality and digitalisation in the building materials industry.” Chair Dominik von Achten then goes on to explain that the company is proud of its cement business but its range of services goes far beyond cement. This is certainly true but in 2021 the cement business generated 44% of the group’s revenue. 19% came from aggregates, 25% from ready-mixed concrete plus asphalt and the remaining 12% from services and other lines.

Yet, Heidelberg Materials is also a leader in driving innovation in carbon capture, utilisation and storage (CCUS) for the cement sector with a full production line capture unit planned for commissioning in 2024 at the Brevik plant in Norway. When it opens it will be the only full scale CCUS unit at a cement plant anywhere in the world. The group further plans to reduce the CO₂ footprint of its cementitious products to below 500kg/t CO₂ by 2030 and aims to generate half of its revenue from low-carbon products. These are not small achievements or ambitions.

Meanwhile, Holcim completed the divestment of its Indian business to Adani Group this week for US$6.4bn. For Holcim the move marks a milestone in the reshaping of its business away from developing markets and the diversification on its product lines into light (and more sustainable) building materials. So why would a company like Adani Group move into the cement sector when multinationals are getting out?

Money is the obvious answer and the one group owner Gautam Adani raised at a speech marking his latest mega-acquisition. He said, “Our entry into this business is happening at a time when India is on the cusp of one of the greatest economic surges seen in the modern world.” He expects his new cement arm to become the most profitable cement producer in the country although his competitors may have other ideas. As well as operational efficiency, Adani also plans to inject US$2.5bn into the business as part of plans to increase its production capacity to 140Mt/yr in the next five years, from around 70Mt/yr at present. However, the financial press in India and elsewhere has wondered how much debt Adani Group can cope with and whether it will consolidate its latest acquisitions or simply use them to buy into even more sectors. Time will tell.

Lastly, it should be noted that Adani Group’s new rival UltraTech Cement has targeted a production capacity of 154Mt/yr by 2025. Any growth in the Indian market will clearly be contested. It is also worth noting that the latter company has retained ‘cement’ in its name. For now at least.

Germany: The former HeidelbergCement launched its new name and branding as Heidelberg Materials at a group level on 20 September 2022. The new two-word moniker underlines the cement producer's pioneering role on the path to building materials digitisation and carbon neutrality. 'Materials' stands for its innovative portfolio of sustainable and intelligent building materials, as well as digital solutions. The group's subsidiaries will also change their names to Heidelberg Materials from the beginning of 2023. Among the first to undergo the transformation will be US-based Lehigh Hanson, which will become Heidelberg Materials in early 2023.

Managing board chair Dominik von Achten said “We are proud of our cement business, but the company's range of services goes far beyond cement. Today, and even more in the future.Our future is sustainable. Our future is digital. Customer demands, markets and competitors are changing rapidly. Opportunities and challenges go beyond country borders; communication is becoming increasingly global. Differentiation opportunities arise." Concerning the company's cement business, von Achten said "We will be the first company in the world to offer carbon-free cement at large scale as early as 2024. We are vigorously driving forward the scaling of our CCUS activities: by 2030, we will reduce our CO₂ emissions by 10Mt/yr with the projects we have already launched. "

Argos Honduras revealed this week that it has been testing the injection of hydrogen into the kiln of its integrated Piedras Azules cement plant. It has completed a pilot with Portugal-based company UTIS. As part of the process it has been trialling, it has split water by electrolysis and then injected the hydrogen and oxygen directly into the kiln via the main burner. The pilot has reportedly increased clinker production and reduced petcoke consumption at the plant.

Argos is far from alone in using hydrogen in this way. At the end of August 2022 Cemex said that it was also starting to use hydrogen at its San Pedro de Macorís cement plant in the Dominican Republic. CRH UK-subsidiary Tarmac completed a trial in July 2022 using hydrogen as an alternative to natural gas at its Tunstead lime plant. HeidelbergCement UK-subsidiary Hanson also ran a successful trial using hydrogen as part of the fuel mix at its Ribblesdale cement plant in 2021. The government-funded trial used a combination of hydrogen (39%), meat and bone meal (12%) and glycerine (49%) to reach a 100% alternative fuels substitution rate. In 2021 Hanson reported that fuel switching to hydrogen could help it reduce its 2050 CO₂ emissions by about 3%, or by -35kg CO₂/t of cement product.

Cemex appears to be a leader in using hydrogen in this way. The Mexico-based company started injecting hydrogen in 2019 and retrofitted all of its European cement plants with the technology to do so in 2020. It then said it wanted to roll this out to the rest of its operations. The project in the Dominican Republic is an example of this. In February 2022 it announced an investment in HiiROC, a UK-based company that has developed a method using thermal plasma electrolysis to convert biomethane, flare gas, or natural gas into hydrogen. The stated aim of this investment was to increase Cemex's hydrogen injection capacity in its cement kilns and to increase its alternative fuel substitution rate. Back in 2020 Cemex said that it planned to use hydrogen injection to contribute 5% of its progress towards its 2030 CO₂ emissions reduction target along with other measures such as increasing its thermal substitution rate and reducing its clinker factor.

As can be seen above there are a number of examples of hydrogen injection being used in cement plants in Europe and the Americas. However, there is very little actual data available publicly at this stage on how much hydrogen that the plants are actually using. For example, Cemex may have hydrogen injection equipment installed at all of its plants in Europe but it is unclear how many plants are actually using it. This is understandable though, given how commercially sensitive the fuel mix of a cement plant is and in Cemex’s case if it wishes to maintain a leader’s advantage in using a new technology.

It is interesting to see, in what has been released so far, the focus on doing deals with companies that supply electrolysis technology such as HiiROC and UTIS. A feasibility study ahead of the Hanson trial at Ribblesdale by the MPA, Cinar and the VDZ suggested that upgrading a kiln burner and adding all the necessary hydrogen storage and pipework could cost at least Euro400,000. However, this study also pointed out that the cost of hydrogen made a big difference to the cost of the CO₂ saving from using it as an alternative fuel. Hence the focus on the technology partners. It will be interesting to see how many more hydrogen injection projects are announced in the coming months and years and, crucially, who is providing the technology to supply the hydrogen.

For more information on the use of hydrogen in cement production see the proceedings from the 15th Global CemFuels Conference & Exhibition where presentations on the topic were given by Cemex and the VDZ

Sweden: The Environmental Protection Agency (Naturvårdsverket) and the county administrative board of Gotland have both recommended rejecting Cementa’s application to extend its operating permit for its integrated Slite cement plant by four years. At present the current temporary permit will expire at the end of 2022, according to the Dagens Industri newspaper. The county administrative board has requested more information and Naturvårdsverket has found issues in the application with groundwater and nature protection area issues.

Cementa says that it submitted it application to the Land and Environment Court in April 2022 and that it was deemed complete by the court, which announced the application. In July 2022, opinions were received from around 10 authorities and associations, such as the Geological Survey of Sweden (SGU), Naturvårdsverket and the Norwegian Sea and Water Authority. Cementa added that it has now responded to this feedback.

“There are and must be high requirements for permit applications, so it is natural that there will be many views and questions in this type of examination,” said Karin Comstedt Webb, vice president of HeidelbergCement Sweden. “We have now clarified the application further and are now looking forward to the main hearing in October 2022. We are confident that our application is complete and we have been keen to show even more clearly that the business can be conducted in coexistence with nearby residents, and surrounding environmental and natural values. We see good conditions for the timetable announced by the court to be kept, which is crucial for the Swedish cement supply not to be jeopardised in the coming years.”

Further views on the application will be submitted in September 2022. The Land and Environment Court will then hold a hearing in October 2022 and a final decision is expected the end of 2022.

Canada: Lehigh Cement has initiated the administrative process to begin the use of alternative fuels (AF) in cement production at its Picton cement plant in Ontario. Under the company’s plans, the plant will substitute 200t/day of AF for coal and petcoke at the plant. Possible AF sources include excess seed from farm feed production in Ontario. The Picton cement plant previously reduced its CO₂ emissions per tonne of cement by 20% through assorted sustainability initiatives.

Picton plant manager Carsten Schraeder said that the move will support Canada’s 2030 emission reduction plan, and also take pressure off landfill sites.

Egypt: Suez Cement says it is the first grey cement company in Egypt and Africa to obtain an environmental product declaration (EPD) certificate in accordance with international ISO standard. Four certificates have been issued for cement products manufactured at the company’s Helwan, Kattameya and Suez integrated plants. These are: CEMII BP 42.5N; CEMIIIA 42.5N; CEMII AL 42.5N; and Masonry 12.5X.

“With this certification, our customers will be able to make an informed choice of one of the lowest carbon footprint materials and reduce the environmental impact of emissions in their investments,” said Mohamed Hegazy, the managing director of Suez Cement.

UK: HeidelbergCement subsidiary Hanson’s plan for the installation of a carbon capture system at its Padeswood cement plant has proceeded to the due diligence stage for funding from the UK government’s Department for Business, Energy and Industrial Strategy. The project is one of 20 from the East Coast Cluster and HyNet North West Consortium to make the shortlist for this phase of the approval process.

If successful, Hanson will be able to capture 800,000t/yr of CO₂ and produce carbon neutral cement at the Padeswood plant by 2027. It will create 54 new skilled full-time jobs.

Second quarter results have been released for many of the European-based cement producers, so we’ll take a look at how they are doing so far in 2022. The general trend for the companies sampled here is that revenue is up, cement sales volumes are down and earnings are varied. Added to this, ready-mixed concrete (RMC) and aggregate sales volumes have risen for most of these organisations. Each producer did well in the US, less well in Europe and differently elsewhere. Concurrently, input costs for raw materials, energy and logistics have been rising and this has been passed on to consumers fairly consistently as price rises.

Graph 1: Sales revenue for selected European-based multinational cement producers in the first half of 2022. Source: Company financial reports.

Graph 2: Cement sales volumes for selected European-based multinational cement producers in the first half of 2022. Source: Company financial reports.

Graph 3: Ready-mixed concrete sales volumes for selected European-based multinational cement producers in the first half of 2022. Source: Company financial reports.

Holcim is currently in a state of transition with responses from regulators on big divestments in India and Brazil expected in the second half of 2022 alongside its diversification into light building materials. Both North America and Europe did well for the group in the first half of 2022, particularly the former, where cement sales volumes rose, unlike the other regions. Asia Pacific was more problematic with inflation and pricing issues reported. Cement demand was also said to be ‘softer’ in China and the Philippines compared to the first half of 2021. The region’s recurring earnings before interest and taxation (EBIT) also fell.

HeidelbergCement’s half-year results were less upbeat with cement sales volumes down by 2.6% on a like-for-like basis, RMC sales volumes stable and aggregates sales volumes up by 1.7%. One point to note here is that HeidelbergCement divested its business in the western US in late 2021 and the graphs above do not show like-for-like changes. However, one reason for the dour tone was that higher input costs had led to a 11.4% drop in the group’s result from current operations before depreciation and amortisation (RCOBD) to Euro€1.53bn. It blamed this on its inability to raise prices sufficiently to counter ‘significantly’ higher costs of energy and transport.

Cemex benefitted from its strong presence in the Americas but even this wasn’t enough to shield it from the negative effect upon earnings of higher energy costs and supply chain disruptions. So, net sales increased in Mexico and the US but operating earnings before interest, taxation, depreciation and amortisation (EBITDA) fell. In Mexico this was blamed on a higher base for comparison in 2021. In the US a declining EBITDA margin was attributed to higher energy costs and supply chain headwinds from maintenance, imports and logistics. Interestingly though, Cemex managed to raise both sales and earnings in its Europe, Middle East, Africa and Asia despite cement sales volumes slipping. It said it was able to do this due to well executed price rises.

Buzzi Unicem reported growth in sales revenue and earnings despite falling cement sales volumes. It attributed this to a ‘strong’ increase in prices. However, it noted that the mounting energy costs had contributed to a decline in its EBITDA margin. Deliveries for the half-year grew in the US, Central Europe, Poland and the Czech Republic. They fell in Italy and, unsurprisingly, Ukraine. Also, despite the growth in deliveries in Poland and the Czech Republic in the reporting period, Buzzi Unicem said that a slowdown in Europe had become evident in the second quarter of 2022 and was particularly evident in Italy, Poland and the Czech Republic. In Ukraine the group reported that activity had resumed at its Volyn plant in the north-west of the country following the Russian invasion in February 2022. The Nikolayev plant, in the south, though continued to remain idle. Sales volumes halved in the country year-on-year. Given the circumstances it seems amazing that they didn’t fall by more frankly.

Finally, Vicat had a tougher time of it than some of the other companies featured here. Its sales revenue grew significantly, as a result of higher prices, but earnings tumbled. The latter was blamed on a high base for comparison in the first half of 2021 and the energy situation. A few non-recurring capital intensive projects at various plants, including the start-up of the Ragland plant’s new kiln in the US, didn’t help either.

Much of the above leaves an uncertain outlook for the second half of 2022. All of the cement producers here expect to increase their sales revenue and raise their prices. Most of them though are rather more circumspect or downright pessimistic about what the state of their earnings will be. The companies covered here are multinational but with a focus on Europe and the US. We have omitted plenty of regional producers elsewhere around the world in this roundup that have already published their results, such as India-based UltraTech Cement or Nigeria-based Dangote Cement. The other big market that is missing is China, where the producers are mostly yet to publish their half-year results. We will return to cover these topics in future weeks.