Displaying items by tag: LafargeHolcim
Malaysian cement producers cope with a currency slide
28 October 2015A common refrain in the notes accompanying multinational corporate balance sheets are the adverse effects of currency exchange rates. So it goes this week with separate complaints from the Cement and Concrete Association of Malaysia and ARM Cement in Kenya. In Malaysia its local currency, the Ringgit, has fallen in value by 24% against the US Dollar since January 2015. The fall has been blamed on low prices for crude oil and for other commodities such as palm oil.
For the cement industry this is creating problems due to imported key inputs such as a coal and gypsum that are paid for in US Dollars. Similarly, clinker imports have risen by 20% as part of the same effect. The government hopes that infrastructure projects will prop up the construction sector for the time being. Local market leader Lafarge Malaysia has concurred with this cautiously. However, it is right to be realistic about the situation, as the problems with the falling value of the Ringgit seem to be reflected in its financial results.
Lafarge Malaysia has seen its revenue fall by 2.5% year-on-year to US$318m for the first six months of 2015 from US$326m for the same period in 2014. Net profit has fallen by 9% to US$32m. This follows a 3.8% year-on-year fall to US$640m for 2014 as a whole compared to US$666m in 2013. The drop in revenue was partly blamed on lower cement prices, aggravated by higher operating costs arising mainly from the increase in input and delivery costs. It also fits with the start of the fall in value of the Ringgit compared to the US Dollar since around the middle of 2014. Lafarge Malaysia's first half-year results in 2014 saw rises in revenue and net profit.
Lafarge Malaysia is far and away the market leader in cement production capacity in the country with a production capacity of 12Mt/yr, giving it a market share of nearly half the country's total capacity of around 25Mt/yr. However, it isn't the only cement producer struggling at present. YTL Corporation reported a 12.7% drop in revenue to US$3.85bn for its financial year that ended on 30 June 2015. Net profit fell by 31% to US$257m. Although the company operates across many business sectors, it too partly blamed the losses on its cement sector. This followed gains in profit, bolstered by its cement business, in the financial year that ended on 30 June 2014.
By contrast Cahya Mata Sarawak (CMS) Cement has benefitted from a construction boom in Sarawak state on the island of Borneo, a region separate from the rest of the country. On-going work on the Pan Borneo Highway has helped sales with other projects on the way. The sole producer with an integrated cement plant in the state ordered a cement grinding plant from Christian Pfeiffer in 2014 with commissioning planned for early 2016. It will be the company's third grinding plant in the state.
The effects of currency depreciation can be seen starkly in the financial results of Lafarge Malaysia and YTL Corporation. Infrastructure spending offers one route out of this as Lafarge are hoping and CMS Cement are experiencing in the relative isolation of Sarawak. However, a sustained low price of oil will test this even for a diversifying economy like Malaysia's. Cement producers in other oil producing nations should take note.
LafargeHolcim completes squeeze-out of Lafarge S A
26 October 2015Switzerland: LafargeHolcim has successfully implemented the squeeze-out of Lafarge S A. With this, the shares of Lafarge S A are now delisted from Euronext Paris. The completion marks an important and final step in the merger process of the group's legacy companies and allows LafargeHolcim to continue focusing on delivering the synergies and progress with the integration.
With the successful squeeze-out, LafargeHolcim Ltd now owns 100% of the share capital and voting rights of Lafarge S A. Following the re-opened offer period, LafargeHolcim Ltd already held 96.41% of the share capital and at least 95.25% of the voting rights of Lafarge S A.
LafargeHolcim had offered the remaining shareholders of Lafarge S A a cash indemnification of Euro60 for each Lafarge S A share (net of costs) or a share indemnification of 9.45 newly-issued LafargeHolcim Ltd shares for 10 Lafarge S A shares. In this context, LafargeHolcim has issued a total of 633,776 registered shares with a nominal value of Euro1.85 each from authorised capital and acquired 10,086,921 shares of Lafarge S A for Euro60 each.
Lafarge Malaysia confident for future despite subdued economy
26 October 2015Malaysia: Lafarge Malaysia Bhd has said that it will be able to achieve a targeted level of growth despite the overall subdued economic situation.
CEO Thierry Marie Robert Legrand said this was possible because of continued government spending in several key projects such as the Mass Rapid Transit (MRT) and Light Rail Transits (LRT) lines after the Budget 2016 was announced.
"We are cautiously optimistic of growth this time. The growth has been quite good in the past few years and this is expected to continue," said Legrand. He added that property projects were also continuing and would help it sustain its business.
Poland: A blueprint for the rest of Europe?
21 October 2015Gorazdze Cement has been approved this week by the local authorities to buy Duda Kruszywa and Duda Beton. Aggregate and concrete acquisitions are outside the remit of this column, but Poland still deserves attention as a European country that has seen construction growth in recent years.
Approval by the Polish Competition and Consumer Protection Office (UOKiK) for the Gorazdze purchase is relevant due to cartel fines that were issued to seven cement companies, including Gorazdze Cement, in 2013. At that time Lafarge had its fine absolved, Gorazdze's was reduced but the other producers had to pay 10% of their annual turnover. As part of the Duda purchase, Gorazdze is expected to sell a concrete unit in Olszowa to avoid market overlap.
Polish cement production hit a high of 18.6Mt in 2011 according to Polish Cement Association (SPC) data. In its annual report for 2011, Lafarge attributed the surge to European Union (EU) funding for infrastructure projects and a deficit in housing. The multinational cement producer reported a 27% increase in domestic sales that year. Since then production fell to a low of 14.5Mt in 2013 before picking up. Cement production for the first nine months of 2015 is a little ahead of 2014 year-on-year.
Poland's cement production capacity is 16.8Mt/yr. The industry comprises 11 cement plants that are run by eight producers. As mentioned in the Global Cement Lafarge-Holcim Merger report, the country already has two cement plants from a CRH subsidiary, Grupa Ożarów. This is pertinent because the country offers a view of how LafargeHolcim might act in competition with CRH in a national environment.
In 2014 CRH noted that cement volumes grew by 6% in the country and its Europe Heavyside sales increased by 4% year-on-year to Euro3.93bn. In the first half of 2015 CRH reported selling 'non-core' businesses from its Europe Heavyside division in Poland amongst other territories. It also reported that whilst a solid general economy and construction growth helped sales, it was under price pressure in all of its main product lines.
Interestingly, LafargeHolcim announced in late September 2015 that it was implementing a new three-year strategy in Poland. The plan is to offer its clients logistic, design and consulting services in addition to cement, concrete and aggregate sales. The choice of Poland to test this strategy in with its clear competition from CRH is instructive as this situation is now duplicated in several markets throughout Central and Eastern Europe. Lafarge too reported a 'competitive' environment in its first quarter results for 2015 before the merger with Holcim completed. Yet it noted that its cement volumes had contracted compared to the same period in 2014. This is in contrast to the SPC data for the first quarter of 2015 that suggests that cement production rose slightly compared to the same period in 2014. However, Lafarge did expect construction activity to pick up for the rest of 2015 due to infrastructure tenders based on a new EU infrastructure plan. SPC data on cement production suggests that this may be correct. LafargeHolcim's and CRH's cement plants are in slightly different parts of the country which may also explain reported differences in sales volumes in 2015.
So, we have a picture of CRH streamlining its business in Poland to help grow profits. LafargeHolcim, meanwhile, is broadening its offer with 'soft' businesses to complement its heavy divisions. The results will be worth watching.
Tanzania: Mbeya Cement, a LafargeHolcim subsidiary, has launched a higher strength cement and stated that its production capacity will triple to 1.1Mt/yr at the end of October 2015. The company, which is 35% locally-owned, said that the cement 'Tembo Supaset 42.5' is used by civil contractors and pre-casters.
Lafarge Tanzania's CEO Catherine Langreney said that the product specifically addresses the needs for block making, concrete mix, mega-structures and high visibility infrastructure projects like bridges, roads and stadiums. "This brand is the result of almost one year of careful research and development by our cement technical experts," said Langreney. "Supaset CEM II is a specially-formulated Portland composite cement that is engineered to meet the fast-setting requirements of block makers."
The introduction of Supaset is likely to assist Mbeya Cement to increase its market share in the block making segment, improve customer satisfaction with Lafarge brands and reinforce its position as a leader in innovation within the Tanzanian construction industry. Langreney said that, before the end of 2015, Mbeya Cement will launch two new innovative products to meet demand of fast growing construction industry and the economy at large.
To cater for future demand, Mbeya Cement plans to start a new vertical grinding production plant, the first in sub-Sahara Africa, at the end of October 2015. "The new 700,000Mt/yr plant will elevates our capacity to 1.1Mt/yr," said Langreney.
Trickle down economics in Ecuador
14 October 2015Change draws nearer this week in the Ecuadorian cement industry with the announcement of further details on a new integrated cement plant. Union Cementera Nacional (UCEM) plans to build its third cement plant. The part-government owned group will build its new 2200t/day facility in the country's central Chimborazo province. The move will expand the group's domestic production from 1600t/day to 3800t/day, adding to its existing 650t/day of plant in Chimborazo and its 950t/day plant in Azogues. The expansion was supported by a US$230m investment agreement agreed in September 2015 between UCEM and Casaracra.
The timing is interesting here given that cement sales have reportedly fallen year-on-year by 7% for the first seven months of 2015, according to Ecuadorian Institute of Cement and Concrete (INECYC) data. Holcim, in its financial report for the first half of 2015, attributed its lower cement volumes to effects on the local economy by lower oil prices and poor weather. This also followed a declining year for volumes in 2014 after Holcim reported a record year in 2013.
Holcim also reported continuing to export clinker to its Ecuador unit in 2014 despite the drop in volumes. To that end it completed the second phase of its own expansion project at its Guayaquil cement plant back in March 2015. It increased its clinker production capacity to 4500t/day at the site at a cost US$400m.
Also of note, but on a smaller scale, was the announcement by the North American subsidiary of Gebr. Pfeiffer in September 2015 that it was supplying a new MPS swing mill for an existing grinding station at a clinker plant run by Hormicreto. Published details are sketchy on this plant but A TEC Greco refers to supplying a burner to the company for a cement kiln in 2013. The mountainous location and ownership by a concrete producer suggest that this may be a mini-cement plant.
Following the departure of Lafarge from the market at the end of 2014, Ecuador now has three main cement producers: LafargeHolcim (inheriting the Holcim assets), UCEM and Union Andina de Cementos (UNACEM). UCEM's expansion plans will increase its share of the industry by production capacity making it the second largest producer in the country. MCPEC - INECYC estimates projected that cement demand would reach 9Mt/yr in 2018. Meanwhile Manuel Román Moreno, general manager of the Empresa Pública Cementera del Ecuador (EPCE), estimated that the country imported around 1Mt/yr of clinker in 2014.
The question then for UCEM is whether the country will want 9Mt/yr of cement in 2018 with a depressed price of crude oil. As an Organisation of the Petroleum Exporting Countries (OPEC) Ecuador's economy is, no doubt, feeling the pinch from the low price of crude oil after a period of growth. In its expansion announcement UCEM reported the reliance of the new plant on bunker oil. This will be trucked in from the Amazonas (Shushufindi) refinery in Sucumbios province and purchased at a subsidised price. Cheap oil can be used to run the plants but it may be needed more to run the country's infrastructure demand for building materials such as a cement.
Switzerland: LafargeHolcim has appointed Ron Wirahadiraksa as the new Chief Financial Officer (CFO) and member of the Executive Committee. Ron Wirahadiraksa will succeed Thomas Aebischer, who is pursuing new opportunities outside the group. Ron Wirahadiraksa will join LafargeHolcim on 1 December 2015.
Ron Wirahadiraksa is currently Executive Vice President and CFO of Philips, a group he joined in 1987. After working in the Netherlands, Greece, Malaysia and the US, he became CFO at LG Philips LCD in South Korea in 1999. During that time, as President and CFO, he shared operating leadership with the Korean CEO. He became CFO at Philips Healthcare in 2008. In 2011, he took over as CFO for the Philips Group and played a pivotal role in the transformation of the company. Ron Wirahadiraksa was born in the Netherlands in 1960 and graduated with a doctorate in Business Economics from The Free University of Amsterdam, the Netherlands.
"I would like to thank Thomas Aebischer for his contribution to the group and I wish him every success in his future endeavors," said Eric Olsen, CEO of LafargeHolcim. "I am delighted to welcome Ron to LafargeHolcim. Ron is a highly-skilled and experienced CFO with a multicultural background. He comes with vast experience in transforming business models, driving performance and in taking value creation to the next level."
"Attracting an international CFO of Ron Wirahadiraksa's caliber is a great opportunity for LafargeHolcim and I am pleased to see him joining the group," said Wolfgang Reitzle, Statutory Chairman of LafargeHolcim. "Under the leadership of Eric Olsen, we have a diverse and strong management team that will be key to the success of our transformation journey to create superior value for our shareholders."
New Zealand: Two cement ship unloaders, a ship unloader and two conveyor belt systems purchased by Holcim are being shipped to New Zealand from the Netherlands on a heavy lift ship called the Happy Dragon.
One of the cement ship unloaders along with a ship unloader, which have a combined weight of 240t, will arrive in Timaru in early November 2015 and will be used by Holcim at its new dome at the Timaru Port. The other unloader and conveyor belts are bound for Holcim's Auckland dome.
Holcim's Capital Projects Manager Ken Cowie said that Holcim was excited to have the cargo in transit in the North Atlantic. "This signals the arrival on site of all the major equipment for the terminal and brings us closer to commissioning the operations later this year."
The cement ship unloaders were built by Van Aalst Bulk Handling in Hazerswoude. The largest of them is 33m long, 15.5m wide and 18m high. A logistics company brought the unloaders 20km east of Rotterdam, where they were placed on a pontoon by a floating crane and floated down to be loaded onto a ship.
Lafarge Nigeria unit acquires United Cement
06 October 2015Nigeria: An affiliate of Lafarge Africa, Nigerian Cement Holdings (NCH), has completed a 100% acquisition of Nigeria's third-largest cement manufacturer United Cement Company of Nigeria (UNICEM). Lafarge did not disclose the purchase price. NCH owned 70% equity in UNICEM before agreeing to the deal in November 2014 to buy the remaining 30% from Flour Mills. UNICEM cement plant in Cross River has a production capacity of 2.5Mt/yr and is undergoing an expansion to 5Mt/yr, to be completed in 2016.
Lafarge's investments in Egypt hit US$3bn in 2015
06 October 2015Egypt: Lafarge Egypt's total investments in the local cement market will hit US$3.2bn at the end of 2015, according to CEO Hussein Mansi.
Mansi said that Lafarge Egypt intends to expand in the local market with US$16.8m of new investments in a recycling project. The project is expected to start within six months of the required land being supplied by the government. In the near future, Lafarge Egypt will supply national projects currently being executed by the government such as the New Administrative Capital project and New Suez Canal projects.
Mansi said that Lafarge Egypt plans to increase its current market share, which is currently estimated at 14%.