Displaying items by tag: LafargeHolcim

France: LafargeHolcim has said that Lafarge Béton is not responsible for the discharge of ‘particles of cement, treatment liquids and plastic microfibers’ from its Bercy concrete plant in Paris Department. The La Télégramme newspaper has reported that the plant has been under environmental inspection since late August 2020. The company says that the pollution resulted from a single incident ‘caused by malicious parties’ who knew of the on-going investigation.

The mayor of Paris has contacted the public prosecutor to request a criminal action against LafargeHolcim.

El Salvador: LafargeHolcim subsidiary Holcim El Salvador has announced an alteration to the composition of its flagship product, Cuscatlán cement, developed in laboratories in France and Mexico. Strategic marketing manager Amalia Palacios said, “The new formula offers the end user higher quality and less waste, that is to say a yield of around 20% more for the same price, so that we are improving quality without an impact on the customer's pocket."

Philippines: LafargeHolcim subsidiary Holcim Philippines says that it has partnered with digital news platform providers Pinoy Builders. The commercial partnership involves Holcim Philippines providing Pinoy Builders with its cement, concrete and health and safety expertise.

Marketing and innovation senior vice president Ram Maganti said, “The Philippines is a very digitally-savvy country and the majority of professionals in the Philippines' construction industry are millennials who are 'digital natives.' With its steadily-growing number of subscribers and followers, Pinoy Builders is helpful in our efforts in engaging and positively influencing the construction industry. We are excited in continuing to contribute to this platform to let Filipino building professionals know how our offerings and solutions can help them in their projects.”

There has been good news from the German Cement Works Association (VDZ) this week. Following a strong start to the year, the association expects cement consumption in 2020 to remain similar to the level, 28.7Mt, reported in 2019. VDZ president Christian Knell acknowledged the difficulty in making forecasts, this year of all years, but said that the association remained positive since demand had held up so well. He noted the continued operation of construction sites, despite the local coronavirus-related lockdown from March 2020, and the ‘quick action’ of politicians.

Graph 1: German cement deliveries, 2015 – 2019: Source: German Cement Works Association (VDZ).

The year certainly started well, with a 33% year-on-year increase in domestic cement deliveries to 1.43Mt in January 2020 from 1.07Mt in January 2019. This was due in part to good weather, although it also looks good because 2019 started badly compared to 2018. Yet, the VDZ’s assessment has been supported by the results of the main producers operating in the country. HeidelbergCement reported that Germany bucked the trend of its Western and Southern Europe Group area in the first half of 2020 with a ‘positive market development’ whereas deliveries declined significantly everywhere else. Similarly, LafargeHolcim noted a ‘resilient’ performance in Germany. Buzzi Unicem released a more detailed assessment, with shipments of hydraulic binders down in April and May 2020 but then back up with a recovery in June 2020. Overall its cement plants reported a slight decline in sales for the first half of the year. Concrete production grew however, by 6% year-on-year, possibly aided by the plants that the group purchased in 2019.

Germany’s success appears to be down to two factors. The first, as Knell mentioned above, is that it was able to keep much of its construction industry open through its lockdown. Dieter Babiel, the head of Hauptverband der Deutschen Bauindustrie – the main German construction industry association - reckoned that the industry was operating at about 80% capacity in May 2020 compared to the situation in other large European countries like France, the UK, Spain and Italy where building sites totally closed at the height of local lockdowns before gradual reopening. Bauindustrie has since reported falling monthly order intake as coronavirus-effects on the general economy filter through to construction. The other reason is that the country has managed to control its outbreak better compared to other European countries. It has reported the third most cases in Europe but its fatality rate is only 4% compared to 14% in the UK, Italy and France. This has been attributed to strong public health measures and high levels of testing, particularly with respect to elderly residential care.

It’s not all plain sailing though since the International Monetary Fund (IMF) has projected a 7.8% decline in Germany’s gross domestic product (GDP) in 2020. Likewise, the VDZ is predicting weakening construction markets and cement demand in the fourth quarter of 2020. It cited falling orders and requests for building permits as mounting evidence for this trend. From here a gloomier outlook is foreseen for 2021 as construction budgets for commercial and government projects are cut. At the same time uncertainty in the labour market is expected to drag down the residential market. With this in mind the VDZ is predicting cement demand to drop by 3 – 5% in 2021.

To end on an upbeat note, if the VDZ’s forecasts are accurate, then the German cement sector looks like it might weather the coronavirus-downturn better than other industries. It knows a downturn in construction is coming and it can prepare for it.

Building materials manufacturer Saint-Gobain summed up the situation large companies face due to coronavirus in its second quarter results when it said that it faced, “very different situations from one country and market to the next.” Financial results are in from many of the largest multinational cement producers outside of China and the basic picture is as Saint-Gobain describes.

Sales revenue for LafargeHolcim, HeidelbergCement and Cemex are all down by around 10% year-on-year for the first half of the year. The variation between different geographical regions is large with some reporting sales declines of up to 20% and others noting rising sales, with one above 5%. Generally, recoveries were reported in June 2020 or when governments relaxed their lockdowns. There’s more variation with earnings figures although this may be down partly to the different figures each company likes to use. Around this is plenty of talk about liquidity and cost cutting programmes to sooth investors.

Figure 1: Sales of selected major multinational cement producers in first half of 2020. Source: Company financial reports.

Figure 2: Cement sales volumes of selected major multinational cement producers in first half of 2020. Source: Company financial reports.

Where it starts to become more interesting is when the companies talk about what they think will happen next. As Robert McCaffrey picked up upon in last week’s Global Cement Live there was a divergence between LafargeHolcim’s optimism for the second half of the year and HeidelbergCement’s caution. LafargeHolcim said it expected a, “Fast demand recovery with an encouraging outlook for the second half of 2020.” Instead, HeidelbergCement said, “A further wave of infections may occur at any time, which would have an impact on construction projects already started or announced in the individual countries. Against this backdrop, it is still not possible to estimate the full effect of the corona crisis on the company results for 2020.” Cemex sat on the fence with, “We expect that Covid-19 will continue to challenge our operations in new ways over the next few quarters.” Contrast this with Buzzi Unicem’s prediction, “Visibility for the second half of the year continues to be very limited and our forecasts are based on a scenario of gradual mitigation of the infections and related restrictions on economic activity.”

This difference in outlook may be subjective. Both LafargeHolcim and HeidelbergCement only had one geographical region each that reported growing sales in the first half of 2020 but LafargeHolcim’s ‘positive’ region represented a larger share of the group’s revenue. Alternatively, it may just be that the companies have different characters and this is reflected in their forecasts. Humans can be either be pessimistic or optimistic and so too can companies.

Of the large regional players, most of the Chinese cement producers are yet to release results for the second quarter of 2020 so there is little to say. Data out this week from China’s Ministry of Industry and Information Technology shows that cement output fell by 4.8% year-on-year to 1Bnt in the first half of 2020. UltraTech Cement, India’s largest producer, saw its revenue fall by 22.5% year-on-year to US$2.34bn for the first half of 2020. The worst of this was in the first quarter of the Indian financial year to 30 June 2020 with revenue falling by 33% with consolidated sales volumes down by 22% year-on-year to 14.7Mt. This coincided with the country’s ‘total’ lockdown period from late-March 2020 to 1 May 2020. Dangote Cement, a large African producer, reported growth in both sales and earnings with full or partial lockdown implemented in South Africa, Congo and Ghana in April 2020 before reopening in May 2020.

This is just a snapshot of what’s been happening with mid-year results awaited from the likes of CRH, Votorantim and, as mentioned above, the Chinese producers. Blanket lockdowns clearly damage construction markets, so future government strategies in tackling the ongoing wave of the pandemic or future waves will have consequences for the financial performance of construction material companies. In the meantime, in Europe at least at the moment, targeted regional lockdowns seem to be the public health measure of choice when outbreaks get out of control. How this translates to balance sheets will be revealed later in the year. In the meantime, while the world works out how to cope with coronavirus, expect more uncertainty.

Germany: The Westküste100 green hydrogen project has received funding approval from the Federal Ministry of Economic Affairs. The plan is backed by an investment of Euro89m, with Euro30m of this total approved for the project’s launch in August 2020. The initiative intends to produce green hydrogen, transport it in the gas network, use it in industrial processes and to interlink different material cycles within the existing infrastructure. The consortium brings together ten partners: EDF Deutschland, Holcim Deutschland, OGE, Ørsted Deutschland, Raffinerie Heide, Heide’s municipal utility, Thüga and ThyssenKrupp Industrial Solutions, along with the Region Heide development agency and the Westküste University of Applied Sciences.

“An electrolysis plant with a capacity of 700MW - this is our vision and the next milestone in implementing the development targets laid down in the national hydrogen strategy by 2030,” said Jürgen Wollschläger, managing director of Raffinerie Heide and coordinator of the Westküste100 project.

The funding approval enables work to begin on the first phase of the project, which is set to run for five years. A newly formed joint venture, H2 Westküste, comprising EDF Deutschland, Ørsted and Raffinerie Heide, is to build a 30MW electrolyser which will produce green hydrogen from offshore wind energy and provide information on the operation, maintenance, control and grid compatibility of the equipment.

In a later stage of the project hydrogen from both electrolysis and CO₂ from a cement plant in Schleswig-Holstein will be used in the process. During the initial phase of the Westküste100 project preparations will be made for converting the Lägerdorf cement plant to an oxyfuel combustion process.

Thorsten Hahn, chief executive officer (CEO) and chairman of Holcim (Deutschland) said, “For us, as a manufacturer of building materials, the funding approval is a key milestone on the way to decarbonising cement production. Now all of us involved in Westküste100 must move forward quickly, decisively and dynamically in order to achieve our ultimate goal of cross-sectoral coupling on a large industrial scale in the coming years.”

Switzerland: LafargeHolcim says that net sales in each of its five regions ‘returned to prior-year levels by the end of June 2020’ following the easing of coronavirus-related lockdowns. Its net sales fell by 10.8% year-on-year to Euro9.95bn in the first half of 2020 on a like-for-like basis due to the ‘severe’ impact of the lockdowns on construction sites in several of its main operating countries. It also blamed negative currency effects for an additional fall in sales. Its recurring earnings before interest and taxation (EBIT) dropped by 22% to Euro1.11bn. Its net debt decreased by 15.8% to Euro9.91bn from Euro11.8bn. Cement sales volumes fell by 13.1% to 87.2Mt, aggregates by 6% to 114Mt and ready-mix concrete (RMC) by 18.6% to 19.2Mm3.

Group chief executive officer Jan Jenisch said, “Our half-year results demonstrate the great resilience of our business. I’m encouraged by our team’s agility to weather the storm with the rapid execution of our ‘Health, Cost & Cash’ action plan, effectively driving cost savings ahead of expectations, improving net working capital and delivering record free cash flow.” He added, “The peak of the crisis is behind us. We expect a solid second half of the year based on June’s full recovery, the trend of our order book and upcoming government stimulus packages.”

By region the group noted the most severe coronavirus-related disruption in Asia-Pacific despite China delivering a full recovery and growing sales volumes by the end of the second quarter. In Europe lockdowns in the UK and France had a particular impact and it said that, “volumes suggest a V-shaped recovery in June 2020 for the majority of markets, except in the UK.” Significant impacts were noted in Ecuador, Colombia and El Salvador in Latin America. Sales volumes declined in Algeria, Egypt, Iraq and South Africa in the group’s Middle East Africa region but Nigeria delivered a ‘resilient’ performance. Finally, North America was the groups best performing region with slight dips in cement and aggregate sales volumes but a rise in RMX and rising recurring EBIT. This was attributed to, “fast and effective cost management in the US.”

Egypt: Solomon Baumgartner Aviles, the chief executive officer (CEO) of Lafarge Egypt, says that cement demand fell by 6.5% year-on-year in the first half of 2020. In an interview with the Daily News Egypt newspaper he said that coronavirus has “strongly impacted the building materials sector” with the biggest effect on the individual construction market as people decided to save their money instead. He added that a government decision to halt licences for building, expanding, upgrading, amending, or supporting construction work for private housing in larger cities had also compounded the problem. Despite this he praised the government for supporting infrastructure projects, which are operating at full capacity.

Aviles also outlined how Lafarge Egypt has developed an integrated plan on Health, Cost and Cash to tackle the coronavirus crisis. So far it has donated over 80,000 masks and gloves, made 200L of antibacterial gel available, and supported public hospitals by refurbishing 460 ventilators.

Myanmar: Switzerland-based LafargeHolcim says it is liquidating its subsidiary in Myanmar. The group says it decided in 2017 to exit its operations in Myanmar. Subsequently, it wound the company down in 2018, with no local employees and no product sales. Its cement repacking plant in Thilawa special economic zone (SEZ) originally opened in 2014.

The announcement follows the discovery by the Sonntags Zeitung newspaper of military links (Tatmadaw) with two companies allegedly linked to a sale of the assets. In mid-2019 the United Nations (UN) recommended that multinational companies operating in the country, “should conduct heightened due diligence to ensure they are not benefiting the Tatmadaw,” following the persecution of the mainly-Muslim Rohingya in Rakhine state from mid-2017.

India: Ambuja Cement’s net profit in the first half of 2020 was US$22.1m, up by 1.5% year-on-year from US$21.7m in the first half of 2019. Revenues decreased by 15% to US$127m from US$149m. The company sold 9.95Mt of cement over the period, down by 18% from 12.2Mt.

Managing director and chief executive officer (CEO) Neeraj Akhoury said, “Volumes were impacted during the second quarter of 2020 as a result of Covid-19 lockdown. Cement demand is expected to rebound, presupposing a normal monsoon and various policy support measures to enhance rural and agricultural incomes. Continued infrastructure, development and affordable housing investment are expected to boost demand growth in the mid-term. The health of our employees and partners is accorded the highest priority.”