Displaying items by tag: Joint Venture

Mexico: Lafarge has announced plans to sell its 47% stake in its Mexican cement business to Mexico's Elementia SA de CV for US$225m in cash. Lafarge and Elementia operate three cement plants in Mexico, with the former owning 53% of their joint venture. The transaction is pending regulatory clearance and has to fulfil a number of customary closing conditions. Lafarge said that the proceeds from the sale would be used to reduce the company's net debt.

Japan/China: Japan’s Taiheiyo Cement has dissolved a joint venture agreement with Xinjiang Tianye in Xinjiang, Chinese in response to Chinese government efforts to reduce excess capacity in the sector.

Taiheiyo Cement Investment, the company’s Chinese arm, signed the agreement with Xinjiang Tianye in December 2012. After receiving government approval, they set up a joint venture in April 2013, planning to produce 1.2Mt/yr of cement. However, in 2013 Beijing increased measures to curb investment in the cement industry to counter overcapacity. This cast doubt on whether the venture could build production facilities as planned. With the business environment for the region's cement industry worsening, Taiheiyo and Xinjiang Tianye opted to end the agreement.

India: Sagar Cements has completed the sale of its 47% stake in its joint venture company, Vicat Sagar Cement. Sagar had earlier obtained approval from the shareholders through postal ballot for the sale. Sagar and Vicat entered into the joint venture in June 2008 with the objective of setting up a 5.5Mt/yr cement plant in Gulbarga, Karnataka. The first phase of the plant, which was to reach a production capacity of 2.75Mt/yr, was completed in December 2012. Production commenced in January 2013.

Mexico: Mexico's cement producer Elementia is in talks to buy out its joint venture partner Lafarge, according to local media. Elementia has the right to buy Lafarge's 47% stake under an option described in the original terms of the partnership. Lafarge is said to be keen to avoid competing with itself in Mexico after agreeing to the US$40bn merger with Holcim, which already operates in the country.

The stake has been valued as high as US$500m. However, it is unlikely to attain that high a price because Lafarge has limited bargaining power and Elementia already has majority and management control of the joint venture. Lafarge may be forced to offer its stake at a discount to convince Elementia to buy. Lafarge and Holcim's recent proposed asset divestment list did not include the Mexican joint venture, which has a cement production capacity of 2Mt/yr.

Elementia sells cement in Mexico under the brand Cementos Fortaleza. Buying out Lafarge would bolster Elementia's position in Mexico, where cement demand is predicted to grow on the back of economic overhauls that were approved in 2013.

Somebody at HeidelbergCement is brave. Making an investment in a cement market characterised in 2012 by job losses and carbon taxation takes some nerve. Yet this is exactly what HeidelbergCement has done with the announcement that it plans to take joint control of Cement Australia with Holcim.

So what's in it for Holcim and HeidelbergCement?

Opportunity and foreign supply chains to minimise the carbon tax seem to be the main reasons. With Holcim's 2012 financial performance dragged down by Europe and Africa, its cost reduction programme, the 'Holcim Leadership Journey,' continues into 2013. Australia, as one of the few disappointing spots in the producer's Asia-Pacific region, is an obvious asset to sell. By contrast, HeidelbergCement reported growth in its operating income in 2012.

With regards to supply chains, both Boral and Adelaide Brighton – Cement Australia's competitors in Australia – acted to seize foreign clinker supplies in 2012. As they are multinationals, Holcim and HeidelbergCement have ready-built supply chains. Figures from the Global Cement Directory 2013 show that Holcim holds a cement production capacity of 9.7Mt in Indonesia, 5.75Mt in the Philippines and 0.55Mt in New Zealand. HeidelbergCement hold 16.5Mt in Indonesia. Despite regular annual high performance and regular capacity growth in the cement industry in Indonesia and the Philippines, having the option to export excess clinker to nearby Australia must be enticing.

For Holcim, minimising risk may be a key factor in their decision to reduce their share in Cement Australia. Holcim dodged mentioning the country's cement performance in its 2013 outlook although it did report an overall volume decrease across all its business lines in 2012. Boral expects its sales volumes to remain flat in the first six months of 2013, with pricing challenged by the high Australian Dollar and low sea freight prices. Adelaide Brighton expects its demand for cement to continue coming from South Australia, Western Australia and the Northern Territory. Adelaide Brighton also took pains to point out the carbon tax will hit its 2013 profits by US$6m, nearly 4% of its 2012 profit. Going 50-50 with HeidelbergCement shares the risks for Holcim as well as the profits.

Holcim faces the same dilemma that Lafarge faced in mid-2012 when it sold two cement plants in the US. It needs to sell assets to cut costs and raise capital but it also needs to pick assets to sell that won't boost its competitors too much. The on-going recovery in the US building industry suggests at present that Lafarge may have made a poor choice in North America. Holcim's decision suggests that they aren't expecting a recovery in Australia anytime soon.

Australia: Swiss cement maker Holcim has announced plans to operate Cement Australia as a joint venture (JV), in which both Holcim and Germany's HeidelbergCement AG will hold equal 50% stakes. Holcim will therefore sell 25% of its stake in Cement Australia to HeidelbergCement for an undisclosed amount. The move has already been approved by the Austrian authorities, according to Holcim.

Cement Australia operates two cement plants and a grinding station in the east and southeast of Australia and in Tasmania with a total cement capacity of 4.2Mt/yr. In addition, a new grinding station in Port Kembla with an annual capacity of 1.1Mt/yr is expected to go online in 2013.

Ireland/UK: Lagan Cement and Quinn Building Products have dropped plans to form a joint venture (JV).

"Discussions have now concluded and both companies have decided not to progress further with the proposed joint venture," the companies said in a statement.

The two companies signed a Memorandum of Understanding December 2012 to explore the possibility of a JV between their cement and building products businesses based in Ballyconnell, Derrylin, Kinnegad, Belfast, Cork and Benelux. At the time, Quinn Manufacturing Group chief executive Paul O'Brien and his opposite number, Jude Lagan, said that the idea was to create a 'sustainable' independent Irish cement producer.

The decision follows the receipt of a package containing a bullet which was sent in the post to the Lagan's chief executive, Kevin Lagan. The bullet, which was sent to Lagan at his Belfast office, was accompanied by a message stating, "Quinn ... is this what you want".

"This is clearly an attempt to intimidate myself and the Lagan Group at a time when we are engaged in discussions with Quinn on combining our cement and building products businesses," said Lagan in a statement released on 14 February 2013.

Mexico: The French building materials giant Lafarge has announced a joint venture with new Mexican cement player Elementia, only a day after announcing that its UK joint venture with Tarmac received competition commission approval. The new joint venture formed will be held 47% by Lafarge and held 53% by Elementia, which will fully consolidate the venture's financial results.

The deal, announced on 8 January 2013, will see Lafarge contribute its two Mexican plants at Vito and Tula, which have a combined capacity of just under 1Mt/yr. Elementia will contribute its cement plant project, a 1Mt/yr installation, which is currently undergoing construction in central Mexico.

A Lafarge press release stated that the combination between Lafarge and Elementia would 'significantly' strengthen its position in Mexico. The transaction, which involves no cash and is subject to regulatory approvals, is expected to close in the second half of 2013, pursuant to the start up of the new Elementia plant.

UK: Lafarge and Anglo American have announced the completion of a 50:50 venture which combines their cement, aggregates, ready-mix concrete, asphalt and asphalt surfacing, maintenance services and waste service businesses in the UK. The joint venture will be known as Lafarge Tarmac and began trading today. The Lafarge Tarmac combination is expected to generate savings of Euro74m through improved operational, logistical and purchasing efficiencies and the introduction of value-added products across a wider geographic area.



Completion of the Lafarge Tarmac joint venture follows final clearance from the UK Competition Commission, based on the completed sale of a portfolio of Tarmac and Lafarge construction materials operations in the UK, which also occurred on 7 January 2013. The agreed sale of Tarmac's 50% ownership interest in Midland Quarry Products is subject to a right of pre-emption in favour of Hanson Quarry Products Europe Limited. As a result of this the completion of this transaction is pending.



"We have successfully united two high quality and complementary UK businesses to create the leading UK construction materials company with high quality assets, two experienced management teams and a portfolio of well-recognised, innovative brands," said Cynthia Carroll, Chief Executive of Anglo American.



"The closing of this transaction and the creation of a new British construction materials champion reinforce Lafarge's ongoing commitment to the UK market and its efforts to continuously improve its offering to customers, as well as playing a full role in developing the infrastructure needed for a growing economy," said Bruno Lafont, Chairman & Chief Executive of Lafarge.

China: The chairman of West China Cement, Zhang Jimin, has said that West China's production capacity reached 23Mt/yr in 2012. Zhang added that the group plans to invest US$321m through mergers and acquisitions to increase production capacity to 30Mt/yr by 2015.

Hebei Province-based cement producer, Tangshan Jidong Cement has said that the company plans to set up a joint-venture (JV) with two cement firms in Mizhi County, Shaanxi-province. The JV will build a 2000t/day cement-clinker production line to expand the local cement market. Jidong Cement will pay US$15.7m for a 61% stake in the JV, which will have a registered capital of US$25.7m.

China Resources Cement Holdings, the largest cement producer in South China, said that its investment subsidiary will set up a JV with a local cement company in An'shun City, Guizhou province. The JV will have a registered capital of US$45m. China Resources Cement will invest US$28.1m in cash to hold a 62.5% stake in the JV while in the first phase, the An'shun company will take a 37.5% stake by providing properties and other assets worth US$17m. After completion, China Resources Cement will spend US$7.86m buying a 17.5% stake in the JV from the An'shun company, increasing its stake in the JV to 80%.