Displaying items by tag: Holcim

Switzerland: Swiss multinational cement producer Holcim has seen a rise in its net income and cash flow in the first half of 2013 with increased operating earnings before interest, tax, depreciation and amortisation (EBITDA) in Latin America and Europe. However, the group said that it saw lower sales volumes in India, which affected its results badly. Despite this, it said that its EBITDA growth and operating profit were in line with its outlook for 2013.

Holcim's consolidated net sales decreased by 5.1% to Euro7.75bn. A 3.4% decline in operating EBITDA to Euro1.45bn was largely attributable to its two Indian group companies as well as Holcim Canada, Holcim Mexico, Holcim Morocco and Holcim France. Consolidated operating profit fell by 3.3% to Euro810m, but on a like-for-like basis moderate growth of 0.1% was recorded. Group net income increased by 23.8% to Euro613m. The group's net financial debt was down by Euro970m compared to the same period of the previous year at Euro8.87bn.

Europe and Latin America reported year-on-year increases in operating results. On account of Canada, North America was not able to match the figures of the previous year and Asia Pacific and Africa Middle East fell considerably short of the previous year's levels owing to India and Morocco, respectively. Holcim Philippines, Aggregate Industries UK, Holcim Ecuador and Holcim US achieved substantially improved operating results. Overall, like-for-like operating EBITDA at group level fell by 0.6% in the first half. At 0.1%, like-for-like operating profit developed moderately positively. The corresponding figures for the second quarter were positive at 2.8% and 5.4% respectively.

Holcim achieved its financial results based on marginally lower cement sales compared to the first half of 2012. Consolidated cement sales were down by 3.7% to 68.6Mt. Price development in all regions continued to be positive with the exception of Europe.

Holcim said that it anticipates an increase in sales of cement in 2013. While Holcim's group regions Asia Pacific and Latin America are expected to witness higher cement sales volumes, Holcim is somewhat less optimistic with regard to Europe and Africa Middle East. In North America, cement sales are expected to reach similar levels to 2012.

Turning to operating EBITDA and operating profit, the board of directors and executive committee expect a further improvement in margins. Holcim says that its development and efficiency programme, the Holcim Leadership Journey is gaining further momentum, and will continue to contribute to this development. Under similar market conditions, organic growth in operating EBITDA and operating profit should be achieved in 2013.

Weston is off. The 'will-they, won't they' of the New Zealand cement industry took a more decisive turn this week with the announcement that Holcim New Zealand intends to import cement instead.

Once Holcim's existing cement plant at Westport winds down there will be no more indigenous cement production on New Zealand's South Island. Golden Bay Cement on North Island will be left as the nation's sole cement producer. Instead Holcim now plans to build US$80m on an import terminal and related infrastructure.

Given a previous price tag of US$400m for the Weston project, switching to an import strategy makes sense for Holcim which has had a hard time of late with a poor first quarter following a tough year in 2012. Despite the benefits that the construction sector in New Zealand has seen with the rebuilding following the 2011 Christchurch earthquake, Holcim is thinking of its wider strategy. Although, as one of the largest multinational cement producers, Holcim has a wide supply chain for clinker, Australia reported poor sales in 2012 and it would be an obvious hub to keep New Zealand topped up with sufficient product.

Last week's doubts about the Indian cement market – when Holcim announced major business restructuring in India – may also have an effect as Vicat too has reported problems in the country this week. The question to ask when Holcim releases its half-year results in mid-August 2013 is how much excess capacity does the company have?

Coincidentally, importing cement is one issue that has come up in the UK Competition Commission's on-going investigation into the UK cement industry. An Irish cement importer has alleged that unnamed European cement producers have blocked his attempts to import cement to Ireland. The UK Competition Commission will continue its investigation until late 2013. Whilst we are not suggesting that the New Zealand cement industry has any problems of this kind, as the market adjusts to a higher level of imports it will encounter new challenges.

Indonesia: Holcim Indonesia has reported that market oversupply has caused lower cement sales in the first half of 2013 than in the first half of 2012. Sales volumes dropped by 1.3% to 4Mt between January 2013 and June 2013.

"The company had foreseen the contraction after a similar dip in the first quarter, the first time after eight consecutive quarters of growth," said Holcim Indonesia's president director Eamon Ginley.

In the first quarter, Holcim Indonesia reported that its cement sales volume had declined by 1.6% to around 2Mt. Ginley said the condition was temporary as demand would continue to increase over the medium to long terms, citing government and private sector investments in infrastructure and housing.

New Zealand: Holcim New Zealand Ltd has announced that it will spend more than US$80m on the construction of an import terminal and related infrastructure that will allow it to import and distribute bulk cement to the New Zealand market, according to local news agency Scoop Independent News. The terminal is expected to be operational in two to three years time. The location of Holcim New Zealand's new import terminal is yet to be finalised and the company is investigating options at a number of New Zealand ports.

Announcing the decision, Holcim New Zealand Ltd managing director Jeremy Smith said, "This represents a substantial commitment by Holcim to the New Zealand building materials market. It means we will be able to leverage off the vast resources available through the Holcim Ltd worldwide supply network to ensure that our New Zealand customers receive cement of a quality and specification suitable for New Zealand conditions."

Once operational, cement imported through the new terminal will replace local production at the company's Westport cement plant. Holcim New Zealand has signalled for some years that the Westport plant was not sustainable in the long term. The decision also means that the long-delayed proposal for a new cement plant at Weston, near Oamaru, is on hold for the foreseeable future. Holcim will, however, maintain ownership of its land assets for the foreseeable future.

"We recognise that this decision has an impact for our staff, customers and for the Westport and Weston communities," said Smith. "It's one we've arrived at after extensively investigating a range of cement supply options and we will be working through the implications with those who will be impacted by the move. For the current economic environment, constructing an import terminal and importing cement is simply the most appropriate decision."

India: Multinational buildings material producer Holcim has released plans to simplify its structure in India by merging Holcim India with its subsidiary Ambuja Cements. Both Holcim's Indian subsidiaries, Ambuja and ACC, have seen net profits fall in the second quarter of 2013.

Holcim intends to increase its shares in Ambuja to 61.39% and Ambuja will acquire Holcim's 50.01% stake in ACC. Both Ambuja and ACC will continue to operate as separately with their own brands. However, the restructuring will allow for closer back-end cooperation between the companies as well as simplifying the group structure.

"This transaction further improves Holcim's holding structure in India, strengthens the platform for future growth and is expected to generate synergy benefits of US$150m/yr. These benefits, which will be realised in a phased manner over two years, will be shared by both companies equally through supply chain, shared services and fixed costs optimisation. The transaction is expected to be neutral on Holcim's EPS in the first full year following the completion of the transaction and accretive thereafter," said Holcim CEO Bernard Fontana.

In a two stage deal, Ambuja will first acquire, through a purchase, a 24% stake in Holcim India for a cash consideration of around US$600m, followed by a stock merger between Holcim India and Ambuja. As part of the merger, Holcim will receive 584 million new equity shares in Ambuja resulting in an increase of its ownership in Ambuja from the current 50.55% to 61.39%.

The transaction is subject to Ambuja's shareholder and regulatory approvals in India.

Sri Lankan cement demand fell in the first half of 2013. Yet this doesn't seem to be stopping the cement industry's slow recovery following the civil war that ended in 2009.

As reported by Sri Lankan media around the launch of Holcim Lanka's 2012 Sustainability Report, the local cement industry has seen volumes fall by 7% but this is expected to improve in the second half. Tokyo Cement, a grinding plant operator, confirmed a similar drop in the first quarter of 2013.

Despite the talk of downturn so far in 2013, Tokyo Cement has announced plans for a 1Mt/yr cement plant costing US$50m complete with its own captive biomass power plant. In addition, plans have emerged of a joint venture involving Pakistan's D.G. Khan Cement to build a grinding plant at Hambantota in the south of the island. Costing US$15m, the plant is intended to process exports to South Africa and Kenya.

The explicit intention to produce clinker in Pakistan and then grind it in Sri Lanka before export to a third destination makes an interesting notion. The Pakistan cement producer may benefit from being able to export cement from Sri Lanka with the added security of knowing that the grinding plant is located in a growing market itself. A helpful strategy given Pakistan's cement production overcapacity.

The Hambantota project is also noteworthy because another Pakistan-based company, Thatta Cement, announced in April 2013 that it had signed an agreement with the Sri Lanka Ports Authority to a build a grinding and bagging plant at Hambantota. Also in 2013 the Nepali entrepreneur Binod Chaudhary submitted a US$75m plan for a cement plant in the north of the island.

Of course all of this appears miniscule in comparison to the level of investment Semen Indonesia has chalked up to spend between now and 2016: up to a whopping US$2bn.

Elsewhere in the news this week the price of extending a US Environmental Protection Agency (EPA) deadline has revealed itself to be US$1.5m. Lafarge North America has succeeded in pushing back pollution controls at its Ravena plant by over a year in exchange for interim limits and an investment in air pollution projects in the local community. It's not a fine but the announcement follows other pollution-related payments at cement plants run by Holcim and Ash Grove. Let's hope that any new plants in Sri Lanka avoid these kind of payments.

Sri Lanka: Sri Lanka's cement demand will pick up in the second half 2013, ending a slump that began in 2012, according to Philippe Richart, the head of Holcim (Lanka) Ltd. However, he added that cement volumes were 7 - 9% down year-on-year in the first half of 2013. In 2012 the firm posted revenues of US$152.9m.

"We expect the second half to be better, whereas 2012 saw a little bit of a decline," said Richart. "Overall we think the market this year will be probably down by 2%."

Tokyo Cement, another Sri Lankan firm which operates grinding plants had also said demand has fallen by 7% in the first quarter but that an improvement was expected.

Official data shows that Sri Lanka's domestic cement production was down by 3.4% year-on-year to 320,000t in the first two months of 2013. Imports were down by 34% to 593,000t. However, production picked up in March 2013 and first quarter production was up by 0.7% year-on-year. Imports for the first quarter also surged by 118% to 854,000t.

US: Holcim (US), the current owner-operator of the Hagerstown cement plant in Hagerstown, Maryland and St. Lawrence Cement, which previously owned the same facility, have agreed to pay a US$700,000 fine and improve emission controls at the facility to settle alleged air pollution violations, according to the US Environmental Protection Agency (EPA). The action against the Hagerstown plant is part of an on-going nationwide EPA effort to tighten pollution controls in the cement industry.

The proposed federal court consent decree requires Holcim to install 'advanced pollution controls' at the plant, Holcim also pledged to spend at least US$150,000 to replace outdated environmental protection equipment.

"It has been a long standing issue and now the company feels that it really is in its best interest to find a resolution," said Holcim spokeswoman Robin DeCarlo.

The Department of Justice filed suit on behalf of EPA in 2011 accusing Holcim and the plant's prior owner, St. Lawrence Cement, of violating the federal Clean Air Act from 2003 to 2007 by modifying the facility's cement kiln in a way that produced 'significant' increased emissions of SO₂.

Switzerland: Xavier Dedullen has been appointed Head of the newly-created Legal and Compliance function at international cement producer Holcim, as well as Group General Counsel. As Corporate Functional Manager, he became a member of Holcim Senior Management, effective 28 June 2013. He reports directly to the Group CEO. As Chief Legal and Compliance Officer and Group General Counsel, Xavier Dedullen assumes responsibility for all legal and compliance matters.

Three stories this week from the Philippines build a complex picture of a booming cement industry. San Miguel purchased a 25% stake in Northern Cement, Lafarge Republic announced its capital expenditure budget for 2013 and the country's on-going price probe reported on its progress.

San Miguel's entry into the market should raise the most interest since its president stated that the company intends to spend US$750m on the construction of three cement plants. Each plant will have a cement production capacity of 2Mt/yr with construction timed to start in 2013 and finish by the end of 2015.

This level of investment, if it happens, surpasses the last major build announcement in the Philippines. In May 2013 Holcim released details of a US$550m plant in Bulacan with a capacity of 2.5Mt/yr. Some indication of the viability of San Miguel's plans may be gleaned from the comparative costs of the projects. San Miguel's plans will cost US$125/t of installed capacity, less than half of Holcim's US$220/t. Possible reasons for this difference may lie in San Miguel releasing the wrong figures or a reliance on lower build quality. However San Miguel's sheer size - its net income was US$2.25bn in 2011 - may itself herald the start of a major player in the domestic cement industry.

Meanwhile the Department of Trade and Industry (DTI) has continued to investigate why the price of cement has risen since 2012. Currently prices are about 5% above the suggested retail price for cement. Cement producers blamed the increases on a higher cost of coal.

The Philippines is currently experiencing massive cement sales increases. In 2012 sales rose by 17.5% to 18.4Mt from 15.6Mt in 2011. With a total capacity of 21Mt/yr and a capacity utilisation rate of 85% in 2012, this growth looks set to continue in 2013, as confirmed by more rises in sales in the first quarter.