Displaying items by tag: Sri Lanka

Sri Lanka: LafargeHolcim has signed an agreement with Siam City Cement to sell Holcim Lanka for US$400m. Holcim Lanka operates one integrated plant and one grinding plant in the country. The transaction is expected to close in the third quarter of 2016.

The proceeds from the sale of Holcim Lanka will be used by Lafarge Holcim to further reduce debt. The Sri Lanka sale follows the divestment of Lafarge India to Nirma that was announced in mid-July 2016. The group says it has now secured three-quarters of its targets to reduce its debt by Euro3.2bn in 2016.

Sri Lanka: The Industry and Commerce Ministry has queried the sale of Holcim Lanka, LafargeHolcim’s business on the island. Industry and Commerce Ministry Secretary TMKB Tennakoon contacted Holcim Lanka in March 2016 to point out that the government has not benefitted from deals with the cement producer to allow it to build a quarry and that it can control attempts to sell some of its assets, according to the Daily News newspaper.

Tennakoon has raised the issue that the Sri Lankan government is not making profit out of a lease agreement, started in 1993, which gave Holcim Lanka mineral rights to a quarry in Aruwakkalu, Puttalam. In addition the cement producer was granted a 12-year tax holiday on funds borrowed from within Sri Lanka, the ministry claims. The ministry has informed Holcim Lanka that it is in the process of evaluating the terms and conditions of the agreement ‘in order to gain more benefits to the industry and the country’ and warns Holcim Lanka that in the terms of Section 4(b) of the agreement, Holcim Lanka cannot transfer or sub-let the premises without the consent of the government-owned Cement Corporation.

LafargeHolcim announced that it was leaving the cement business in Sri Lanka in early June 2016. The Industry and Commerce Ministry was expressed its interest in buying the local company.

Sri Lanka: The Industry and Commerce Ministry has expressed its interest in buying the local operations of LafargeHolcim. Government sources have said that discussions are now on-going within the administration. The multinational cement producer announced in early June 2016 that it was selling its subsidiary Holcim Lanka. The company was originally state-owned before it was privatised.

"The government is willing to negotiate to buy it at a reasonable price. This is the only integrated cement plant in Sri Lanka. The limestone quarry in Puttalam belongs to the Cement Corporation and it had been leased out to Holcim," said a spokesman of the ministry quoted by the Daily News newspaper. He added that no final decision on the matter has been taken yet. The government also hopes that, if it successfully purchased the company, it could reduce the price of cement in the country.

Local press reports that seven bidders have made offers for Holcim Lanka. These include companies from UAE, Indonesia, Thailand, China and Sri Lanka. Holcim Lanka’s assets include two packing plants in Galle and Trincomalee, a cement plant in Puttalam and a cement grinding plant in Galle.

When a small cement market sits just off the coast of one of the world’s biggest producers, it’s not a recipe for a lot of column inches. Sri Lanka’s cement market, is particularly small, ranked 128th out of 141 clinker producing nations according to the Global Cement Top 100 Report 2015, and is dwarfed by a very dominant neighbour in India. Therefore, when two stories about plant projects and divestments came in from Sri Lanka this week, our interest was suitably piqued.

The first story came from global giant LafargeHolcim, which announced the planned divestment of its 0.6Mt/yr integrated Holcim Lanka plant at Puttalam, its 1.0Mt/yr grinding plant in Galle and associated packing facilities. The second story came from South Korea’s AFKO Group GMEX (AFKO), which has expressed strong intentions to reopen the Kankesanthurai plant in the north of the country.

LafargeHolcim stated that its move was part of its wider divestment strategy following the 2015 merger of Lafarge and Holcim. Considering that the company currently controls 1.6Mt/yr of Sri Lanka’s 3.6Mt/yr cement capacity (around 44%) the potential ramifications are big - A huge position is up for grabs.

Local newspaper The Nation stated that three locally-owned groups were already circling the assets as of Saturday 4 June 2016, but it’s still early days. A major player could easily step in to grab some high-quality assets in this rapidly-growing market, which grew by 4.5% in 2014 and is investing strongly in infrastructure. With its recent history or major purchases, CRH could certainly be interested. Larger Indian and Pakistani players, stifled by continued overcapacity at home, could also be in line to snap up the assets.

Up in the north, the AFKO project sounds massive. It could also have large implications for the shape of the Sri Lankan cement sector but there is a lot of work to be done. The Kankesanthurai plant produced its last cement in 1991 as the civil war raged in the north of Sri Lanka. It had a capacity of just 0.12Mt/yr at that time. However, AFKO chairman Keun Young Lee stated that the company was, “Ready to enter with US$450m as a start.” This is far more than the amount needed to re-start a small, presumably wet process cement plant. The amount strongly suggests an entire new, state-of-the-art facility, but no capacity has been announced.

AFKO sounds very serious but other projects have previously run into trouble on the island. A restart at Kankesanthurai has previously been mooted twice, once by a domestic player and once by a company from the UAE. Meanwhile Thatta Cement has suspended construction of a US$15m, 0.1Mt/yr grinding plant at Rajapaksa, Hambantota. It will be very interesting to see how the AFKO project develops over the coming months – It will also be seeing how the eventual price-tag for the project compares with the revenue that LafargeHolcim raises from its own divestment.

While Sri Lanka remains a small player, its cement sector is very similar to that of India when we take populations into account. Both have room for expansion. India has 310Mt/yr (according to the Global Cement Directory 2016) but, with a population of over 1.25 billion, it has a per-capita capacity of around 250kg/capita. Sri Lanka, with 3.6Mt/yr of capacity and 20.2 million inhabitants, comes in at just under 200kg/capita. There is clearly room for growth in both of these figures and further projects could yet be on the horizon for Sri Lanka. If they play their cards right, AFKO and the successful bidder for the LafargeHolcim assets could be in a great position to benefit from the island’s strong continued growth.

Sri Lanka: South Korean conglomerate AFKO Group GMEX has expressed interest in reopening the Kankesanthurai cement plant located in the Northern Province of Sri Lanka, the country’s Industry and Commerce Ministry has said, according to the Daily Mirror.

“AFKO specialises in cement projects. We are keen to partner in the Kankesanthurai Cement Project and are ready to enter with US$450m as a start. We shall also bring in all the necessary machinery and technology and can start from scratch. We only need Sri Lanka’s land and labour,” said AFKO Group GMEX chairman Keun Young Lee at a meeting with Industry and Commerce Minister Rishad Bathiudeen in Colombo. Lee also expressed interest in cement production elsewhere in Sri Lanka.

AFKO intends to start a feasibility study shortly. Ssangyong C&T is the favoured engineering company to start construction at the site. AFKO Group, which merged with Korea’s multinational Hyundai Group in 2008, runs its own construction and cement projects in Africa and elsewhere.

The Kankesanthurai cement plant started operations in 1950 under the Department of Industries and was converted to a public corporation in 1956, being named as Kankesan Cement Works. It closed in 1991 due the civil war. At that time it had a production capacity of 115,000t/yr. In 2011 – 2012 Sri Lanka Cement Corporation and Lanka Cement Limited were planning to resume bagging at the plant. Previously, UAE-based cement company Ras Al Khaimah had been linked to a US$100m investment plan in the plant.

Sri Lanka: LafargeHolcim is exiting its cement business in Sri Lanka, according to the EconomyNext financial news service. A spokesperson said the decision to sell its subsidiary Holcim Lanka was part of a larger global divestment strategy. The company operates the country’s only integrated cement plant, a cement grinding plant and a bagging plant.

Indonesia: Holcim Indonesia plans to focus its exports of cement towards Australia, Sri Lanka and Bangladesh in 2016 amidst unstable demand at home. Holcim Indonesia’s chief financial officer Mark Schmidt emphasised the company’s increasing desire to export more whilst not mentioning any specific export sales targets in comments that were reported by the Jakarta Post.

Gary Schutz, the president-director of Holcim Indonesia, reinforced the importance of government spending plants towards meeting the country’s cement demand in a press release published after the company’s May 2016 annual general meeting. “We are concerned that government spending plans – especially those for infrastructure – should be realised on time and in full this year. Infrastructure alongside housing development are both vital catalysts in achieving planned growth rates for the economy. It is equally important in order that Indonesia stays competitive with in the Association of Southeast Asian Nations (ASEAN) Economic Community.”

The Indonesian subsidiary of LafargeHolcim increased its cement production capacity to 15Mt/yr from 11Mt/yr after acquiring Lafarge Cement Indonesia and starting operations at the Tuban II plant in East Java.

Sri Lanka: Holcim Lanka has inaugurated a transport model for the transportation of its raw materials. In a public-private partnership between Holcim Lanka and the government, the state railway will transport raw materials by rail from the port of Trincomalee to the Mahawa railway station. The company's dedicated trucks will then transport the materials to the Puttalam cement plant. The inauguration took place at the China Bay station in Trincomalee, according to the Daily news newspaper.

“The successful launch of this phase would not have been possible without the support received from the Ministry of Transport," said Holcim Lanka Procurement and Logistics Director Charith Wijendra.

Environmental and efficiency improvements of the new model include using Supramax bulk carriers instead of smaller ships, using dedicated containerised trucks to reduce spillages and cut journeys and a reduction in the use of the railway network.

Sri Lanka: Tokyo Cement has resumed importing clinker from Japan. The clinker will be used to make the producer’s NIPPON-PRO branded cement.

"We at Tokyo Cement having identified the demand for a high performance cement tied up with a leading Japanese manufacturer to import clinker with high specifications," said Dashantha Udawatte, Group Marketing Manager at Tokyo Cement.

Tokyo Cement operates a 2.4Mt/yr cement grinding plant in Trincomalee.

Sri Lanka: Harsha Cabral was appointed as the Director of Tokyo Cement Company Lanka one year ago on 1 December 2014. Cabral was appointed to the Board in March 2009