Displaying items by tag: Strategy

Brazil: Votorantim Cimentos recorded sales of 7.7Mt of cement in the first quarter of 2025, up by 2% year-on-year. Revenues rose by 1% year-on-year in local currency terms, to US$998m. The producer partly attributed the growth to its on-going geographical diversification. Nonetheless, its earnings before interest, taxation, depreciation and amortisation (EBITDA) fell by 14% year-on-year to US$107m, resulting in a net loss of US$58m. Votorantim Cimentos invested US$97.6m in capital expenditure during the quarter, including commencing kiln upgrades at its Alconera and Málaga plants in Spain, up by 35% year-on-year. It expects to commission its newly expanded Salto de Pirapora and Edealina cement plants in Brazil later in 2025 and in early 2026 respectively.

CEO Osvaldo Ayres said “Our financial strength and discipline in capital allocation have enabled us to navigate this volatile global environment. At the same time, we continued to maintain our focus on the long term through our programme of investments in capacity expansion, structural competitiveness and acceleration of new businesses.”

Portugal: Cimpor has presented its decarbonisation plan during a visit from the Portuguese Minister of Economy, Pedro Reis, to its Alhandra cement plant. The plan involves a €360m investment across Cimpor’s Alhandra, Souselas and Loulé plants to achieve carbon neutrality by 2050. Current projects at the Alhandra plant include a €110m investment in alternative fuels and two €35m investments in a replacement mill and new clinker cooler. The company estimates a CO₂ emissions reduction of 190,000t/yr and a 16GWh energy saving. Similar initiatives are underway at the Souselas plant, such as the conversion of a kiln to produce calcined clays, which could reportedly cut 70,000t/yr of CO₂.

Cevat Mert, CEO of Cimpor for Portugal and Cape Verde, said “We are committed to investing in Portugal for the environment, sustainability and technology, and our projects are going at full speed. I would like to emphasise that the government´s infrastructure investments, support and incentives, particularly for the environment and sustainability, need to gain further momentum, and we trust in the minister’s support on prioritising this matter. I am confident that together we will continue to build a cement sector that Portugal can be proud of.”

US: Dragon Products reportedly plans to lay off six employees at its Thomaston, Maine, cement plant later in 2024, in the plant’s on-going transition from cement production to distribution only. This will reduce the plant’s total employees to 20, down by 76% from 85 at the start of the year. Local press has reported that rising operating costs, including for energy and transport, led to the move.

The Thomaston plant continues to process ‘residual’ raw materials and has begun implementation of its new distribution strategy, taking delivery of 30,000t of bagged cement via the port of Searsport. A second delivery is scheduled for October 2024.

The mountainous eastern shore of the Adriatic Sea and its hinterlands in Europe’s Balkan Peninsula have one of the world’s highest densities of countries: six, across a broad equilateral triangle of 212,000km². All six states – Albania, Bosnia & Herzegovina, Kosovo, Montenegro, North Macedonia and Serbia – are historically characterised by political non-alignment, carrying over from the Cold War period, and all the more notable for the presence of the EU to the north (Croatia, Hungary and Romania) and east (Bulgaria and Greece).

A nine-plant, 9Mt/yr local cement sector serves the 16.8m-strong population of the unconsolidated ‘bloc.’ Albania has 2.8Mt/yr (31%), Serbia 2.7Mt/yr (30%), Bosnia & Herzegovina 1.6Mt/yr (18%), North Macedonia 1.4Mt/yr (15%) and Kosovo 500,000t/yr (6%), while Montenegro has no cement capacity – for now. Altogether, this gives this quarter of South East Europe a capacity per capita of 539kg/yr. The industry consists entirely of companies based outside of the region. Albania’s two plants are Lebanese and Greek-owned (by Seament Holding and Titan Cement Group respectively). Titan Cement Group also controls single-plant Kosovo and North Macedonia, and competes in the Serbian cement industry alongside larger and smaller plants belonging to Switzerland-based Holcim and Ireland-based CRH, respectively. Lastly, Bosnia & Herzegovina’s capacity is shared evenly between Germany-based Heidelberg Materials and Hungary-based Talentis International Construction, with one plant each.

Lafarge Srbija, Holcim's subsidiary in Serbia, announced plans for its second plant in the country, at Ratari in Belgrade, last week. No capacity has yet emerged, but the plant will cost €110m, making something in the region of the country’s existing 0.6 – 1.2Mt/yr plants seem likely. This would give Serbia over a third of total capacity in the Central Balkans and twice the number of plants of any other country there, expanding its per-capita capacity by 22 – 44%, from a regionally low 408kg/yr to 500 – 590kg/yr.

In announcing the upcoming Ratari cement plant, Lafarge Srbija laid emphasis on its sustainability. The plant will use 1Mt/yr of ash from the adjacent Nikola Tesla B thermal power plant as a raw material in its cement production. In this way, it will help to clear the Nikola Tesla B plant’s 1600 hectare ash dumps, from which only 180,000t of ash was harvested in 2023. Circularity has been front and centre of Holcim’s discussions of its growth in Serbia for some time. When Lafarge Srbija acquired aggregates producer Teko Mining Serbia in 2022, the group indicated that the business would play a part in its development of construction and demolition materials (CDM)-based cement and concrete.

Holcim’s Strategy 2025 growth plan entails bolt-on acquisitions in ‘mature markets,’ backed by strategic divestments elsewhere. Other companies have been more explicit about a realignment towards metropolitan markets, above all in North America, at a time when they are also diversifying away from cement and into other materials. Just why a leading producer should look to build cement capacity in Serbia warrants investigation.

Serbia is the only Central Balkan member of Cembureau, the European cement association. In a European market report for 2022, the association attributed to it the continent’s fastest declining cement consumption (jointly with Slovakia), down by 11% year-on-year. Like the rest of Europe, Serbia is also gradually shrinking, its population dwindling by 0.7% year-on-year to 6.62m in 2023, which limits hopes for a longer-term recovery. Serbia remains the largest country in the Central Balkans, with 39% of the total regional population.

Several factors have compounded Serbia’s difficulties as a cement-producing country. Firstly, like the Nikola Tesla B thermal power plant, its kilns run on coal. 50% of this coal originated in Russia and Ukraine in 2021, causing the entire operation to become ‘imperilled’ after the former’s brutal invasion of the latter in February 2022, according to the Serbian Cement Industry Association. In planning terms, this was a case of putting half one’s eggs in two baskets – and dropping them both.

Secondly, Serbia’s choice of export markets is mainly confined to either the EU or global markets via the River Danube, Black Sea and Mediterranean. Either way, it is in competition with a cement exporting giant: Türkiye. Serbia sold €19.7m-worth of cement in the EU in 2023, up by 63% over the three-year period since 2020 – 31% behind Türkiye’s €28.8m (more than double its 2020 figure).¹ One other Central Balkan country had a greater reliance on the EU market: Bosnia & Herzegovina. It exported €48.4m-worth of cement there, quadruple its 2020 figure and behind only China (€133m) and the UK (€54.7) in cement exports to the bloc by value.

Bosnia & Herzegovina’s cement industry underwent a different permutation at the start of 2024: an acquisition, replacing one EU-based player with another. Lukavac Cement, which operates the 800,000t/yr Lukavac cement plant in Tuzla, changed hands from Austria-based building materials producer Asamer Baustoffe to Hungary-based property developer Talentis International Construction. Talentis International Construction belongs to one of Hungary’s major family-owned conglomerates, Mészáros Csoport.

Besides Central Europe, Balkan countries have found a ready source of investments in the past decade in China. In construction alone, Chinese investments total €13.2bn in Serbia, €2.4bn in Bosnia & Herzegovina, €915m in Montenegro and €650m in North Macedonia.² This can be a booster shot to all-important domestic cement markets, but has some risks. Montenegro previously faced bankruptcy after Export-Import Bank of China began to call in an €847m loan for construction of the still upcoming A1 motorway in the country’s Northern Region. This did not put off the Montenegrin government from signing a new memorandum of understanding (MoU) with China-based Shandong Foreign Economic and Technical Cooperation and Shandong Luqiao Group for construction of a new €54m coast road in the Coastal Region in mid-2023.

In Montenegro, UK-based private equity firm Chayton Capital is currently funding a feasibility study for a partly state-owned cement plant and building materials complex at the Pljevlja energy hub in the Northern Region. Along with an upgrade to the existing Pljevlja coal-fired power plant, the project will cost €700m.

In 2026, EU member states will begin to partly tax third-country imports of cement and other products against their specific CO₂ emissions, progressing to the implementation of a 100% Carbon Border Adjustment Mechanism (CBAM) by 2034. Montenegro led the Central Balkans’ preparations for the EU’s CBAM roll-out with the introduction of its own emissions trading system in early 2021. Bosnia & Herzegovina will follow its example by 2026, but other countries in the region have struggled to conceive of the arrangement except as part of future EU accession agreements.

Based on the average specific CO₂ emissions of cement produced in the EU, the World Bank has forecast that exporters to the bloc will be disadvantaged if their own specific emissions exceed 5.52kg CO₂eq/€.³ By contrast, any figure below this ought to offer an increased competitive edge. Albanian cement has average emissions of 4.71kg CO₂eq/€, 15% below ‘biting point’ and 13% below Türkiye’s 5.39CO₂eq/€. Albania’s government consolidated its anticipated gains by quintupling the coal tax for 2024 to €0.15/kg. The figure is based on the International Monetary Fund’s recommended minimum CO₂ emissions tax of €55.80/t, 21% shy of the current EU Emissions Trading Scheme (ETS) credit price of €70.49/t.⁴

The Central Balkans is a region of apparently slow markets and industry growth regardless – to 11 cement plants, following the completion of current and upcoming projects. A recurrent theme of capital expenditure investments and the way investors talk about them may help to explain this: sustainability. Looking at the mix of technologies in the current nine plants, these include wet kilns and fuels lines built for conventional fossil fuels. This is not to presume that any given plant might not be happy with its existing equipment as is. Nonetheless, the overall picture is of a set of veteran plants with scope to benefit from the kind of investments which all four global cement producers active in the region are already carrying out elsewhere in Europe. Such plans may already be in motion. In late 2023, Titan Cement Group’s North Macedonian subsidiary Cementarnica Usje secured shareholder approval to take two new loans of up to €27m combined.

As the latest news from Serbia showed, taking care of existing plants does not preclude also building new ones. The cement industry of the Central Balkans is finding its position in the new reduced-CO₂ global cement trade – one in which old and new work together.

References

1. Trend Economy, ‘European Union – Imports and Exports – Articles of cement,’ 28 January 2024, https://trendeconomy.com/data/h2/EuropeanUnion/6810#

2. American Enterprise Institute, 'China Global Investment Tracker,' 3 February 2024 https://www.aei.org/china-global-investment-tracker/

3. World Bank Group, ‘Relative CBAM Exposure Index,’ 15 June 2023, https://www.worldbank.org/en/data/interactive/2023/06/15/relative-cbam-exposure-index

4. Ember, 'Carbon Price Tracker,' 26 August 2024, https://ember-climate.org/data/data-tools/carbon-price-viewer/

Thailand: Chair of the Thai Cement Manufacturers Association (TCMA), Dr Chana Poomee, announced the company’s new strategy, called 'TCMA Synergising the Actions toward Net Zero 2050'. This strategy aims to drive the cement industry towards clean energy transition, connect with global green funds and address climate change.

The vision involves four key missions for 2024-2026, including developing low-carbon cement, enhancing resource-efficient mining practices, building an integrated waste-to-value ecosystem, and transitioning to clean energy.

The TCMA also aims to reduce its CO₂ emissions by 6.9Mt/yr by 2030. Collaborations with various partners, including the Thailand Fellowship Cement Manufacturers and the Thai Bankers Association, are planned to leverage innovation and government policy support.

Mexico: Cemex reported sales of US$17.4bn in 2023, up by 8% year-on-year from 2022 levels. Meanwhile, the group’s operating earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 20% to US$3.35bn. The producer said that strong product pricing in all markets and slowing costs inflation compounded the positive effects of its growth investment strategy. On a consolidated basis, Cemex’s cement sales volumes fell by 6% to 51.7Mt from 55.1Mt. They rose by 3% in Mexico but fell by 10% in Europe, Middle East, Africa and Asia, by 3% in South and Central America and the Caribbean and by 13% in the US.

Chief executive officer Fernando González said "I am pleased to announce that 2023 is a great year for our company where we delivered not only great results and recovered from the extraordinary inflationary pressures of the last few years, but also continued executing against our ambitious decarbonisation commitments, reducing our CO2 emissions by 4% year-on-year and by 13% since 2020. Despite the significant macro challenges of the last four years, we have proven not only the resilience of our business model but also our ability to pivot and adjust rapidly to changing global conditions. This foundation gives us additional flexibility in capital allocation, where we continue to accelerate investments in our bolt-on growth strategy, initiate a sustainable return programme for shareholders and bolster our capital structure."

World: The Global Cement and Concrete Association (GCCA) has signed a new agreement with the China Cement Association (CCA). The agreement constitutes an historic ‘partnership pledge’ to accelerate cement decarbonisation globally in 2024 – 2026. The partners says that their collaboration will contribute to the development and launch of the upcoming China Cement Carbon Neutrality Roadmap. Equipment supplier Sinoma International Engineering and the European Cement Research Academy (ECRA) will also help to develop the roadmap. The GCCA previously launched its own global net zero roadmap in 2021. Together, GCCA and CCA members account for 90% of global cement production in capacity terms.

GCCA CEO Thomas Guillot, said “The world needs leadership and collaboration like never before, especially on addressing the key issue of our time, climate change. This agreement between the China industry and the global industry is a signal to the world that we stand ready to deliver the essential decarbonised building materials that our planet needs. Cement and concrete enable the key infrastructure, thriving and resilient communities, clean water, safe homes and the shift to clean energy that are essential to a future sustainable world.”

CCA Executive president Kong Xiangzhong said “This important agreement marks a win-win cooperation, and shows where we can collaborate effectively to bring insights, technical know-how and greater focus to our shared decarbonisation mission. I am sure this will create a mutually-beneficial and long-term partnership that will be crucial in building a more sustainable world.”

Denmark: FLSmidth's cement business recorded preliminary, unaudited sales of US$871m in 2023, down by 59% year-on-year from US$2.14bn in 2022. The business contributed 25% of the group’s consolidated sales of US$3.5bn. FLSmidth had a total order intake for the year of US$3.11bn, toward which the cement business contributed US$711m (23%). The supplier said that its results were in line with guidance. It now expects its cement business to generate US$580 – 653m (19 – 23%) of total group sales of US$2.9 – 3.12bn in 2024.

FLSmidth said “We expect the short-term outlook for the cement industry to remain impacted by macroeconomic uncertainty. The guidance for 2024 reflects the ongoing execution of the GREEN’26 strategy, continued business simplification and product portfolio pruning, including the expected closing of sale of the MAAG gears and drives business during the first quarter of 2024.”

Rwanda: South Africa-based PPC has completed the sale of its 51% stake in the Rwandan cement producer to Kenya-based Devki Group subsidiary National Cement, for US$42.5m. The divestiture advances PPC's strategic exit of Central and East Africa. As a result, the group's financial position is now cash positive. It had previously reduced its debt by 50% to US$20.3m from US$40.7m between March 2020 and September 2023.

PPC CEO Matias Cardarelli said "I am pleased with the timely completion of the sale of our stake in Cimerwa. The disposal allows us to focus on our core Southern African markets, where we see opportunities to drive improved profitability and secure a more sustainable return on capital."

Brazil: Votorantim Cimentos plans to invest US$1bn in expanding its Brazilian operations in the period up to the end of 2028. US$304m-worth of the investments are already underway at the start of 2024. Reuters has reported that the investments include cement plant projects to raise Votorantim Cimentos’ Brazilian cement production capacity by 8.8% to 37Mt/yr. These include a US$162m investment in a 20% capacity expansion to its Votorantim cement plant and a US$60.8m, 1Mt/yr expansion to its Salto de Pirapora plant. Further aims are to ensure structural competitiveness, raise energy efficiency and digitise operations, including applying artificial intelligence (AI) to freight. The producer expects its earnings before interest, taxation, depreciation, and amortization (EBITDA) to eventually rise by US$263/yr between 2023 and 2028 as a result.