Displaying items by tag: Mexico
Mexico: Cruz Azul has launched the construction of a fifth production line at its Oaxaca cement plant in Lagunas. State governor Alejandro Murat Hinojosa presided over the ceremony. The new line has an investment of over US$130m and is scheduled for completion by the end of 2020. It will also be able to co-process alternative fuels up to a rate of 40%. Previously, Germany’s Loesche and France’s Fives sold grinding mills for the upgrade.
US and Mexican performance drive strong third quarter for Cemex
26 October 2018Mexico: Sales growth in the US and Mexico has contributed to a strong third quarter for Cemex in 2018. Overall, its net sales rose by 7% year-on-year to US$10.9bn in the first nine months of 2017 from US$10.2bn in the same period in 2017. Cement sales volumes rose by 3% to 52.7Mt from 51.1Mt. However, despite the sales growth, operating earnings before interest, taxation, depreciation and amortisation (EBITDA) remained flat at US$1.96bn.
“These results were underpinned by healthy volume and pricing dynamics in our three core products in most of our portfolio. We are pleased with our operations in Mexico and the US, with strong growth in year-over-year volumes for our three core products and improved prices. In our Europe region, prices continued to improve with growth in ready-mix and aggregates volumes. In addition, in our Asia, Middle East and Africa region, we saw volumes and prices in the Philippines rising in the mid-single digits as well as a double-digit increase in cement prices in Egypt,” said Fernando A Gonzalez, chief executive officer (CEO) of Cemex.
Despite the strong markets in North America the building materials company reported a 3% drop in net sales in its South, Central America and Caribbean business area. A particular poor result was noted in Colombia. However, cement sales volumes picked up year-on-year in the third quarter of 2018 following elections.
Update on Mexico: free trade edition
03 October 2018Cementos Fortaleza started building its new grinding plant in Merida this week. The 0.25Mt/yr unit is expected to open in July 2019. It marks the first new plant in the country in a while and it will be only the second in the south-eastern state of Yucatan, joining Cemex’s integrated plant. It follows a number of upgrades at existing plants over the last two years, such as various mill orders by Cruz Azul from European suppliers (as part of an upgrade at two of its plants) and Elementia’s upgrade to its Tula plant.
Note that Cementos Fortaleza is a subsidiary of Elementia, the building materials company partly-owned by ‘Mexico’s richest man’ Carlos Slim. The group has steadily been expanding with its purchase of the remaining share in Cementos Fortaleza in 2015, acquiring a controlling stake in Giant Cement in the US in 2016 and a project to build a grinding plant in Costa Rica in early 2018.
The other big news story this week with implications for the cement sector was the arrangement of the US-Mexico-Canada Agreement (USMCA), the successor to the North American Free Trade Agreement (NAFTA). Although the exact details of the deal are still emerging, the consensus is that the cement industry in Mexico is unlikely to be affected much. The two points that might have implications for the cement industry are changes to rules of origin regulations and tariffs on imports made by low-wage workers. Both clauses are targeted at the automotive sector to protect US industry so it is unlikely that cement will be affected. In addition it is worth remembering that Mexico was the fifth largest exporter of cement and clinker to the US in 2017 after Canada, Greece, China and Turkey. And, all the major Mexican cement producers operate plants in the US, further protecting them from any potential negative consequences of the USMCA.
Graph 1: Mexican cement production, 2009 – 2017. Source: Camara Nacional del Cemento (CANCEM).
Back in Mexico, the graph above shows that production has been growing in fits and starts over the last decade. The last growth trend started in 2013 but it stalled in 2017. However, the Camara Nacional del Cemento (CANCEM) was forecasting growth of 2.5% year-on-year for 2018 in April 2018. The last time this column covered Mexico, back in early 2017, we produced a breakdown of the industry by company and production capacity. This is worth looking at for an overview of the production base.
Cemex, the largest local producer, reported Ordinary Portland Cement sales volume growth of 3% year-on-year in the second quarter of 2018 but flat growth for the first half of the year. This growth was supported by good activity in the formal residential sector with support from the industrial and commercial sector. LafargeHolcim released less detailed figures for the first half of 2018 but it attributed its strong performance in Latin America to Mexico. Overall cement sales for the region grew by 12.1% to 12.6Mt, in part due to large infrastructure projects in Mexico, such as the new Mexico City International airport. The third biggest producer, Grupo Cementos de Chihuahua, said that its cement sales volumes rose by 2.5% in the first half of the year, supported by rising prices.
As reported in early 2017, the Mexican cement industry is moving ahead with confidence. A modest amount of production capacity is being built, the steady market growth since 2013 looks set to continue after a minor blip in 2017 and the main producers are all reporting good performance so far in 2018. Finally, the USMCA looks unlikely to trouble Mexican producers much and their diversified holdings will certainly help them if it does. For the moment - bravo!
Cementos Fortaleza building grinding plant in Merida
28 September 2018Mexico: Cementos Fortaleza has started to build a new 0.25Mt/yr grinding plant at Merida in Yucatan. The project has an investment of US$30m, according to the El Economista newspaper. The plant is scheduled to open in July 2019. It will create 50 direct jobs.
New grinding plant for Elementia
16 August 2018Mexico: Elementia has said that it will install a new cement grinding plant in Yucatán. It will invest US$30m and will start at a capacity of 0.25Mt/yr. Commercial operation is expected within the first half of 2019.
Holcim Mexico to launch two new cement products
31 July 2018Mexico: Holcim Mexico is launching two new brands for the local market. Holcim Prefacem is targeted for precast concrete elements and Holcim Supercem, a Composite Class 40 Portland Cement, is aimed at ready-mix concrete plants. Both products were developed by the company’s Centre for Building Technological Innovation (CiTec ) and are being produced at its Ramos Arizpe plant. Holcim Prefacem and Holcim Supercem will be first available near to the Ramos Arizpe plant in the states of Chihuahua, Nuevo Leon, San Luis Potosi, Durango, Zacatecas, Tamaulipas and Coahuila.
"Innovation makes a difference. With the support of Holcim Mexico and LafargeHolcim worldwide, we aim to cover the needs of specific market segments, with products that enhance our clients’ profitability”, said Marco Maccarelli, Corporate Sales Director Cement and Retail of Holcim Mexico.
Cemex planning further sales to reduce debt
27 July 2018Mexico: The Mexican cement multinational Cemex has announced that is planning a new round of asset sales and debt reduction in a bid to speed up its growth and return to an investment-grade rating. It will reposition its portfolio to focus on markets with the greatest long-term growth potential.
By January 2021 Cemex aims to sell US$1.5 - 2.0bn in assets and reduce its total debt by US$3.5bn, while finding further cost savings of US$150m. It also plans to pay annual cash dividends starting with US$150m in 2019. Cemex has given a lot of money back to bond investors and banks in recent years and now is in a position to compensate shareholders with dividends, in addition to recently approved buyback funds, according to Chief Executive Fernando González.
Cemex lost its investment-grade ratings in 2009 during the global financial crisis, when its earnings fell after the company had taken on large amounts of debt to expand through acquisitions. The company returned to profitability following major asset sales and debt reduction. In early 2018 it announced that it was thinking about expanding into growing markets, apparently indicating an end to asset sales. However, it abandoned these plans after a number of shareholders objected.
Debt reduction, cost cutting and asset sales of recent years were successful, but earnings before interest, taxes, depreciation and amortisation (EBITDA), a measure of cash flow, didn’t grow as much as expected, according to González. In addition to lower earnings in Colombia, Egypt and the Philippines, Cemex also faced rising fuel costs.
In the second quarter of 2018, Cemex’s net profit increased by 32% compared to the same period of 2017 to US$382m. Sales grew by 7% to US$3.8bn, and earnings before interest, taxes, depreciation and amortisation, (EBITDA) were up by 4% to US$714m. Cement sales in the same period increased by 4% to 18.6Mt.
Mexico: Grupo Cementos de Chihuahua’s (GCC) net sales rose by 11.4% year-on-year to US$399m in the first half of 2018 from US$358m in the same period in 2017. Its earnings before interest, taxation, depreciation and amortisation (EBITDA) grew by 22% to US$115m from US$94.2m.
Its US sales rose by 11.1% to US$283m and its Mexican sales rose by 7% to US$60m. Cement sales volumes increased by 6.1% and 2.5% in the US and Mexico respectively. However, the cement producer reported falling sales volumes in the second quarter of 2018 in the US due to poor weather in Iowa, North Dakota and South Dakota and delays in paving projects.
Mexico: The Procuraduría Federal de Protección al Ambiente (PROFEPA) awarded an Recognition of Environmental Excellence to 12 Cemex cement plants. The award is presented to companies that demonstrate a continuous commitment to protect the environment. The plants that were recognised were: Atotonilco in Hidalgo; Barrientos in Mexico State; Ensenada in Baja California; Huichapan in Hidalgo; Mérida, in Yucatan; Monterrey in Nuevo León; Tamuín in San Luis Potosí; Tepeaca in Puebla; Torreón, in Coahuila; Valles in San Luis Potosí; Yaqui, in Sonora; and Zapotiltic, in Jalisco.
Mexico: Grupo Cementos de Chihuahua (GCC) has taken out a new US$400m loan to reduce its interest payments. The loan has a term of five years with a margin of 1.25 – 2% on Libor, based on the debt / earnings before interest, taxation, depreciation and amortisation (EBITDA) ratio, according to the El Financiero newspaper. The initial margin will be 1.75%. The loan has been supplied by BBVA Bancomer, Banco Nacional de México, JP Morgan Chase Bank and the Bank of Nova Scotia. It will also be used for general corporate purposes.