Displaying items by tag: LafargeHolcim
LafargeHolcim reacts to coronavirus
06 May 2020LafargeHolcim’s first quarter results last week bore all the signs of a prizefighter on the receiving end of a punch. It’s taking pain now but it’s likely to be temporary. A volley of market disruption caused by coronavirus-related government lockdowns can be seen wreaking havoc steadily across its different geographical reporting areas. Asia Pacific region has been most affected so far, followed by its Middle East Africa, Europe, South America and North America regions. That last one didn’t show any top-line financial effects from health control measures, although they are surely coming. The worst is yet to come as chief executive officer (CEO) Jan Jenisch said, “The biggest impact from Covid-19 is expected in Q2. The full impact of the crisis on the company’s 2020 results cannot be assessed at this point.”
Depending on how easing the lockdowns plays out, LafargeHocim’s multinational nature may cushion it from the worst effects. Despite the group’s cement sales volumes falling in the first quarter in most regions on a like-for-like basis, it performed strongly in North America with an 8% rise year-on-year to 3.6Mt. Aggregate and concrete volumes were also up, as well as net sales and earnings before interest, taxation, depreciation and amortisation (EBITDA). Sadly, this is about to change. Most of Europe brought in its lockdown measures in early to mid-March but the US enacted its own lockdown later. The group was quick to point out that it had found the April 2020 data on the rebound of activity in China ‘encouraging.’ If this is the pattern for all regions and second waves are suppressed without resorting to more lockdowns then the group’s wide geographical presence may help it.
As discussed a few weeks ago the major multinational building materials producer is actually in a better position for the unexpected given its success in reducing its debt levels in recent years, notably following divestments in South-East Asia in 2018 and 2019As discussed a few weeks ago the major multinational building materials producer is actually in a better position for the unexpected given its success in reducing its debt levels in recent years, notably following divestments in South-East Asia in 2018 and 2019. Naturally, it was keen to point this out in its press release with talk of its net financial debt to recurring EBITDA of 1.5x as at the end 2019, liquidity of Euro7.5bn in cash and credit lines and a Baa2/outlook stable credit rating from Moody’s in late April 2020. That sense of confidence was later reinforced with, “The building industry is resilient and expected to benefit from future recovery plans from governments and central banks.” This last point is important given that most economic recovery plans tend to involve building things.
HeidelbergCement’s financial results for the first quarter of 2020 are due out on 7 May 2020. Once these come in, some sort of comparison between the larger multinational cement producers, including Cemex and CRH, will be possible. However, the different geographical footprint of each of these companies will hinder this kind of analysis given the progressive way the coronavirus outbreak has spread. In the meantime check out Global Cement Magazine’s feature on the North American cement market (written before the lockdowns) and be sure to register for Global Cement Live this week, which includes an update on the US from consultant John Kline.
Czech Republic: Lafarge Cement has appointed Miroslav Kratochvíl as its chief executive officer (CEO). He has succeeded João Paulo Pereira da Silva, who has taken up a new role outside of the LafargeHolcim Group.
Kratochvíl joined Lafarge Cement in 2013 as a sales director where he relaunched the Čížkovický Cement brand. Prior to this he worked for Tremco Illbruck, a European building materials producer and supplier, managing sales in Eastern European countries.
Switzerland: LafargeHolcim has reported sales of Euro5.03bn in the first quarter of 2020, down by 11% year-on-year from Euro5.66bn in the corresponding period of 2019. Cement sales over the period fell by 10% year-on-year to 45.0Mt from 50.0Mt. The group’s earnings before interest and taxation (EBIT) was Euro249m, down by 14% from Euro290m.
LafargeHolcim CEO Jan Jenisch said that the results showed the group’s ‘resilience, despite the COVID-19 outbreak in China’ in January 2020. Other markets were disrupted from mid-March. “I am confident that LafargeHolcim will emerge from this pandemic as an important contributor to economic recovery as building activity gets back to normal,” he added.
LafargeHolcim’s coronavirus action plan consists of a Euro380m year-on-year capex reduction, a Euro285m year-on-year fixed cost reduction, realisation of energy price reductions, a review of all third party products and services and a reduction of net working capital in line with the level of activity.
LafargeHolcim proposes two new board members for AGM
22 April 2020Switzerland: The board of directors of LafargeHolcim will request its shareholders to approve the appointment of Philippe Block and Kim Fausing as new members at its annual general meeting (AGM), due to be held on 12 May 2020. The appointments are intended to add perspectives from academia and the building industry to the board.
Block, a Belgian national born in 1980, is a Professor of Architecture and Structure at the Swiss Federal Institute of Technology (ETH) in Zurich, Switzerland. He is the founder and co-director of the Block Research Group at ETH where his research focuses on the analysis of unreinforced masonry structures, structural design, computational form finding and new construction techniques. Since 2014 he has served on the Academic Committee of the LafargeHolcim Foundation for Sustainable Construction.
Fausing, a Danish national born in 1964, began his professional career with the Hilti Group in Denmark 1990. He went on to run its operations then took over country operations in Austria and Japan before becoming Division President at its headquarters in Liechtenstein. In 2007 Fausing moved to the Danish Danfoss Group to assume the role of chief operating officer. In January 2008 he became a member of its executive committee, which he has chaired since July 2017 as president and chief executive officer (CEO).
Except for Paul Desmarais, Jr, all other existing members of the Board will stand for re-election, with Beat Hess remaining as chairman. Hess said, “on behalf of the entire Board of Directors I would like to thank Paul Desmarais, Jr, for his generous contributions over the past years. He will be missed. At the same time I am glad we can propose these two outstanding candidates. I’m confident they would strengthen our board’s expertise by adding vast experience from multinational corporations as well as the perspective of a renowned academic who has focused on creating sustainable solutions.”
ACC records coronavirus-related downturn
22 April 2020India: The impact of the coronavirus pandemic was visible in the financial performance of ACC, one of LafargeHolcim’s major Indian subsidiaries, during the three months to 31 March 2020. For the quarter, the company’s consolidated net profit fell by 6.6% on a year-on-year basis to US$42.1m, while net sales declined by 11% to US$448m on the back of a steep fall in volumes, which came to 6.6Mt, 12% lower year-on-year. ACC’s ready mix concrete (RMC) volumes remained stable at 930,000t.
The pandemic mainly impacted sales volumes in March 2020, whereas January and February 2020 saw healthy growth in both cement and RMC sales. ACC said that this was due to a focus on premium products, increase in value-added solutions in its ready mix business, cost reductions on the manufacturing side and logistics-derived savings. Input cost of raw materials were lower on account of material source mix optimisation and supply chain efficiencies. Consequently, the company’s earnings before interest, tax, depreciation and amortisation (EBITDA) for the first quarter increased by 10% year-on-year to US$76.4m.
Sridhar Balakrishnan, ACC’s managing director and chief executive officer (CEO), said, “We believe that with a high probability of a normal monsoon season, growth in the rural economy will revive and stay strong. We expect cement demand to increase in the medium term once the pandemic subsides and business operations commence”.
A short look at cement company debt
15 April 2020Yesterday, on 14 April 2020, the International Monetary Fund (IMF) forecast a 3% gross domestic product (GDP) growth contraction in 2020 due to negative economic effects from the coronavirus outbreak and its containment. Most regions around the world may experience negative growth in 2020 with exceptions only in so-called Emerging and Developing Asia and Low-income Developing Countries. This is just one projection among many coming out at the moment but the prognosis is downward. This begs the questions: how will cement companies cope?
Markets for building materials are not going to disappear in these conditions but demand looks likely to be reduced. Added to this, an industry that’s been facing increasing production overcapacity over the years may be challenged by additional competition effects. Here we will look at the debt profile of some of the major multinational cement producers outside of China. Please note that this is a cursory examination of corporate debt that only looks at simple financial indicators. Company financial officers want to present themselves in best possible light and will have alternatives that point to their strengths. For a detailed view we refer readers to the credit rating agencies and the companies’ published financial information directly.
Graph 1: Net debt and EBITDA for selected multinational cement companies in 2019. Source: Company financial reports and investor presentations. Note, Conversion for reporting currencies to US$, HeidelbergCement uses Result from Current Operations Before Depreciation and Amortisation (RCOBD) and UltraTech Cement results from 2018 – 2019 financial year.
Graph 1 presents a comparison between net debt and earnings before interest, taxation, depreciation and amortisation (EBITDA) in real terms. The bigger the gap between debt and earnings then the more one starts to wonder how it can be repaid. One feature to note in this graph is the size of the debt of the three largest producers – LafargeHolcim, HeidelbergCement and Cemex – despite the fact that the companies are of different sizes. Cemex’s high debt to earnings ratio has been much commented on previously following its acquisition of Rinker just before the financial crash in 2007 and 2008. Unfortunately though, despite strenuous mitigation efforts, it remains prominent. Other positions to note are those of Buzzi Unicem and Dangote Cement, which have higher earnings than debts. These are envious positions to be in.
Graph 2: Net debt/EBITDA and EBITDA Margin for selected multinational cement companies in 2019. Source and notes as in Graph 1.
Graph 2 shows the ratio of net debt and EBITDA and the EBITDA Margin, a company’s earnings divided by its revenue. This graph better shows the relationship between debt and earnings. This can be seen well in a comparison between LafargeHolcim and HeidelbergCement. The latter has higher debts with respect to its earnings. Its debt jumped in 2016 following its acquisition of Italcementi. LafargeHolcim’s debts ballooned followed its formation by merger in 2015 but this was in line with the jump in its equity. Where it struggled was with slow earnings in the years afterwards. However, bold divestments in South-East Asia in 2018 and 2019 appear to have fixed this.
Other companies to watch in the higher Net debt/EBITDA category include India’s UltraTech Cement and both of the large Brazilian multinationals, Votorantim and InterCement. In recent years UltraTech Cement has been busy buying up other cement producers in India. The difference between the Brazilian companies may reflect the fallout from their fight to buy Cimpor back in 2012. InterCement and its parent company Camargo Corrêa won the battle to acquire the Portuguese company but Votorantim was given selected international assets outside of Brazil. Unfortunately, the Brazilian market then collapsed and Camargo Corrêa has reportedly been trying to sell some or all of its cement assets ever since.
The other financial indicator in Graph 2 is EBITDA margin or earnings/operating profit as a percentage of revenue. Higher is generally seen as better here in comparison to other companies in the same sector. Note how LafargeHolcim is ahead of HeidelbergCement and Cemex, possibly due to its cost cutting and synergies since the merger. InterCement also has a relatively high EBITDA margin, boosted by a pickup by the Brazilian economy in 2019. Again, Buzzi Unicem and Dangote Cement stand out. Both of these are public companies but are associated with family or individual ownership, although in very different markets. Neither has really indulged in any large-scale acquisitions in recent years. Dangote Cement has been steadily expanding but through building its own plants and distribution networks.
We’ve not mentioned CRH as its figures seem ‘average’ compared to the other cement producers discussed here. Average is of course relative for one of the world’s biggest building materials manufacturers with a net of debt of US$7.4bn in 2019! Yet, despite battles with activist investors over board member pay aside, CRH might be the rare producer that knows when to stop expanding. Notably in 2018 after an expansion phase, including acquisitions of Ash Grove Cement and LafargeHolcim assets previously, it publicly decided in 2018 to take a pause. There may be weaknesses in the company’s balance sheets yet to be revealed but they are not apparent using these metrics.
In summary, we’ve focused on corporate acquisitions here as the main source of debt in cement producers. This is simplistic but timing is everything when taking on a large amount of debt. Cemex is still carrying the scars from buying Rinker over a decade ago and InterCement and HeidelbergCement, to a lesser extent, are ones to watch through the next bad patch. Other things to consider are a general move to a more regional model for these producers away from a global one. UltraTech Cement’s focus on the Indian sub-continent or Dangote Cement’s work in Africa are examples of this. This approach could go wrong if the sole regions they operate in suffer disproportionately from the economic fallout from coronavirus. Or, if any producer, even one with high debts, has the good fortune to be present in a territory that suffers less from the downturn it may benefit. On a final note, it is worth mentioning that government data reports that China’s domestic cement production capacity utilisation in the two-week period ending on 10 April 2020 bounced back to 95% following the relaxation of the lockdown.
UK: Aggregate Industries has announced a donation of materials to the NHS for use in construction of the Louisa Jordan temporary coronavirus hospital in the Scottish Exhibition Centre (SEC) Glasgow. The hospital will host up to 1000 patients when completed in April 2020.
Nigeria: Switzerland-based LafargeHolcim subsidiary Lafarge Africa has donated three of its facilities - along with personal protective equipment (PPE) - for use to isolate and treat coronavirus patients. Lafarge Africa chief executive officer (CEO) Khaled El Dokani said, “Our intervention will relieve healthcare facilities in Lagos and in our host communities, to support those fighting COVID-19.”
In addition, Lafarge Africa stepped up its water sanitation and hygiene (WASH) initiatives in its host communities.
Holcim Philippines hampered by new lockdown
07 April 2020Philippines: Holcim Philippines has suspended the operation of its manufacturing plant in Davao as the city goes on lockdown until (at least) 19 April 2020 in order to contain the ongoing coronavirus outbreak. This was due to a 4 April 2020 order by Mayor Sara Duerte that imposed enhanced community quarantine protocols. Holcim plants are now suspended in the whole of Luzon and in Davao City, prompting the company to announce that it could miss its full-year goals.
Luzon is now on the fourth week of a month-long isolation order that is formally due to end on 12 April 2020. However, government officials have already sounded the possibility that this could be extended.
A short look at low carbon cement and concrete
01 April 2020Cement and concrete products with sustainability credentials have increased in recent years as societies start to demand decarbonisation. In spite of the recent drop in the European Union (EU) Emissions Trading Scheme (ETS) price, there has been a trend in recent years in the construction industry towards offerings with better environmental credentials. Indeed, this week’s position paper from Cembureau on a carbon border mechanism concerns directly the growth of these kinds of products within Europe. Typically, the higher profile projects have been slag cement or concrete implementations such as Hanson’s use of its Regen cement substitute in a London sewer project or David Ball Group’s Cemfree concrete in a road project also in the UK. In this short review we’ll take a selective look at a few of the so-called low carbon cement and concrete products currently available.
Table 1: Some examples of methods to reduce embodied CO2 in cement and concrete. Note - the product examples are selective. In some cases many other products are available.
Material | Type | Method | Product examples |
Cement | SCM cement | Lower clinker factor | Many products |
Cement | Limestone calcined clay cement | Lower clinker factor | LC3, FutureCem, Polysius activated clay, H-EVA |
Cement | Calcium silicate cement | Reduced process emissions | Solidia, Celitement |
Cement | Recycled concrete fines | Reduced lifecycle emissions | Susteno |
Cement | Geopolymer cement | Reduced process emissions | Vertua |
Cement | Calcium sulphoaluminate cements | Reduced process emissions | Many products |
Concrete | CO2 curing/mineralisation | Uses CO2 and reduces water usage | Solidia, CarbonCure Technologies |
Concrete | Recycled concrete coarse | Reduced lifecycle emissions | Evopact, EcoCrete, FastCarb |
Concrete | SCM concrete | Uses less or no cement | Cemfree, Carbicrete, Regen |
Concrete | Uses less cement in mix | Uses less cement | |
Concrete | Admixtures | Uses less cement | |
Concrete | Locally sourced aggregate / better supply chain logistics | Reduced transport emissions | |
Concrete | Geopolymer concrete | Uses no cement | E-Crete |
Concrete | Graphene concrete | Uses less cement | Concrene |
Concrete | Carbon offsetting | Separate offsetting scheme | Vertua |
Looking at cement first, the easiest way for many producers to bring a lower carbon product to market has been to promote cements made using secondary cementitious materials (SCM) such as granulated blast furnace slag or fly ash. These types of cements have a long history, typically in specialist applications and/or in relation to ease of supply. For example, cement producers in eastern India often manufacture slag cements owing to the number of local steel plants. However, cement producers have more recently started to publicise their environmental credentials as they reduce the clinker factor of the final product. Alongside this though, in Europe especially, a number of so-called low carbon cement producers have appeared on the scene such as EcoCem and Hoffman Green Technologies. These newer producers tend to offer SCM cement products or other low carbon ones built around a grinding model. It is likely that their businesses have benefitted from tightening EU environmental legislation. How far cement producers can pivot to SCM cement products is contentious given that slag and fly ash are finite byproducts of other industries that are also under pressure to decarbonise. Although it should be noted that other SCMs such as pozzolans exist.
As will be seen below a few of the methods to reduce embodied CO2 in cement and concrete can be used in both materials. SCMs are no exception and hold a long history in concrete usage. As mentioned above David Ball Group sells Cemfree a concrete product that contains no cement. Harsco Environmental, a minerals management company, invested US$3m into Carbicrete, a technology start-up working on a cement-free concrete, in late 2019.
Limestone calcined clay cements are the next set of products that are starting to make an appearance through the work of the Swiss-government backed LC3 project, more commercial offerings like FutureCem from Cementir and H-EVA from Hoffman Green Technologies and today’s announcement about ThyssenKrupp’s plans to fit the Kribi cement plant in Cameroon with its Polysius activated clay system. They too, like SCM cements, reduce the clinker factor of the cement. The downside is that, as in the name, the clay element needs to be calcined requiring capital investment, although LC3 make a strong case in their literature about how fast these costs can be recouped in a variety of scenarios.
Calcium silicate cements offer reduced process emissions by decreasing the lime content of the clinker lowering the amount of CO2 released and bringing down the temperature required in the kiln to make the clinker. Solidia offers its calcium silicate cement as part of a two-part system with a CO2 cured concrete. In the US LafargeHolcim used Solidia’s product in a commercial project in mid-2019 at a New Jersey paver and block plant. Solidia’s second core technology is using CO2 to cure concrete and reducing water usage. They are not alone here as Canada’s CarbonCure Technologies uses CO2 in a similar way with their technology. In their case they focus more on CO2 mineralisation. In Germany, Schwenk Zement backed the Celitement project, which developed a hydraulic calcium hydro silicate based product that does not use CO2 curing. Celitement has since become part of Schwenk Zement.
Solidia isn’t the only company looking at two complementary technologies along the cement-concrete production chain. A number of companies are looking at recycling concrete and demolition waste. Generally this splits into coarse waste that is used as an aggregate substitute in concrete and fine waste that is used to make cement. LafargeHolcim has Evopact for the coarse waste and Susteno for the fine. HeidelbergCement has EcoCrete for the coarse and is researching the use of fines. Closing the loop for heavy building material producers definitely seems like the way to go at the moment and this view is reinforced by the involvement of the two largest multinational producers.
Of the rest of the other low carbon cement methods detailed in table 1 these cover other non-Ordinary Portland Cement (OPC) such as geopolymer and calcium sulphoaluminate cements. The former are a type of alkali activated binder and generally lack common standards. The latter are similar to slag cements in that they are established specialist products with lower CO2 emissions than OPC.
With concrete when trying to make a low carbon product the first choice is whether to choose a low-carbon cement as the binder or even not to use cement at all in the case of Regen or Cemfree. From here the next step is to simply use less cement in a concrete mixture. There are a number of ways to do this from optimising aggregate gradation, following performance specifications more closely, using strength tests like maturity methods and generally adhering to quality control protocols better to deliver more consistency. Read the Mineral Production Association (MPA) publication Specifying Sustainable Concrete for more detail on this. Using concrete admixtures can also help make concrete more sustainable by improving quality and performance at construction sites through the use of plasticisers and accelerators, by decreasing embodied carbon through the use of water reducers and by improving the whole life performance of concretes. The use of locally-sourced aggregates is also worth noting here since it can reduce associated transport CO2 emissions.
More novel methods of reducing embodied CO2 emissions in concrete include the use of geopolymer concrete in the case of Zeobond Group’s E-Crete or adding graphene as Concrene does. Like geopolymer cements, geopolymer concretes are relatively new and lack common standards. Products like Concrene, meanwhile, remain currently at the startup level. Finally, if all else fails, offsetting the CO2 released by a cement or concrete product is always an option. This is what Cemex has done with its Vertua Ultra Zero product. The first 70% reduction in embodied CO2 is gained through the use of geopolymer cement. Then the remaining 30% reduction is achieved through a carbon offsetting scheme via a carbon neutral certification verified by the Carbon Trust.
As can be seen, a variety of methods exist for cement and concrete producers to reduce the embodied CO2 of their products and call them ‘low-carbon.’ For the moment most remain in the ‘novelty section’ but as legislators promote and specifiers look for sustainable construction they continue to become more mainstream. What has been interesting to note from this short study is that some companies are looking at multiple solutions along the production and supply chain whilst others are concentrating on single ones. The companies looking at multiple methods range from the biggest building material producers like LafargeHolcim and HeidelbergCement to smaller newer ones like Solidia and Hoffman Green Technologies. Also of note is that many of these products have existed already in various forms for a long time like SCM cements and concretes or the many ways concretes can be made more sustainable through much simpler ways such as changing aggregate sourcing or working more efficiently. In many cases once markets receive sufficient stimulus it seems likely that low carbon cement and concrete products will proliferate.
Global Cement is researching a market report on low carbon cement and concrete. If readers have any comments to make please contact us at This email address is being protected from spambots. You need JavaScript enabled to view it.