Displaying items by tag: Loma Negra
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.
Marcelo Mindlin and Daniel Sielecki to contend with international bidders in Loma Negra auction
22 February 2024Argentina: Camargo Correa Group’s auctioneer JP Morgan will receive offers from bidders for Loma Negra later in February 2024. The La Nación newspaper has reported that Loma Negra may attract a price of over US$700m. Private investors Marcelo Mindlin and Daniel Sielecki will bid together, against anticipated corporate bidders from Brazil and China. Mindlin and Sielecki are joint owners of utilities provider Transportadora Gas del Sur.
BTG Pactual expects to start receiving bids for InterCement assets in February 2024
02 February 2024Brazil: Investment banking and management company BTG Pactual will start receiving ‘binding proposals’ for prospective buyers of assets belonging to InterCement before the end of February 2024, Valor Online News has reported. These will reportedly include InterCement's stake in Argentina-based Loma Negra, as well as its Brazilian business. The latter may involve an outright divestment or the enlistment of a new significant partner. Companhia Siderúrgica Nacional (CSN) previously hired Morgan Stanley for negotiations with InterCement, and China-based Huaxin Cement has reportedly showed interest in its assets. While an outright acquisition might face challenges on grounds of competition, Brazilian market leader Votorantim Cimentos is nonetheless also ‘interested’ in a partial takeover. Continuing plant closures and debt-related asset disposals also potentially further complicate any deal. On the basis of CSN’s previous US$1bn acquisition of (10.3Mt/yr-capacity) LafargeHolcim Brazil, Valor Online News has estimated the sale price of InterCement’s Brazil business as US$1.6bn.
Loma Negra publishes first-half 2023 results
11 August 2023Argentina: Loma Negra’s sales dropped by 2.1% year-on-year to US$353m in the first half of 2023, from US$361m in the first half of 2022. The company’s cement and lime sales were 3.15Mt, in line with first-half 2022 volumes. Its adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) fell by 23% to US$86.8m, while its net profit dropped by 32% to US$31.1m from US$45.9m.
Argentina: Loma Negra recorded sales of US$197m during the first quarter of 2023, up by 2.9% year-on-year from first-quarter 2022 levels. The company's earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 5.8% year-on-year to US$63m. Its net profit fell by 19% year-on-year to US$22.9m. Throughout the quarter under review, Loma Negra sold 1.54Mt of cement, up by 4.3% year-on-year.
Chief execuive officer Sergio Faifman said “We started the year in a very good shape, with solid operating result and cash flow generation, together with a very robust financial position. Despite the challenging macro scenario and the economic disorder in Argentina, cement demand remains strong, posting 3.1% growth in spite of the high base of comparison, and Loma Negra showed even higher growth figures." Faifman continued "We also completed our first issuance of corporate bonds with high success and with great support from the market, which demonstrates the confidence that investors place in our company. This gave us the possibility of refinancing our short-term debt in Argentinian Pesos and further strengthening our balance sheet. For the remainder of the year, we are cautiously optimistic that we will continue to see healthy dynamics in our markets, although at slower rates as we approach the presidential elections.”
Loma Negra increases sales as earnings drop in 2022
09 March 2023Argentina: Loma Negra recorded sales of US$835m in 2022, up by 1.1% year-on-year from 2021 levels. The producer said that growth in revenues from cement was 'flattish,' however volumes rose by 9.7% to 6.72Mt from 6.13Mt. Its cost of sales was US$530m, up by 7.9% from US$491m. Meanwhile, earnings before interest, taxation, depreciation and amortisation (EBITDA) fell by 3.8% to US$217m.
Loma Negra's CEO Sergio Faifman praised the 'extraordinary' results, saying "2022 was a year of many challenges and opportunities. The favorable evolution of Argentina's gross domestic product (GDP) during the year and the great performance of the construction activity gave a strong boost to the cement demand, with national shipments that were very close to exceeding 13Mt, allowing the industry to widely surpass the record reached in 2015."
Update on Uruguay, January 2023
25 January 2023Cementos Artigas inaugurated an upgrade to its integrated Minas plant this week. The joint-venture between Spain-based Cementos Molins and Brazil-based Votorantim Cimentos has been working on the US$40m project since mid-2020. The main plan is to combine the functions of the integrated Minas plant in Lavalleja and the company’s cement grinding plant at Sayago in Montevideo at one site. Key parts of the upgrade included the installation of a new vertical grinding mill, a cellular silo and a bulk cement despatching centre. The Uruguayan president Luis Lacalle turned up for the opening ceremony.
The cement sector in the country is modest compared to those in its much larger neighbours, Argentina and Brazil. It only has four integrated plants with a total production capacity of around 1.4Mt/yr compared to, say, Brazil’s 70-odd plants with a capacity in excess of 85Mt/yr. However, a few things have been happening recently that are worth noting. Firstly, a new integrated plant operated by a new entrant opened in mid-2021. Cielo Azul Cementos y Calizas was set up by investors in Brazil with links to Uruguay. It started in ready-mixed concrete (RMX) in the early 2010s before it contracted FLSmidth in 2017 to build it a 0.6Mt/yr integrated cement plant at La Pacífica in Treinta y Tres. It has also opened an RMX plant in neighbouring Paraguay.
Votorantim Cimentos may have been irked by the opening of a new competitor in Uruguay as it blamed it for a drop in its third quarter revenue in 2022 in its Latin American region outside of Brazil. It described the dynamic in the country as ‘challenging.’ Its local business partner, Cementos Molins, was a bit more balanced in its assessment for 2021, reporting that earnings had falling slightly due to global input cost rises and that sales had fallen due to increased competition from new capacity. Whatever else happens, now that the Minas upgrade project has finished, it seems likely that Cementos Artigas’ costs have the potential to decrease.
The country’s third cement producer, Cementos del Plata, was also busy in 2022. The subsidiary of state-owned Administración Nacional de Combustibles, Alcohol y Portland (ANCAP) announced in September 2022 that is was going to seek a business partner in its business. Its reasoning was that it wants to restore competitiveness to the local cement market and reverse the ‘deficit’ economic situation of the last 20 years. By November 2022, 11 companies had been selected for the next stage of the process. Notable entrants include InterCement-subsidiary Loma Negra, Empresa Publica Productiva Cementos de Bolivia (ECEBOL), Cementos Artigas, Cielo Azul Cementos y Calizas and the Turkish Cement Manufacturers' Association (TürkÇimento). That last name is particularly interesting as it is the only organisation with an obvious link to the cement sector from outside of South America. Two China-based engineering companies are also among the contenders.
Prior to the current initiative to gain inward investment into Cementos del Plata, ANCAP has been noteworthy for union activity at its plants such as strikes in recent years. A reported attempt to privatise the Paysandú plant in 2020 was blocked by the unions, according to local press. In separate news, ANCAP concluded from an investigation in June 2022 that persons unknown had attempted to intentionally damage the kiln of its Minas plant through the introduction of foreign materials. There is no reason to connect the two stories but it does suggest that any investor into the business might want to consider a wide variety of stakeholders as part of any due diligence process.
Uruguay’s cement sector is changing as we have seen above. Cementos Artigas has completed an upgrade to one of its plants, Cielo Azul Cementos y Calizas built a new integrated plant in 2021 and Cementos del Plata is actively hunting for a partner. Just who that new investor might be has implications for the local sector. The Government of Uruguay announced in 2021 that it wanted to set up free trade agreements with China and Türkiye. Unsurprisingly, both Turkish and Chinese organisations are amongst the ones that have made it to the current selection stage.
Loma Negra records strong sales in third quarter
09 November 2022Argentina: Loma Negra, part of Brazil-based InterCement, recorded net sales of US$236m in the third quarter of 2022, a 4.2% year-on-year rise compared to the third quarter of 2021. The group attributed the increase to improved cement sales, complemented by improved concrete and aggregates sales.
Loma Negra’s consolidated adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) rose by 12.7% to US$47.0m. However, it still made a net loss of US$76.6m, mainly due to the cancellation of debt in foreign currencies with local funding.
Sergio Faifman, Loma Negra's chief executive officer, noted, “The industry (exhibits) a positive trend, showing a high level of activity and heading to a record year. In fact, the third quarter was the best in history in terms of cement shipments for the industry and for Loma Negra. Our production capacity and our extensive nationwide distribution network allow us to keep up with the growing demand, underpinning our status as leaders in the industry.”
Loma Negra increases sales and profit in first half of 2022
12 August 2022Argentina: Loma Negra recorded first-half 2022 sales of US$357m, up by 1.2% year-on-year from US$353m. Its cement sales rose by 13% to 3.15Mt from 2.79Mt in the first half of 2021. The producer more than doubled its net profit to US$45.4m from US$19.3m.
Argentina: The National Commission for the Defence of Competition (CNDC) has concluded an investigation into the cement industry with the finding that all four Argentinian cement producers colluded to maintain high prices between 2013 and 2018. Cementera Avellaneda, Holcim Argentina, Loma Negra and Petroquímica Comodoro Rivadavia (PCR) reportedly increased their sales by US$178m between 1 July 2017 and 30 June 2018 through cost overruns generated by their control of local markets.
The CNDC ordered the Portland Cement Manufacturers Association (AFCP) to refrain from distributing competitively sensitive information production, dispatches and imports information between its member companies.