Displaying items by tag: HeidelbergCement
Half year multinational cement producer roundup
02 August 2017Cement sales volumes are down at the larger multinational cement producers so far in 2017. As the first half-year results emerge, a picture seems to be appearing of sluggish growth at best for the major internationals. Reduced working days and poor weather have been blamed for the underwhelming performance.
Graph 1: Cement sales volumes for selected multinational cement producers during the first half of 2017. Source: Company financial reports.
True, LafargeHolcim’s sales rose by 0.4% year-on-year on a like-for-like basis, probably due to the assets the group has been sloughing off since the merger, but this is hardly the dynamic growth shareholders may have hoped for. Meanwhile, HeidelbergCement, following its acquisition of Italcementi in late 2016, has only been able to increase its cement and clinker sales by 1% for the first half of 2017 once consolidation effects were excluded. Here the problem appears to be reduced sales in both the US and Indonesia at the same time. This then leaves Cemex with a 2% drop in sales volumes to 33.9Mt with a big drop in the US despite a promising construction market otherwise. It blamed the decline on a high comparison base in 2016 and the weather.
The larger regional players examined here appear to have fared better. Both UltraTech Cement in India and Dangote in sub-Saharan Africa reported flat or falling sales volumes. However, delve a little deeper and there’s more going on. UltraTech didn’t offer any reason for the decline although it was likely focused on its acquisition of assets from Jaiprakash Associates and the knock-on from the demonetisation process last year. That purchase increased its cement production capacity by nearly 40% to 91.4Mt/yr from 66.3Mt/yr and it seems keen, to investors at least, that it will be able to rocket up the capacity utilisation rate at the new plants.
Dangote meanwhile has taken a blow from the poor economic situation in Nigeria, where it still produces most of its cement. Here, sales fell by 21.8% to 6.86Mt from 8.77Mt, causing its overall sales to fall by 11.3% to 11.5Mt. Almost incredibly though, as Graph 2 shows, Dangote upped its sales revenue by a whopping 41.2% to US$1.13bn off the back of improved efficiencies and a much better fuel mix in Nigeria. The turnaround is impressive considering the pressure the company faced in 2016. Today’s news that the firm has sold a 2.3% stake to foreign investors adds to the impression of a company on the move.
Graph 2: Sales revenue for selected multinational cement producers during the first half of 2017. Source: Company financial reports.
Looking at overall sales revenue shows a happier picture for most of the producers detailed here, with the exception of HeidelbergCement. Although Graph 2 shows declines for LafargeHolcim and Cemex on a like-for-like basis, at least growth is occurring. HeidelbergCement though has reported static revenue on an adjusted basis for the period. This suggests that the producer has hit problems just as it is starting to integrate the Italcementi assets into its portfolio. In theory the geographic spread of its new production units should shield it from lowered growth elsewhere but if this doesn’t happen it may be in for a rougher ride than LafargeHolcim following its merger.
In summary, being a large-scale multinational cement producer doesn’t quite seem to be offering the balanced growth one might expect so far in 2017. Cement sales volumes are slipping and revenue is also down on a direct comparison basis. It’s barely a case for comparison but smaller regionally based producers like UltraTech Cement and Dangote, in the right locations, seem to be capitalising on their positions. We’ll see how the big Brazilian producers Votorantim and InterCement, Buzzi Unicem and CRH fit this trend when they release their financial results over the next few weeks.
Jesús Ortiz elected new president of Oficemen
02 August 2017Spain: The board of directors of Oficemen, the Spanish cement association, has elected Jesús Ortiz, the chief executive officer (CEO) of HeidelbergCement in Spain, as its new president. He suceeds Jaime Ruiz de Haro, the CEO of Cemex España.
Jesús Ortiz, aged 56 years, worked between 1983 and 1989 as a Diplomatic Commercial Attaché for the French Ministry for Economy and Finance in various overseas postings and in France. In 1989 he joined Italcementi Group in France and then held different operational responsibilities at its Spainish operations. Between 2003 and 2007 he served as Managing Director of Italcementi Group’s activities in Greece and Bulgaria. He joined HeidelbergCement in 2007 as its General Manager for Spain before moving to Brussels to assume responsibilities for the group’s aggregate and concrete business in Europe and Africa. Following HeidelbergCement’s acquisition of Italcementi in 2016 he returned to Spain to coordinate the integration of the companies.
He holds a diploma in Economics and Business Administration from the ESC Clermont Graduate School of Management in Clermont-Ferrand, France and a master's degree from the European Institute of Business Administration in Fontainebleau, France. He is also the president of the European Aggregates Association (UEPG).
Germany: HeidelbergCement’s cement sales volumes have struggled to grow in the first half of 2017 following its acquisition of Italcementi. Its sales volumes rose to 60.7Mt year-on-year in the first half of 2017 from 39.9Mt in the same period in 2016. However, on a pro forma basis its sales fell by 1% with falling sales noted in its Asia-Pacific region. The group blamed its poor performance in the second quarter of 2017 on reduced working days, bad weather in the US and a late Ramadan period that reduced selling days in Indonesia.
“In the light of the difficult general conditions, we achieved a good result in the second quarter,” said Bernd Scheifele, chairman of the managing board. “We were able to almost offset the effect of higher energy costs, bad weather conditions, fewer working days, and increased competition in some emerging countries. The synergies from the Italcementi acquisition are clearly visible in the results.”
The group’s sales revenue rose by 31% to Euro8.39bn from Euro6.41bn although it only rose by 1% on a pro forma basis. Its earnings before interest and tax rose by 6% to Euro776m from Euro728m.
By region cement sales rose in all regions on both a consolidated and pro forma basis except for Asia-Pacific. Here, cement and clinker sales fell by 3.1% once the newly acquired Italcemeni assets in India and Thailand had been excluded. A particular decline was recorded in Indonesia due to the timing of Ramadan in June 2017 and reduced demand for residential housing. Elsewhere, the US market was hit by poor weather, although the housing market remained promising. In the group’s Africa-Eastern Mediterranean, the group reported issues in Egypt but strong increases in cement sales were reported as new production capacity started in Togo, Tanzania and Burkina Faso.
Mondi to conduct due diligence review for Suez Bags
20 July 2017Egypt: The board of Suez Bags has approved Mondi Paper Sales to conduct a due diligence financial and technical review. The subsidiary of Austria’s Mondi was one of two companies considered for the review, according to Arab Finance. Suez Bags is a bag producer for cement, gypsum and other building materials based in Cairo. It is owned by Germany’s HeidelbergCement.
Germany: Bernd Scheifele, the chairman of HeidelbergCement, has admitted that his company needs to take action to improve its overall sustainability management following its acquisition of Italcementi. Following the purchase both its specific gross CO2 emissions per tonne of cementitious material and its alternative fuels mix fell. However, specific emissions of NOx and SOx fell, although specific dust emissions rose in the reporting period. The cement producer also improved accident frequency despite increasing its workforce to 15,781 in 2016 from 9560 in 2015.
Sweden: Cementa, subsidiary of HeidelbergCement, and Vattenfall are conducting a pilot study on electrified cement production to attempt to reach zero carbon dioxide emissions by 2030. The intention of the CemZero project is to supply power to cement plants from a so-called ‘climate smart Swedish energy system.’
"Electrification within the industry is an important element in the transition to sustainable urban development. We are now going to develop knowledge within the field in order to ascertain together with Vattenfall whether it is a potential future solution for cement production," says Jan Gånge, chief executive officer (CEO) of Cementa.
HeidelbergCement and Aachen University of Applied Sciences start study into binding CO2 in olivine and basalt
29 June 2017Germany: HeidelbergCement and Aachen University of Applied Sciences (RWTH Aachen) have started a three-year research project ‘CO2MIN’ that started on 1 June 2017 examining the absorption of CO2 from flue gas by olivine and basalt. The intention is that the carbonised minerals could be used as a value-added additive in the production of building materials. HeidelbergCement and RWTH are supported by the Potsdam Institute for Advanced Sustainability Studies (IASS) and the Dutch start-up Green Minerals. The Federal Ministry of Education and Research (BMBF) is funding the project with Euro3m.
"We are already reducing the CO2 emissions of our plants very successfully by using alternative fuels and raw materials and by optimising the efficiency of our kilns," said Jan Theulen, Director of Alternative Resources at HeidelbergCement. He added that binding CO2 in minerals was one approach the company was exploring to reduce its emissions further.
In the first year the research project will focus on the investigation of different minerals in small-scale experiments. The carbonation of the most suitable minerals will then be tested under process conditions in the second year. The experiments will be conducted by the institute of Process Metallurgy and Metal Recycling (IME), which is the coordinator of the RWTH group. Life-cycle assessments (RWTH) as well as analyses of economic aspects and social acceptance (IASS) complete this project phase. In the third year, marketability and acceptance will be further optimised through intensive cooperation with customers.
Cyprus: The Statistical Service of Cyprus has stopped reporting data on the cement industry following a request by a local cement producer. It has announced that to safeguard ‘statistical confidentiality’ it will no longer disseminate monthly data for the production, sales and exports of cement and clinker. The department of the Republic of Cyprus apologised to the users of the data stating that it is obliged, under the provisions of the Statistics Law of 2000, to respect the request.
The island’s main cement producer is Vassiliko Cement, which operates an integrated plant in the southern Republic of Cyprus. Italy’s Italacementi owned a minority stake in the company before its takeover by HeidelbergCement. LafargeHolcim’s subsidiary Boğaz Endüstri ve Madencilik runs a cement grinding plant in the so-called northern Turkish Republic of Northern Cyprus.
Italy’s cement sector continues to consolidate
21 June 2017Buzzi Unicem strengthened its position in Italy this week with a deal to buy Cementizillo. The agreement included Zillo Group’s two integrated cement plants at Fanna and Este in the northeast with a combined production capacity of 1.4Mt/yr. The sale price appeared to be low at a maximum of Euro104m plus 450,000 shares in Buzzi. However, the interesting part of this transaction is a variable portion of zero to Euro21m based on the average price of cement achieved by Buzzi in Italy between 2017 and 2020.
Buzzi hammered home the point in its acquisition statement that the local cement sector suffers from, “…significant surplus of production capacity coupled with permanently reduced sales volumes.” No doubt this was a prominent part of the deal negotiations given that, with a rough calculation of Euro10m for the shares, Buzzi has picked up the new cement production capacity at about Euro80/t or US$91/t. In July 2016 this column commented that Cementir’s purchase of Compagnie des Ciments Belges’ assets for Euro125/t seemed fairly low globally. Yet even this seemed high when Cementir picked up Sacci’s cement business, including five cement plants, for Euro125m or Euro38/t. Although it should be noted that Sacci was bankrupt at the time and being run by its liquidators.
As ever all these transactions were complicated by assets other than clinker production lines but the problems facing the Italian cement industry are clear. Following on from last week’s column about changing patterns of cement consumption in southern Europe, the cement intensity of the construction sectors in Italy and Spain has dropped significantly since 2000 suggesting that the mode of construction has moved from new projects to patching up old ones. Throw in the financial crash in 2007 and, strikingly, cement production in Italy fell from 49Mt in 2006 to 21Mt in 2015. Anecdotally, looking through the Global Cement Directory 2017, 13 of the country’s 56 integrated cement plants were listed as idled, mothballed or closed at the start of the year. Cembureau, the European Cement Association, reckons that consumption fell year-on-year by 4.7% in 2016 with a further drop of 3% forecast for 2017. Surprisingly though estimates from the Associazione Italiana Tecnico Economica Cemento (AITEC) suggest that cement exports have not increased dramatically since 2007. Since hitting a low of 1.6Mt in 2011 they rose to 2.5Mt, a similar figure to that of before the crash.
This kind of environment suggests consolidation and that’s exactly what has happened with Buzzi buying Cementizillo this week, Germany’s HeidelbergCement’s purchase of Italcementi in 2016 and Cementir’s purchase of Sacci in the same year. Earlier in 2014 Austria's Wietersdorfer & Peggauer picked up a plant in Cadola from Buzzi.
Financially, the story is in line with what the declining production and consumption figures suggest. Buzzi reported that its net sales in Italy fell by 16% to Euro375m in 2016 and Cementir said that its sales would have fallen by 14% had it not benefitted from the new revenue from Sacci.
HeidelbergCement presented Italy as a territory ripe for ‘substantial’ recovery potential at a shareholders event in the autumn of 2016. It highlighted opportunities in further rationalisation of the industry, recovery in cement consumption from a low base and optimisation of the country’s distribution and depot network. It probably will not be publicly released but if Buzzi Unicem pays out the full amount of its variable payment to Cementizillo then the industry may be picking up again. Until then expect more acquisitions.
Hanson expands technical service team
13 June 2017UK: Hanson Cement has expanded its technical team to offer customers support on cement and cementitious issues. The team, headed by national technical manager Simon Chudley, will offer advice information and technical support ranging from product data and case studies to laboratory trials and product testing.