Displaying items by tag: Huaxin Cement
Huaxin Cement builds an empire in Sub-Saharan Africa
04 December 2024Huaxin Cement revealed this week that it is buying Holcim’s majority stake in Lafarge Africa for US$1bn. The moment marks a big step in the China-based cement producer’s international ambitions. It has been linked in the financial media to many divestments around the world in recent years. Yet this appears to be its largest acquisition so far and it adds to what is becoming a serious sized multinational business in Sub-Saharan Africa.
The details of the deal are that Holcim has agreed to sell its 83% share of Lafarge Africa to Huaxin Cement. Lafarge Africa operates four integrated cement plants in Nigeria at Sagamu and Ewekoro in Ogun State, at Mfamosing in Cross River State and the Ashaka Cement plant in Gombe State. It has a combined production capacity of 10.5Mt/yr. The transaction is expected to close in 2025 subject to regulatory approvals.
Holcim holds a relationship with Huaxin Cement that dates back to the late 1990s when it first bought a stake in the company. Following the formation of LafargeHolcim in the mid-2010s, Lafarge’s subsidiary Lafarge China Cement was sold to Huaxin Cement. At the end of 2023 Holcim reported that it owned just under a 42% share in the company. Huaxin Cement has also bought assets from Holcim as the latter company has divested subsidiaries over the last decade. In 2021 it bought Lafarge Zambia and Pan African Cement in Malawi from Holcim. This adds to other acquisitions in the region. In 2020 it purchased African Tanzanian Maweni Limestone from ARM Cement. Later in 2023 it picked up InterCement’s subsidiaries in Mozambique and South Africa. In addition, in October 2024 local media in Zimbabwe reported that the company was planning to build a grinding plant. Now, throw in the plants in Nigeria and Huaxin Cement is the second biggest cement producer in Sub-Saharan Africa after Dangote Cement.
Huaxin Cement said it had an overseas cement grinding capacity of just under 21Mt/yr at the end of 2023. However, this figure included plants in Cambodia, Kyrgyzstan, Nepal, Oman, Tajikistan and Uzbekistan. Data from the Global Cement Directory 2024 suggests that the company now has 10 integrated cement plants in Sub-Saharan Africa with a cement capacity of around 18Mt/yr. It also operates a number of grinding plants in these countries.
The Lafarge Africa deal is significant because a mainland China-based cement producer has finally hit the US$1bn window in merger and acquisition (M&A) activity overseas. Many potential acquisitions in the sector are linked by the press to Chinese companies these days. However, most of the activity to date has been of a plant-by-plant or piecemeal nature. Alternatively, these companies have been building their own plants around the world as part of the Belt and Road Initiative. Taiwan Cement Corporation (TCC) has spent more buying itself into Türkiye-based OYAK Cement since 2018 but it is headquartered in Taipei.
The question from here is how much further does Huaxin Cement plan to expand both in Africa and beyond? The obvious answer is that it will keep going given the state of the cement sector back home in China, the retreat of the western multinationals and the demographic trends in the region. World population growth is predicted to be fastest in Africa in the coming decades and demand for cement should follow. Outside of Africa, the ‘big’ one recently has been InterCement in Brazil. Unfortunately for Huaxin Cement though, InterCement extended its exclusivity deal with Companhia Siderúrgica Nacional (CSN) in November 2024. If the Lafarge Africa transaction completes then it will be the biggest deal yet and it will welcome a China-based cement company to the big league of international M&A. It may just be the start.
Huaxin Cement to buy Lafarge Africa for US$1bn
02 December 2024Nigeria: Holcim plans to sell Lafarge Africa to China-based Huaxin Cement for an equity value of US$1bn. The Switzerland-based building materials producer owns an 83% share of the subsidiary. The transaction is expected to close in 2025 subject to regulatory approvals.
Lafarge Africa operates four integrated cement plants in Nigeria at Sagamu and Ewekoro in Ogun State, at Mfamosing in Cross River State and the Ashaka Cement plant in Gombe State. It has a combined production capacity of 10.5Mt/yr. The company also holds a ready-mixed concrete production capacity of 0.4Mm3/yr. Its local recycling subsidiary, Geocycle, reported an alternative fuels thermal substitution rate of 37% in 2022.
Huaxin Cement to build new plant in Zimbabwe
16 October 2024Zimbabwe: Huaxin Cement has invested US$15m in a new manufacturing plant in Zimbabwe, according to Bulawayo 24 News. The company has set up a subsidiary Huaxin Zimbabwe, to oversee operations. Huaxin Zimbabwe director Clemence Gomba said that the initial capacity will be 300,000t/yr, potentially increasing to 1Mt/yr if lime reserves are accessed, adding that he wanted “Zimbabweans to get cement at their doorsteps.” The plant will serve both local and export markets. Huaxin plans to employ five Chinese nationals and 200 local people.
Company CEO Mr Chen said “We started construction of the site last month [September 2024] and we hope to finish by the end of November 2024. In December 2024, we will start the production of cement. The plant will start with a production capacity of 25,000t/month of cement, we will mainly be manufacturing 32.5 and 42.5 cement. We hope to satisfy the local market so that we can reduce our imports. We hope to find some limestone reserves so that we will not be importing any clinker.”
Industry and Commerce Minister Mangaliso Ndlovu toured the site, saying that Zimbabwe is experiencing a surge in imports mainly from Zambia and South Africa, a reflection that local production is ‘not satisfying’ the market.
Update on China, September 2024
04 September 2024It won’t be a surprise to most readers that the Chinese cement industry continued to struggle in the first half of 2024. The China Cement Association (CCA) summarised the situation as a "continuous decline in demand, low price fluctuations and continuous losses in the industry." Cement output fell year-on-year and four of the six large cement companies featured in this article reported falls in revenue. The CCA estimated that the sector as a whole lost about US$140m in the first half of the year.
Graph 1: Cement output in China, 2019 to first half of 2024. Source: National Bureau of Statistics of China.
Data from the National Bureau of Statistics of China shows that cement output fell by 13% to 855Mt in the first half of 2024 from 980Mt in the same period in 2023. That’s a fall of more than 100Mt and around the annual cement production capacity of the US! Analysis by the CCA reckons that the first half of 2024 saw the lowest cement production since 2011. It blamed the situation on the failure of the real estate market to stabilise and a slowdown in infrastructure investment. Geographically the areas with the biggest declines were the Northeast, Northwest and Central and South regions. Those provinces with the smallest declines were Tibet, Jiangsu, Yunnan and Hebei. However, the CCA was keen to point out that staggered production, through initiatives such as peak shifting, took place in the second quarter of 2024, the producers’ cement inventory fell and cement prices rallied somewhat in June 2024.
Graph 2: Sales revenue from selected Chinese cement producers. Source: Company financial reports. Note: For CNBM Basic building materials segment revenue shown only.
CNBM says that it is the largest cement producer in the world. However, Anhui Conch appears to have sold more cement and clinker than CNBM did… in the first half of 2024 at least. Anhui Conch sold 126Mt of cement and clinker, a drop of 3% year-on-year, compared to 114Mt by CNBM, a drop of 20%. Anhui Conch’s sales revenue and net profit fell by 30% to US$6.4bn and 48% to US$490m respectively. The sales revenue from CNBM’s Basic Building Materials segment, its division that manufactures cement, deceased by 31% to US$5.73bn. Tangshan Jidong and CRC reported similar situations to their larger peers with declines in revenue and profit.
Huaxin Cement and Taiwan Cement both managed to raise revenue, but this was mostly due to their businesses outside of China. Huaxin Cement increased its operating income by 3% to US$2.3bn, with sales volumes of cement falling at home but growing abroad. Indeed, its domestic operating income fell by 32% to US$716m, a similar rate of decline to the other companies featured here. By comparison, the operating income from its overseas cement business rose by 55% to US$502m. Combined with a boost in aggregate sales volumes, this helped to stabilise the company’s financial performance. Taiwan Cement, meanwhile, completed its acquisition of Cimpor Portugal in March 2024 giving it a majority stake in OYAK’s cement business in Türkiye. Subsequently, its revenue in the second quarter of 2024 shot up year-on-year.
CNBM hit the nail on the head in its half-year report when it said: “The overcapacity has not been fundamentally resolved.” China is a big country with lots of regional variation but when cement plants stopped manufacturing cement in the second quarter of 2024 the price improved. Funny that should happen! The government is slowly making adjustments to the real estate market and other mechanisms, including the China national emissions trading system, are due to be applied to cement plants soon. Yet, until that overcapacity is addressed or unless some market fundamentals change then expect to see more of the same in China in the near future.
Update on China, April 2024
03 April 2024We turn to look at the Chinese cement sector now that the larger China-based cement producers have released their financial results for 2023. In summary, national output of cement has continued to fall and many of the bigger companies are reporting weakening sales and profits. Yet this trend appears to be slowing, with a few of the producers managing to grow revenue, profits and sales volumes.
Graph 1: Cement output in China, 2018 to 2023. Source: National Bureau of Statistics of China.
Data from the National Bureau of Statistics of China shows that cement output fell by 4.5% year-on-year from 2.11Bnt in 2022 to 2.02Bnt in 2023. This is a slower rate of decline than the 10.4% drop reported between 2021 and 2022. However, it is worth noting that the rate of decrease in output on a half-year basis fell strongly in the first half of 2023 but remained similar in the second half of the year. In its commentary, the China Cement Association (CCA) said that the country’s real estate development investment fell by 10% year-on-year to US$1.53tn.
Graph 2: Sales revenue from selected Chinese cement producers. Source: Company financial reports.
Graph 3: Sales volumes of cement and clinker from selected Chinese cement producers. Source: Company financial reports.
Unlike in 2022 the two graphs above show that not every cement producer has lost revenue or sales volumes of cement in 2023. CNBM chair Zhou Yuxian used the phrase ‘storms and challenges’ to describe the situation faced by the world’s largest cement company. He left president Wei Rushan to deliver the bad news that the cement industry as a whole faced “insufficient demand, weakening expectations and weakening off-peak season characteristics” along with surpluses and high costs. He said that the cement sector in China saw its profit fall by 50% to US$4.42bn in 2023, its lowest figure since the mid-2000s.
In comparison CNBM Group’s revenue fell by 10% year-on-year to US$29bn and profit by 52% to US$534m. This was principally due to losses from the group’s basic building materials division, the section that makes heavy building materials, including cement. Alongside this, it pushed on with its supply-side structural reforms, implemented staggered peak production and worked on sustainability initiatives. These included preparations for the national carbon emissions trading scheme. Anhui Conch’s results showed that it managed to increase its revenue but its sales volumes of cement dropped and its profits fell by 33% to US$1.48bn. It achieved the boost in revenue by growing its trading business.
Of the smaller companies covered here, only Huaxin Cement managed to grow its revenue in 2023. It appeared to pull this off by growing its concrete and aggregate business domestically whilst growing the business overseas at the same time. The share of its international business grew to 16% in 2023 from 13% in 2022. Major overseas acquisitions in 2023 included Oman Cement and InterCement’s subsidiaries in Mozambique and South Africa. More recently Huaxin Cement has also been reported by local media as the preferential bidder for InterCement’s business in Brazil, although no formal announcement has been made. Of the rest, Tangshan Jidong Cement, CRBMT and China Tianrui all reported declines in sales revenue and profits. Tangshan Jidong Cement did manage to grow its cement sales volumes, but reported heightened competition in the north and north-east of China where most of its plants are located.
With the first quarter results for 2024 on the way soon, the CCA has been bracing itself and the sector for more bad news. It noted that national cement prices during the last week of March 2024 were about 1% lower than during the same week in 2023. Prices were lower in East, Central and South China, although they had increased in Chengdu and Sichuan. The CCA is worried that a price war, either nationally or regionally, will make a bad situation worse. It has called on cement producers to accept that the slowdown of infrastructure development in the country has led to a decline in cement demand and that this is the new normal. Apart from the usual watchwords of ‘self-discipline,’ ‘overcapacity reduction’ and ‘supply-side reforms’ the association has suggested that cement companies look for growth internationally and look to the leadership of associations to help everyone adapt to the new market situation. China’s sales output of cement may be starting to stabilise, but the market has a way to go yet to adapt to the new reality.
Huaxin Cement fights off decline in cement market
03 April 2024China: Huaxin Cement grew its revenue and profit in 2023 by growing its concrete market domestically and increasing its international business. Its revenue rose by 11% year-on-year to US$4.67bn in 2023 from US$4.21bn in 2022. However its operating revenue from cement and clinker declined. The group’s net profit increased by 2% to US$382m from US$373m. Its cement sales volumes grew by 2% to 76.8Mt from 75.3Mt. Concrete sales volumes mounted by 66% to 27.3Mm3.
The share of its international business grew by 16% in 2023 from 13% in 2022. Notable acquisitions in 2023 included the purchases of Oman Cement and InterCement’s assets in Sub-Saharan Africa.
Brazil: Companhia Siderúrgica Nacional (CSN), Votorantim Cimentos and China-based Huaxin Cement have all submitted ‘virtually’ identical bids for InterCement's assets in Brazil. Valor International News has reported that Huaxin Cement may be the bidder that best 'pleases' InterCement. As a would-be market newcomer, its acquisition of the business would not require investigation by the Administrative Council for Economic Defence (CADE).
For rival bidder CSN, growth in Brazil would shape its planned initial public offering of its local cement subsidiary CSN Cimentos later in 2024. The group reportedly plans to appoint current CFO Marcelo Ribeiro as CEO of CSN Cimentos.
How to sell InterCement in Brazil
28 February 2024InterCement confirmed this week that it is accepting bids for its sale. The local financial press had been covering InterCement’s progress towards this since the autumn when it was reported that it appointed BTG Pactual to manage the sale.
The Valor Econômico newspaper then revealed this week that Companhia Siderúrgica Nacional (CSN), Votorantim and China-based Huaxin Cement had all submitted bids. InterCement admitted that it had received offers but didn’t say from who, and pointed out that no deal had been signed yet. Valor said that Votorantim was part of a consortium including Polimix (parent company of Mizu Cimentos) and Buzzi. However, Votorantim issued a statement affirming its involvement but pointing out that it was acting alone and not part of a consortium. Finally, Valor reported that InterCement is looking to raise at least US$1.2bn from the sale of its business in Brazil. In Argentina, Loma Negra confirmed what its parent company, InterCement, was doing. La Nación newspaper also reckoned that the parent company might be looking for over US$700m for the subsidiary.
Rumours that InterCement was looking to sell assets have swirled around since the early 2010s when InterCement picked up the Brazil-based assets of Cimpor and Votorantim bought the international ones. The local market then collapsed giving InterCement a hard time, although when it started to rally in the late 2010s the talk turned to a potential initial public offering. More recently the focus has been on InterCement’s high level of debt and pending maturation dates. It publicly said it was working towards a new capital structure in May 2023 and various debt negotiations followed. By the end of the third quarter of 2023 it reported debts in debentures and senior notes of just under US$1.6bn. It signed a deal to sell its subsidiary in Egypt in January 2023 to an unspecified buyer and then divested its operations in Mozambique and South Africa to Huaxin Cement for just over US$230m in December 2023.
It is noteworthy that InterCement has gone public about its divestment intentions now, given previous coverage in the local press and the poor state of its finances in 2023. In November 2023, for example, Valor reported that CSN had hired Morgan Stanley to represent it in a dispute over the sale. At this time Huaxin Cement plus Titan, Buzzi, Polimix and Vicat were all said to be interested. CSN was also said to be waiting until the results of the presidential election in Argentina first before committing to any deal. Yet InterCement said nothing about what was going on at this time.
The other issue is whether InterCement wants to sell its assets in one big piece or in sections. This would be of particular interest to Votorantim, and CSN to a lesser extent, since they control 30% and 20% of the cement market respectively, according to Valor. Data based on cement production capacity data from the Global Cement Directory makes the gap between the two companies wider since Votorantim holds 46% compared to CSN’s 9%. The point here is that the local competition regulator, the Administrative Court of the Brazilian Administrative Council of Economic Defence (CADE), would be more likely to intervene if it determined that one company might be about to distort the market. Clearly this could happen if Votorantim struck a deal to buy InterCement but there might also be issues regionally with CSN or indeed some of the other local cement producers. Alternatively, Votorantim might be interested in buying Loma Negra instead. All InterCement has said on the matter is that it is “evaluating strategic alternatives, such as private placement, merger, or partnership with a strategic player, or even a potential divestment.”
Any potential sales of InterCement would be the biggest adjustment to the Brazilian cement sector since CSN bought Holcim Brazil for just over US$1bn in mid-2022. There appear to be plenty of potential vendors for both the businesses in Brazil and Argentina but whether InterCement sells its assets in one big lump or in separate pieces may be an issue almost as important as the price, given the competition concerns. Finally, could this be the first major China-based acquisition in the cement sector in South America? Huaxin Cement demonstrated willingness to buy plants from InterCement in Africa in 2023 and it has been linked in the current auction. Unlike previous talk of InterCement selling up, this time it seems serious given the divestments in Africa and the scale of the debt. An outcome seems likely in the coming months.
Brazil: Companhia Siderúrgica Nacional (CSN), Huaxin Cement and Votorantim Cimentos have all bid for InterCement’s Brazilian business, Valor Online News has reported. The source stated that Votorantim Cimentos is leading a consortium alongside Italy-based Buzzi and concrete producer Polimix Concreto, however the Brazilian cement market leader denied this, stating that its offer is ‘individual and independent.’ Both Votorantim Cimentos and CSN Cimentos are reportedly considering making initial public offerings (IPOs).
Votorantim Cimentos said “The company clarifies that it is not part of nor leads any consortium within the auction process. To date, its offer remains under evaluation by the respective seller and, therefore, no documents have been signed with any counterparty that generate an obligation or firm commitment for the acquisition of the assets that were the subject of the offer.”
Huaxin Cement Tanzania Maweni Company commissions new clinker line at Maweni cement plant
05 February 2024Tanzania: Huaxin Cement Tanzania Maweni Company has commissioned a new 4000t/day clinker line at its Mavini cement plant, after completing the Phase 2 of the plant’s construction. China Industrial and Economic Information Database has reported that this phase of construction commenced in August 2022. The new line is equipped with a 15MW biomass-fired power plant.
During the 14th Five-Year Plan (2021 – 2025), Huaxin Cement aims to quadruple its production capacity outside of China to 16.5Mt/yr. 6.07Mt/yr-worth of this will come online in 2024 and 2025. The company says that its strategy partly reflects the slowing of its domestic market since 2022.