Displaying items by tag: Results

The publication of LafargeHolcim’s annual financial results for 2016 this week starts to give us a review of the year as a whole for the multinational cement producers. Of the larger producers, CNBM, Anhui Conch and Votorantim are expected to make their releases in April 2016, so we’ll focus here on the available data from LafargeHolcim, HeidelbergCement, Cemex and BuzziUnicem, with UltraTech Cement included for some regional variety.

Graph 1: Sales revenue from multinational cement producers in 2015 and 2016 (Euro millions). Source: Company financial reports.

As can be seen in Graph 1 currency exchange effects have caused problems for producers’ sales revenues, with LafargeHolcim, HeidelbergCement and Cemex all reporting falling sales on a direct comparison. Subsequently like-for-like adjustments have cropped up repeatedly on balance sheets to try and present a more investor-friendly picture, although even this has still seen LafargeHolcim and HeidelbergCement report small declines. In this sense it’s a little unfair to include India’s UtraTech Cement, given that the bulk of its business is in just one country. Operating in just one country though has its own risks, one of which we’ll discuss below.

Unsurprisingly, given the poor sales, the focus for the multinationals has generally been on earnings measures such as operating earnings before interest, taxation, depreciation and amortisation (EBITDA). Here, LafargeHolcim and Cemex have done far better as they have streamlined their businesses. For example, LafargeHolcim’s operating EBITDA rose by 12.9% year-on-year to Euro4.895bn in 2016.

Graph 2: Cement sales volumes from multinational cement producers in 2015 and 2016 (Mt). Source: Company financial reports.

Graph 2 looks at cement sales volumes. Most of the producers have made small gains or losses in 2016 with the stark exception of LafargeHolcim. Its cement sales fell by 12.9% to 233Mt in 2016. More alarmingly, for the fourth quarter of 2016 LafargeHolcim blamed an increased rate of declining cement sales volumes on demonetisation in India, tough trading conditions in Indonesia and a unusually good year (in 2015) to compare itself against in the US.

On that point about India, UltraTech may not have released any sales volumes figures but other larger Indian producers have experienced problems with the government’s decision to remove certain banknotes from circulation in November 2016. A report by HDFC Securities this week suggests that cement volumes fell by 13% year-on-year in January 2017 following a 9% decline in December 2016. The country may be facing its first decline in cement sales volumes since 2001. This is squarely down to government policy.

On a regional basis probably the most worrying theme has been an apparent slowdown in the US towards the end of the year. As mentioned above LafargeHolcim has blamed it on a good previous year and Cemex concurred. Buzzi Unicem also reported the same trend but didn’t attribute it to anything in paticular. President Donald Trump’s push for US$1tr investment on infrastructure in the US should help to reverse this along with anything that happens with his Mexican border wall plans.

The other area to pay attention to is Indonesia. Both LafargeHolcim and HeidelbergCement reported tough trading here prompted by production overcapacity. Locally, Semen Indonesia said this week that its sales revenue fell by 3% to US$1.95bn in 2016 and it still has new cement plants to be commissioned in 2017.

The overall picture for 2016 from these cement producers appears to be one of companies treading water and making savings as their sales were battered. As mentioned previously (The global cement industry in 2016, Global Cement Magazine, December 2016) the geographic spread of assets the multinationals own doesn’t seem to be protecting them from world events as well as they once did. On the plus side northern Europe seemed to pick up or at least hold steady in 2016 but various political shocks such as the UK departure from the European Union and elections in France and Germany may scupper this. In a similar vein India remains one of the key markets but government policy has potentially dented its growth this year. In the US cement volumes may be slowing but Donald Trump is riding to the rescue! With this continued high level of potentially disruptive events cement producers are probably hoping for a quiet year in 2017.

LafargeHolcim was the last major European cement producer to release its second quarter financial results last week. The collective picture is confused. Cement sales volumes have risen but sales revenue have fallen.

Most of the producers have blamed negative currency effects for their falls in revenue during the first half of 2016. Holding a mixed geographical portfolio of building materials production assets has kept these companies afloat over the last decade but this has come with a price. The recent appreciation of the Euro versus currencies in various key markets, such as in Egypt, has hit balance sheets, since the majority of these firms are based in Europe and mostly use the Euro for their accounting. Meanwhile, sales volumes of cement have mostly risen for the companies we have examined making currency effects a major contributor.

Graph 1 - Changes in cement sales volumes for major non-Chinese cement producers in the first half of 2016 compared to the first half of 2015 (%). Data labels are the volumes reported in 2016. Source: Company reports.

As can be seen in Graph 1, sales volumes have risen for most of the producers, with the exception of LafargeHolcim. Despite blaming shortages of gas in Nigeria for hitting its operating income, LafargeHolcim actually saw its biggest drop in sales volumes in Latin America by 13.2% year-on-year to 11.8Mt. The other surprise here was that its North American region reported a 2.7% fall to 8.8Mt with Canada the likely cause. Vicat deserves mention here for its giant boost in sales volumes due to recovery in France and good performance in Egypt and the US, amongst other territories.

Graph 2 - Changes in sales revenue for major non-Chinese cement producers in the first half of 2016 compared to the first half of 2015 (%). Data labels are the sales reported in 2016. Source: Company reports.

Overall sales revenue for these companies presents a gloomier scenario with the majority of them losing revenue in the first half of the year, with most of them blaming negative currency effects for this. Titan is included in this graph to show that it’s not all bad news. Its growth in revenue was supported by good performance in the US and Egypt. Likewise, good performance in Eastern Europe and the US helped Buzzi Unicem turn in a positive increase in its sales revenue. They remain, however, the exception.

Looking at sales revenue generated from cement offers one way to disentangle currency effects from performance. Unfortunately, only about half of the companies looked at here actually published this for the reporting period. Of these, LafargeHolcim reported a massive rise that was probably due to the accounting coping with the merger process that finalised in 2015. Of the rest - HeidelbergCement, Italcementi and Vicat – the sales revenue from each company’s cement businesses fell at a faster rate than overall sales. Like-for-like figures here would help clarify this situation.

Meanwhile, a mixed global patchwork of cement demand is focusing multinational attention on key countries with growing economies like Egypt and Nigeria. Both of these countries have undergone currency devaluation versus the Euro and are facing energy shortages for various reasons. The exposure of the multinational cement producers to such places may become clearer in the second half of the year.

LafargeHolcim was the last of the major non-Chinese cement producers to report its annual financial results when it did so on 17 March 2016. With the full set in, as it were, Global Cement will compare the progress of the world’s largest multinational cement companies in 2015.

The first thing to note is that whilst cement production growth rates have hardly been inspiring in 2015, growth or holding the status quo is occurring. The emerging markets have faced challenges in 2015 following the prolonged depression in the construction sector in Europe since 2008. As Wolfgang Reitzle and Eric Olsen put it in the forward of the 2015 LafargeHolcim annual report, “…our share price has been significantly affected, mainly by the volatility associated with emerging markets.”

Figure 1: Cement & clinker sales volumes from five major cement producers, 2011 – 2015. Source: Annual reports. Note: Sales volumes are calculated for LafargeHolcim for 2011 – 2013.

Figure 1 shows cement and clinker sales volumes for the major cement producers from 2011 to 2015. This graph isn’t quite as depressing as it looks because it shows a drop in cement production for the major producers and it has started to show remedial action being taken. Where growth isn’t happening in a market, pressure builds to find it through mergers and acquisitions.

So, Lafarge and Holcim merged and the decision may be now starting to show promise with its sales volumes remaining static year-on-year in 2015 rather than falling. It should be noted here that the drop from 2013 to 2014 is due to the divestments Lafarge and Holcim both made before the merger to satisfy competition bodies and because the sales volumes were calculated here from the separate Lafarge and Holcim annual reports.

Even more so, HeidelbergCement’s plan to buy Italcementi may be a good idea here. Already it has been growing its cement production each year since 2013. The acquisition could potentially speed up the growth considerably. Elsewhere, both Cemex and Buzzi Unicem are showing signs of picking up cement production since 2013.

Figure 2: Earnings before interest and taxation (EBIT) for five major cement producers, 2011 – 2015. Source: Annual reports. Note: Cemex and LafargeHolcim figures have been converted from US Dollars and Swiss Francs respectively at current exchange rates.

Figure 2 shows one indicator of profitability for the major cement producers by comparing their earnings before interest and taxation (EBIT). This is less useful than cement sales volumes because it covers the producers’ entire businesses including aggregate and concrete sectors. However, it does show the problems Italcementi has faced and it offers one reason why the company might have allowed itself to be taken over. Note also how Cemex has continued to increase its EBIT despite its high levels of debts.

Returning to the LafargeHolcim comments about volatile emerging markets, most of the producers reported tough trading in their Asian territories in 2015. The exceptions were Cemex with its reliance on the Philippines booming market and Buzzi with its limited assets in the region. However, Cemex suffered in its own major emerging market in South and Central America. Despite these setbacks though all of the producers featured here benefitted from growing sales volumes in North America, particularly in the US.

Both LafargeHolcim and Cemex announced divestments promptly following their results announcements suggesting that they feel they need to do more to regain the profitability they once had. LafargeHolcim plans to sell assets in South Korea and Saudi Arabia. Cemex has agreed to sell cement plants in Bangladesh and Thailand and a minority stake in its business in the Philippines. This last decision may suggest how serious Cemex is about tackling its debts considering the strong market in that country at present. HeidelbergCement is due to complete its acquisition of Italcementi in the second half of 2016.

Finally, the major changes to the multinational cement producers will continue in 2016 as CRH asserts itself following its major acquisitions from Lafarge and Holcim in 2015. Already its Europe Heavyside Divison reported sales revenue of Euro3.61bn in 2015 surpassing that of Buzzi Unicem. Other international producers such as Eurocement, InterCement and Votorantim were also poised for continuing growing but poor domestic markets (Russia and Brazil) may cripple their ambitions in the short term.

Cemex has taken action towards its debts over the course of the last week. First, it announced that it had amended its credit agreements in order to delay the looming effects of consolidated financial leverage and coverage ratio limits by one year to March 2017 with other similar deadlines also delayed. Then it announced the pricing of US$1bn of Senior Secured Notes due in 2026, a form of secured borrowing. This was followed by confirmation of asset sales in Bangladesh and Thailand. Finally, it announced that it was seeking regulatory permission to sell a minority stake in its subsidiary in the Philippines.

This column has discussed the on-going financial travails at Cemex a few times, notably recently when the group released its fourth quarter results for 2015 and in the wake of HeidelbergCement’s announcement to buy Italcementi. Basically, it all comes down to debt, as the following graph shows.

Figure 1 - Cemex assets, debt and equity, 2006 - 2015

Cemex took on large amounts of debt following its acquisition of Rinker in 2007. Since then the value of its assets have been falling faster than it has been able to reduce its debts. However, its equity (assets minus debts) is looking like it might dip below its debts in 2016. Hence, action needs to be taken. Cemex appears to have attempted to do this over the last week. Will it be enough?

The credit amendment was probably the most pressing issue for the Cemex management given that the terms have been reliant on maintaining a leverage ratio (debt divided by assets) below a set limit. Cemex has extended the terms of the borrowing in its favour so it can keep the leverage ratio higher for longer without penalty from its creditors. Note that the leverage ratio here means the ratio between debt and operating earnings before interest, taxation, depreciation and amortisation (EBIDTA).

Selling assets and shares in Asia is the next step in cutting debt in the window the group has negotiated for itself. It holds minor cement production assets in Thailand and Bangladesh that it is selling to Siam City Cement for US$53m. These include a 0.8Mt/yr integrated cement plant in Saraburi, Thailand and a 0.52Mt/yr cement grinding plant in Madangonj, Bangladesh. Unfortunately for Cemex it purchased the Saraburi plant for US$77m in 2001 from Saraburi Cement making it a loss of at least US$24m.

A minority sale of shares in its Philippines assets is more promising. The group runs two integrated cement plants in the country, the Solid Cement Plant in Rizal and the APO Cement Plant in Cebu with a combined cement production capacity of 6.23Mt/yr and a new 1.5Mt/yr production line on the way at Solid Cement also. Local media estimate that the sale could earn Cemex as much as US$850m from the booming market. The Cement Manufacturer's Association of the Philippines reported that cement sales volumes grew by 14.3% to 24.4Mt in 2015 with more growth predicted for 2016.

The credit amendment and asset sales of US$0.9bn may give Cemex the breathing room it requires to keep the creditors at bay for a while longer. It originally refinanced its debts in 2009 at the height of the financial crisis to keep the business running until the markets picked up again. They haven’t. A question that might be legitimately asked at Cemex’s analyst day later this week, on 17 March 2016, is this: when is Cemex going to seriously tackle its debts? As the situation continues the group may end up devoting more time to managing its debts than it will to actually making cement and other building products.

Cemex trumpeted last week that it had returned to positive net income for the first time in six years in its fourth quarter results for 2015. In effect the multinational building materials company was saying it is putting its house in order following taking on too much debt in the late 2000s. Similar reassuring noises have repeatedly been made as it has cut its debts down since that time.

The figure Cemex was shouting about this time was its controlling interest net income or the net income attributable to the controlling shareholder. It has risen to a gain of US$75m after being negative, or in loss, since 2010. In that year the sting from the financial crash in 2008 caused havoc and net sales for the company hit a low of US$14bn, having been at over US$20bn in the boom times of 2007 and 2008.

Meanwhile, the company has been steadily whittling away at its total debt reducing it down to just US$15.3bn in 2015. This is a massive figure given that its total equity was US$9.5bn in 2015.

By comparison, Lafarge was reporting a net debt of Euro9.3bn in 2014 compared to a total equity of Euro17.3bn. Its debt-to-equity ratio was far smaller than Cemex’s despite being perceived as the weaker partner financially going into the merger with Holcim in 2015. Unsurprisingly, it was news in August 2015 when Cemex refinanced a bank loan agreement for a US$15bn debt that was previously renegotiated in 2009. Everyone is watching Cemex’s debts keenly.

Against this financial backdrop Cemex’s cement business has been steadily producing fairly static levels of cement since 2009. It 2015 it has reported that it produced 66Mt. However, net sales fell in 2015 by 8% year-on-year to US$14bn, a disappointing result following sales growth since 2012. Fernando A Gonzalez, Cemex’s Chief Executive Officer, blamed it on a ‘challenging’ macroeconomic environment.

Notably overall net sales have been down in Mexico, Northern Europe and Central and South America in 2015. Although Cemex hasn’t released cement sales volumes, volumes fell by 3% in Northern Europe, 2% in its Mediterranean region and 4% in Central and South America in 2015. Thankfully, growth continued to pick up the US, bolstered by housing and infrastructure spending. The Philippines has remained a powerhouse in cement consumption in Asia.

Reviewing Cemex’s expansion projects in 2015 suggest muted capital expenditure with a focus on upgrades and side projects rather than clinker production growth. Such announcements included projects in Nicaragua, the Dominican Republic, Colombia and Mexico. The exception was in the Philippines where a full-on US$300m project including a new 1.5Mt/yr plant was announced in May 2015. Given the surging cement volume sales in the country this is likely a safe investment.

As discussed previously in this column and elsewhere Cemex has suffered from high debts at exactly the time its major international rivals have started to merge. At the same time its Chinese rivals in terms of production capacity have undergone similar capacity consolidation as part of state mandated capacity reduction initiatives. This has left Cemex between the mega-cement producers like LafargeHoclim and HeidelbergCement and the up-and-comers such as Eurocement or Votorantim.

Now, its reliance on markets in the Americas it hitting a roadblock from reducing growth south of the US as global commodity prices tumble and economies suffer. It couldn’t have happened at a worse time for the company. Bar the odd bright spot such as the US and the Philippines it seems that all Cemex can do is wait it out.

This week we got our first real sense of how things are going at the new global cement leader LafargeHolcim. The group released its first 'combined' results, which cover the third quarter of the year and the nine month period to 30 September 2015.

First impressions are that LafargeHolcim is having a tough time of it, struggling, as many cement industry players are, with an increasingly tricky and uneven global market. It reported a fall in net sales and adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) for the first nine months of 2015, compared to the same period of 2014. Cement sales were also down by 1.3%. The group said that lower than expected demand was the reason behind lower sales, particularly in China and Brazil, which continue to struggle economically. It also picked out India as a country where momentum was lacking.

Of course, it's not all bad. While net sales were down, they were only down very slightly, by 0.6% year-on-year in the first nine months. Many a cement producer would love to pull in Euro20.4bn in sales and ship 189Mt of cement in just nine months! And, after a sticky start to the year, the picture is improving in some regions, with third quarter performance buoyed by improving fortunes in Asia, excluding China and India. LafargeHolcim was able to continue banking on the strong recovery in North America and parts of Europe, where some markets, such as the UK, continue to buck the otherwise depressing trend.

While these results will be a concern they are by no means horrific. However, they have already given rise to (or at least sped up) LafargeHolcim's future divestment plans. According to Dow Jones, LafargeHolcim plans to raise Euro3.23bn in 2016 from selling off assets, around half as much as Lafarge and Holcim had to sell to allow the merger to go through. The company has reportedly started discussions with interested parties, including private-equity firms and industry rivals about some of the assets. The proceeds will be returned to shareholders through dividends or share buybacks, according to CEO Eric Olsen.

Which assets will be divested remains to be seen. However, it reportedly won't involve LafargeHolcim's assets in Australia and New Zealand, at least in the short term. In the past week or so local media has reported that LafargeHolcim's assets in the two countries were to be sold off. However, since then Holcim Australia's Chief Executive Mark Campbell said the company was 'not currently being sold.' Campbell also added that he couldn't rule out a possible sale in the future.

So, while being clear that LafargeHolcim has no plans to sell its Australian and New Zealand assets at the moment, what could happen if it did? The starting point is complex, especially in Australia. According to the Global Cement Directory 2016, there are six operational integrated cement plants and 12 grinding plants in the country, which share a combined 13.9Mt/yr of cement capacity. LafargeHolcim has a 50% interest in Cement Australia's 4.0Mt of cement capacity, giving it 2Mt/yr of capacity and around 14% of national capacity. The other 50% of Cement Australia is owned by HeidelbergCement. Other major players include Adelaide Brighton, which has 2.3Mt/yr in its own name and a 50% stake in Independent Cement, and Boral Cement, which owns 2.3Mt/yr of capacity outright and 50% of SunState Cement's 1.5Mt/yr of capacity. In New Zealand there are two integrated plants, one operated by Golden Bay Cement and one by LafargeHolcim. The latter, however, is due to be closed in 2016.

If LafargeHolcim was to leave the mix in Australia, it is possible that neither Adelaide Brighton nor Boral would be able to take over its share, due to their already-large market presences. This may leave the door open for other regional players, perhaps a Chinese player looking to exit that country's rapidly-declining domestic market? Cemex is contracting and still heavily indebted, leaving it out of the running. While it is also possible that assets could be sold to private equity firms, another interested player could be Ireland's CRH, with 'cash to burn' and recent disappointment from its failure to buy Lafarge and Holcim's former assets in India.

Of course, if the assets aren't for sale, it won't be possible to buy them, meaning that for now the above is just speculation. However, the quick analysis above does highlight the relative lack of viable cement industry suitors in this region. If LafargeHolcim does ever decide to sell in this region, it might find the assets hard to shift.

The past week has seen several quarterly financial results from producers in the world's second-largest cement industry: India. So far, they do not make for a great read from an economic perspective, although some players, including Birla Group and Sanghi Cement are yet to show their hands.

So let's kick off. For the quarter that ended on 30 September 2015, LafargeHolcim subsidiary Ambuja Cements saw its net profit slide by 36% year-on-year to US$23.6m compared to the same period of 2014. Its income fell by 4% to US$324m as it battled a one-off charge. ACC, LafargeHolcim's other Indian subsidiary, saw a profit of US$17.5m for the quarter, a year-on-year fall of 40% compared to 2014. Not great for the global number one player.

Other players to announce so far have included JK Cements, which reported a 58% fall in consolidated net profit to US$2.1m. Meanwhile, Century Textiles, which owns Century Cement, fared even worse. It actually posted a loss compared to a marginal profit in 2014, despite an increase in total income.

It has not been all doom and gloom however. UltraTech Cement, while it reported a drop in profit, was not as badly affected as the firms listed above. It recorded a 3.9% fall to a net profit of US$59.7m for the quarter, down from US$62.3m in the same period of 2014. This was reported as being better than expected according to a senior research analyst at Angel Broking, perhaps hinting at shaky ground under even these results.

So far, the exception to the lower profits and losses has been India Cements Ltd (ICL), which posted an almost five-fold growth in its net profit. It profit grew from US$1.14m to US$6.26m, which it said stemmed mainly from improved operating parameters and substantial reductions in its variable costs. Its operating profit grew to US$35.4m from US$27.9m. It expects performance to improve as it increases its capacity utilisation rate up, currently languishing at just 60%.

Does the company provide a model for other producers to follow? Perhaps. The company's managing director and vice-chairman of ICL, N Srinivasan, said that the company was poised for improved conditions in its markets. In the company's results he said, "Going forward, we see better times ahead. We had a tough time for two years and have achieved a turnaround by cutting costs and maintaining a healthy cement price." The fact that ICL has managed to 'maintain a healthy cement price' in times of low requires scrutiny in a separate column.

However, a possible take-away from the results released so far is that the larger producers seem to have greater immunity to the problems surrounding over-supply in India. Economies-of-scale and the ability to spread risk around different Indian markets tends to favour larger players like UltraTech. Conversely, a smaller player that finds itself 'stuck' in one of the weaker regional markets, must just sit tight and weather the storm. Either that or it can make itself into a strategic acquisition target for one of the larger groups.

We are still awaiting results from other players in the Indian market, but with low demand, it would be foolish to expect them to be significantly different from the above. Given this, two key factors will help determine whether the decline in profits continues or not. Firstly, India's Modi government is promising large-scale infrastructure projects, which would help boost demand for cement. The industry has heard such promises in the past, however, and may chose to be skeptical. Secondly, it is important to remember that lower profits are being seen at the moment, even despite lower coal costs. Any upward change in these costs and the pace may become too fast for some of the country's smaller producers.

It has been another week of financial results from the global cement industry, with big hitters Lafarge and Holcim reporting what some might call 'concerning' numbers for the first half of the year. Both cement producers are, of course, making preparations ahead of their proposed merger, which could come to pass within 12 months, all being well. But are things well?

In the first half of 2014, Lafarge saw its earnings before interest, tax, depreciation and amortisation (EBITDA) decrease by 2%, with sales down by 5%. Lafarge noted that its shrinking size, this week highlighted by the sale of its Pakistani assets, and adverse exchange rate effects did not help matters. CEO Bruno Lafont was up-beat in asserting that North American and European markets would see improvements over the rest of 2014. Meanwhile, things are slightly better at Holcim, which reported an increased EBITDA (albeit just by 0.2%) as well as like-for-like sales that were up by 4.8% compared to the first half of 2013. However, its increased sales volumes and revenues could not prevent a fall in net income.

If one takes these results together, the first half of 2014 seems to been one of general stagnation for the future LafargeHolcim. It is important to remember that even more asset sales are inevitable, mainly from the weaker performer Lafarge. We are left to ponder how the new LafargeHolcim will perform in 12 months time.

At present, without serious improvement across all world economies, it is likely that LafargeHolcim (and other multinational producers) will continue to be on relatively shaky ground post-merger. The reality is that many of the promising markets that the company will serve are no longer rapidly-growing emerging economies, but are instead caught up in lower-than-expected growth (for example in Indonesia, India, China and Brazil), political disputes (for example in Algeria, Thailand, Eastern Ukraine and the Middle East) and other damaging events (for example the Ebola outbreak in West Africa). The global economy is certainly 'uneven,' as Holcim's CEO Bernard Fontana said in Holcim's results statement, but it also seems to be getting more uneven. Simple geographical and income groupings for countries, for example 'Far East = Profit,' are becoming increasingly out of date.

Navigating such a rapidly-changing world is, in one sense, less difficult for larger companies than smaller ones because risk can be spread over a much wider range of economies. However, larger companies are also slower to react to changes and the appropriateness of their responses may not be ideally tailored to individual markets. When LafargeHolcim comes to be, it will likely suffer also due to the inherent difficulties of merging two such large firms that may not see eye-to-eye on all issues. This will have to be done without some of its best assets and a lot of its 'run-time' will be dedicated to the merging process. In such an environment it is easier to be distracted from its main tasks: is it possible that this effect is already becoming apparent? As Lafarge and Holcim's latest results show, there is little room for deterioration in their results.

There is a key question: Is the LafargeHolcim first half EBITDA slide a sign of poor markets or related to preparations for the merger that shareholders will tolerate as they anticipate future riches? Will LafargeHolcim be profitable in the long-run?

Recovery in the European cement markets arrived slowly in 2013. Balance sheets at HeidelbergCement, Cemex, Italcementi, Vicat and Buzzi Unicem appear to have stalled into something less than the recovery that everybody wants. The picture is more stable in Western Europe but declining revenues have headed east.

The European Commission's Autumn 2013 Economic Forecast has summed it up well, predicting that the European Union's (EU) gross domestic product (GDP) would remain static in 2013. On the strength of the results seen so far that feels about right. The cement industry in Europe hasn't continued to decline but the 'recovery' is slow. Yet a recovery is happening on the strength of these financial results so far. Compared to some of the sales declines seen in 2012 this is good news.

With results from the big European-based cement producers Lafarge and Holcim due later in February 2014, here is a summary of the European situation.

HeidelbergCement's revenue has remained flat in 2013 at Euro13.9bn although its cement, clinker and ground-granulated blast-furnace slag (GGBS) sales volumes have risen by 2.6% to 91.3Mt. Compare this with the 8.7% bounce in revenue from 2011 to 2012. By region, the problem areas have now shifted from losses in Western and Northern Europe to losses in Eastern Europe and Central Asia. Market pickup in the UK has driven this turnaround, despite diminished sales volumes in Germany.

Similarly, Cemex's sales have also remained flat at US$15.2bn. Both of its European areas have improved their sales, with sales losses only reported for the Northern Europe region. Again, sales in the UK drove overall business with France starting to improve too.

Italcementi had it tougher in 2013 with its sixth consecutive drop in revenue since 2008. Just like HeidelbergCement, the problem regions for Italcementi have shifted east in 2013 from Western Europe to the group's Emerging Europe, North Africa and Middle East area. However Italcementi is losing revenue in Western Europe faster than HeidelbergCement, mainly due to the poor Italian market.

Elsewhere, Vicat reported that its consolidated cement sales fell by 4% to Euro1.11bn. Sales decline lessened in France and the rest of Europe even saw sales rise by 4% to Euro427m. Buzzi Unicem saw its cement sales volumes remain static in 2013 at 27.4Mt.

Overall it may not feel great but it's better than the cement industry news for Europe we've been used to in recent years. With the European Commission Economic Forecast suggesting a 1.4% rise in GDP in 2014, the next 12 months look more promising.

The third quarter results are in and signs of a recovery in the construction industry are present. Generally for the European producers, volumes of cement sold in the third quarter of 2013 have improved year-on-year compared to the figures for the first nine months of 2013. Although many of these third quarter sales changes are still negative it seems like the industry has turned a corner.

Lafarge reported that cement sales fell by 4% year-on-year to 102Mt for the first nine months in 2013. In the third quarter of 2013 sales remained stable year–on-year at 36.7Mt. Holcim saw its nine month sales fall by 3% to 104Mt while its third quarter sales remained stable at 36Mt. HeidelbergCement saw its nine month sales rise by 1% to 67.7Mt while its third quarter sales rose by 4% to 25.3Mt. Italcementi saw its nine month sales fall by 6% to 32.6Mt while its third quarter sales fell by 2% to 10.8Mt.

By region some of the differences between the European-based multinational cement producers have been telling. Lafarge, for example, is still down year-on-year on cement volumes sold in North America, denting the perceived wisdom of a strong North American recovery. However, profit indicators such as earnings before interest, taxes, depreciation and amortisation (EBITDA) have risen in that region, increasingly in the third quarter. Cemex and Holcim have done better in this region.

Notably, the unstable political situation in Egypt has also impacted the balance sheets for Lafarge and Italcementi. Lafarge reported that cement sales volumes fell by 27% for the first nine months of 2013, principally due to gas shortages, and 19% for the third quarter as the company started to substitute other fuels. Similarly, Italcementi saw overall cement and clinker sales drop by 11.2% in the nine months and 14% in the third quarter.

Meanwhile in China, Anhui Conch produced 86.2Mt for the nine months, a year-on-year increase of 12.1%. Overall revenues in China seem to have risen after decreases in 2012. Anhui Conch reported that its operating revenue rose by 15% to US$6.08bn for the first nine months and US$2.20bn for the third quarter of 2013. Analysts have pinned the return to profit to building in the country's eastern and southern provinces and the effects of government-led industry consolidation. Bucking this trend though, China National Building Materials (CNBM) saw its revenue rise by 37% to US$13.5bn for the first nine months of 2013 but its profit fell by 8.1% to US$542m.

Anhui Conch, Lafarge, Holcim, CNBM, Italcementi and HeidelbergCement all feature at the top of Global Cement's list of the 'Top 75 global cement companies' to be published in the December 2013 issue of Global Cement Magazine. Ahead of final publication we want to know whether readers agree with the rankings. Download our list (registration required) and let us know your comments by 1 December 2013.