Displaying items by tag: Tarmac

More positive news emerged from the UK cement industry this week with the news that Cemex is planning to restart the second kiln at its South Ferriby plant later in 2018. This marks the full recovery of the plant after a disastrous flood in late 2013 and it is an all round good news story. Around the same time the local government in Scotland approved the planning application for an upgrade to Tarmac’s Dunbar cement plant. That project involves installing a new cement grinding mill, a new cement storage silo and a rail loading facility.

Graph 1: Domestic cement, imported cement and other cementitious sales in the UK, 2001 - 2017. Source: Mineral Products Association.

The timing is interesting given the general uncertainty in the UK economy ahead of the UK exit from the European Union (EU). However, data from the Mineral Products Association (MPA) shows that total cementitious material sales (cement plus products made from fly ash and ground granulated blast furnace slag (GGBS)) reached 15.3Mt in 2017 from a low of 10.3Mt in 2009 following the financial crash. This isn’t as high as the 15.8Mt figures recorded in 2007 but it does mark a recovery. This masks to an extent the change in the market since 2007. Cement sales in 2017 at 10.2Mt were still below a high of 11.9Mt in 2008. The recovery has been driven by higher imports, 1.9Mt in 2017, and higher use of fly ash and GGBS products, which reached 3.2Mt in 2017.

Cemex and Tarmac are not alone in announcing projects. HeidelbergCement’s local subsidiary Hanson is upgrading its Padeswood plant with a new Euro22m mill. Irish slag cement grinding company Ecocem opened its import terminal at Sheerness in mid-2017 and French grinding firm, Cem'In'Eu, has also expressed interest in building a plant, in this case in London.

As discussed earlier in the year, new upgrade projects in the UK appear to carry an element of risk given the unknown status of its departure from the EU. Supply chains may be affected, companies are delaying investment and the value of Pound Sterling is falling. The collapse of construction services company Carillion also had a knock-on effect in the industry and, with major work on the Crossrail infrastructure project finishing, the industry has no major infrastructure projects in support. A quarterly graph of UK construction industry output volume by Arcadis shows almost uniform growth since mid-2012 although this started to flatten in 2017. A badly-handled Brexit (UK exit from the EU) could undo this growth.

All of this presents a picture of risk-adverse capital projects in the UK. The MPA figures help to explain the focus on grinding at Padeswood and Dunbar. The market has changed since 2007, with a growing focus on imports and secondary cementitious materials. Hence spending money on equipment to process these inputs makes sense. The decision to increase production at South Ferriby meanwhile depends on reviving existing equipment. Regional cement sales figures to 2016 from the MPA appear to indicate static demand in counties close to the plant (Yorkshire and Humberside) but sales have increased in the East Midlands and the East of England.

Just compare the current UK approach to the situation in Egypt. This week the head of the cement division of the Chamber of Building Materials described the decision to build the Beni Suef cement plant to local media as “not based on precise information” and that it had harmed local production. In case you had forgotten, that plant is one of the biggest in the world with six lines. The commentator may well have been representing smaller local producers but opening a 12Mt/yr plant in Egypt in these turbulent economic times marks a different approach to risk than the modest plant upgrades in the UK. Let’s wait and see who has the best approach.

UK: The planning department of East Lothian Council in Scotland has granted planning permission to an upgrade of Tarmac’s Dunbar cement plant. The work will include building a new cement grinding mill, a new cement storage silo and a rail loading facility. The work will also include a shed, belt conveyors pneumatic pipelines and associated works.

In its supporting statement the company said that the new cement mill was necessary to produce new grades of cement required for modern construction and the cement market. The proposed mill will replace two existing mills on the site and is intended to be more energy efficient and quieter than the existing mills. It added that the plant would benefits from rail sidings on both the south and north side of the East Coast Mainline railway line. At present trains are fed only on the south side using adjacent silos where train capacity is already fully used. Additional products are exported by road.

UK: Tarmac plans to restructure the distribution model for its cement and lime division. Following a strategic review it will move to a regional model for both bulk and packed cement distribution, which have previously operated on a national basis. Tarmac’s own fleet operations will handle around 50% of bulk cement and 20% of packed cement distribution, supported by five regional distribution providers selected through a procurement process.

“Our supply chain and logistics operations are crucial to maintaining Tarmac Cement and Lime’s position as the UK’s market leader. The new regional transport operating model will provide enhanced resilience, flexibility, service, cost and safety for our customers, who trust us to deliver the products they need to realise major projects,” said Mike Eberlin, managing director at Tarmac Cement and Lime.

Tarmac Cement and Lime’s regional distribution partners will be engaged on new five-year logistics contracts effective from December 2018. They are Abbey Logistics (bulk cement – Scotland), Pollocks (packed cement – Scotland & North), Lomas Distribution (bulk and packed cement – Central), Wincanton (bulk and packed cement – South West), Stobarts (bulk and packed cement – South East) and Proctors (packed cement – Barnstone).

Tarmac’s Lime & Powders operation will remain fully subcontracted on a national basis to Lomas Distribution (bulk lime and powders and lime tippers) and RR Andrews (powder tipper operations).

There will be no change to customer order arrangements.

Hillhead 2018 is on this week and where better to capture a feel of the UK’s quarrying and construction industries? For those that don’t know, Hillhead is a biennial show that takes place in a quarry in Derbyshire. The show bills itself as the largest quarrying, construction and recycling event in the world. A large scale UK show gives us the opportunity to look at the local cement industry and we did exactly that in the June 2018 issue of Global Cement Magazine with Edwin Trout’s feature on the UK cement sector in 2017 and 2018. Following on from that article we’ll pick up a few threads.

Graph 1: Domestic cement production in the UK, 1996 - 2016. Source: Mineral Products Association (MPA).

Cement production in the UK fell by 5Mt/yr during the financial crisis of 2007 - 2008. Since then, as Graph 1 shows, production has been growing almost uniformly. However, it may have reached a plateau in 2017, with the major producers complaining about a weakened market due to Brexit uncertainty.

Main points from a news angle are the rise of the Breedon Group with its acquisition of Ireland’s Lagan Cement in April 2018, investments at Hanson’s Padeswood cement plant and Tarmac’s Dunbar cement plant and a fairly static market reported by the major producers. Alongside this, Ireland’s Ecocem opened a terminal in Sheerness in June 2017 and, more recently, has just inaugurated its slag grinding plant on the other side of the English Channel at Dunkirk.

The decision by Breedon to straddle an impending UK-European Union (EU) border seems wise with Hanson’s parent company HeidelbergCement actively blaming Brexit for market uncertainty in the UK. The rise of Ecocem, a slag cement grinder and distributor, also seems to suit the atmosphere with its smaller, more nimble operation than a clinker producer. It’s into this situation that Hanson is reusing a mill from Spain for its Padeswood project and Tarmac is buying its mill from Cemengal, a manufacturer known for making modular mills that can be moved after installation if so desired.

Banging on about Brexit, and indeed Brexit uncertainty, can’t last forever and once clarity appears then the building industry can focus on various pressing issues. One is the country’s lack of residential housing supply. One possible solution for this is a new national planning policy. The government finished a consultation period in May 2018 for the National Planning Policy Framework (NPPF) and industry bodies like the Mineral Products Association (MPA) have been making their views known. The MPA worries that that the proposed changes will weaken the mineral planning system and threaten the replenishment of aggregate and other mineral reserves. It argues that to secure the essential minerals required to build all those new houses the government needs an, “...efficient and effective mineral planning system with up to date plans, well-resourced planning departments and good data, which are prerequisites, as is appropriate capacity and capability in the ministry to ensure the system is planned, monitored and managed.” Detractors may point out that once the NPPF gets sorted we can all get on with the job of actually, like, building things but, as ever, the MPA has its part to play in the process.

Another indicator for the resumption of ‘business as normal’ might be the number of exhibitors at a trade show like Hillhead. The oranisers say that the exhibitors have grown by 10% in 2018 from 2016. With a heatwave forecast, the group stages of the football World Cup continuing and live demonstrations ongoing there are worse places to be to ponder the state of the industry. Come and find Global Cement at our stand (PC45) in the main pavillion at Hillhead 2018 and tell us what you think.

UK: Tarmac’s Women in Cement group has held its first networking event with colleagues from across the company’s cement and lime business coming together to discuss key industry challenges and opportunities. The event was attended by team members from the businesses supply chain and logistics, customer service, health and safety and cement plant teams. It included a range of discussion topics and presentations, from personal protective equipment (PPE) and welfare facilities to profiling role models and opportunities to attract more women to pursue careers at Tarmac and in the wider construction industry.

“It has been fantastic to bring together colleagues from across the business to share their experiences and continue our work to collaborate and drive positive change. We’re looking forward to building and broadening activities across Tarmac and continuing to encourage people from all age groups, genders nationalities and ethnicities to be part of the debate and help to define opportunities for development and progress,” said Johanna O’Driscoll, Tarmac’s finance director.

The Women in Cement group is one of a number of diversity and inclusion initiatives across Tarmac. The company has partnered with organisations including the Taylor Bennett Foundation, Skillforce and the Career Transition Partnership, which all focus on supporting people from diverse backgrounds into jobs.

UK: Spain’s Cemengal is supplying a 0.5Mt/yr Plug & Grind Vertical mill to Tarmac’s Dunbar cement plant. Work started in April 2018 and the project is expected to be completed by July 2019. The unit follows the Plug & Grind product line’s modular format and it includes a FLSmidth OK Mill 37.3. The mill will be used to grind clinker at the cement plant although the subsidiary of CRH may also use the mill to grind slag. The order is Cemengal’s first Plug & Grind Vertical in Europe.

UK: Martin Riley has been appointed Senior Vice President of Tarmac. He will report to Ken McKnight, President Europe Heavyside. Riley was previously Managing Director, Aggregates and Asphalt at Tarmac. The appointment is part of the transition of the businesses acquired from Lafarge Holcim into the European Heavyside business of CRH.

In addition, the Tarmac Cement and Lime business will integrate into a new CRH business cluster consisting of UK Cement, Ireland and Spain, led by Oliver Mahon, Senior Vice President, who will also report to Ken McKnight. As part of this reorganisation the former CEO of Tarmac since 2013, Cyrille Ragoucy, will leave the business.

The news that Holcim and Lafarge are planning a merger should come as no great surprise to long-term observers of the industry. Such mega-mergers have been periodically mooted over the decades and have already come to pass.

Lafarge took its present form through many acquisitions, but it was the mega-merger with Blue Circle Industries that brought it to pre-eminence. That deal was hard fought, rapidly becoming a hostile takeover after the then-CEO of Blue Circle, Richard Haythornthwaite, decided that the amount that the CEO of Lafarge, Bertrand Coulomb, was offering for his company was not high enough.

A year of claims, counter-claims, offers, rebuffs and haggling ensued, leading to a higher offer that was eventually accepted by the Blue Circle board. However, as Lafarge was a Euro-denominated company and Blue Circle was resolutely British (and was thinking in UK pounds sterling) after exchange rate variations had been taken into account, Lafarge paid less after a year than it had offered in he first place. The British CEO got a big pay-off and went on to greater glory, having appeared to extract a great deal more money (in GB pounds) for his shareholders. Apparently they teach this as a case study in business schools.

Mega-mergers have also shaped other giants in the industry. For example Chichibu-Onoda and Sumitomo-Osaka came together to make Taiheiyo Cement and Ciments Français was added to Italcimenti, although in this last case they still retain their separate identities. Often the deals amount to an accretive takeover by one larger company of a smaller one, but transformative deals consisting of a 'merger' of 'equals' also happen in the cement industry, and with good reason. The merging of research efforts; the optimisation of management; the rationalisation of procurement strategies: all of these will immediately save plenty of money.

However, it's on the financial side that these larger merged companies can sometimes see the most benefit. The cost of borrowing money is inversely proportional to the size of the company (and of the sums involved); the colossal sums demanded by overpaid and greedy bankers will diminish in proportion if the sums involved are larger. So, the cost of borrowing money to be able to invest in takeovers or for capital expenditure will reduce as a proportion of overall cost.

There are other significant potential savings as well, from operational synergies, although these can be harder to quantify and - critically - harder to retain once the competition technocrats have run their slide rules over the proposed deal. They generally do not like too much of the market ending in the hands of too few players.

A good case in point is the recent mega of Tarmac and Lafarge in the UK. To allow the deal to take place the merged company was obliged to sell off one of its key assets, the Hope cement plant, which is now owned and operated by newcomer Hope Construction Materials. Even after the deal has been completed, the market regulator is considering the possibility of making the merged company sell additional facilities, something that strikes Global Cement as 'just not on.'

However, with operations in 90 countries, Lafarge and Holcim can expect to face competition scrutiny in at least 15 countries including Brazil, Canada, Ecuador, France, the UK, the US, Morocco and the Philippines. Meanwhile, in Serbia it has been reported the two companies have a combined market share of 97% across all their business lines!

Lafarge and Holcim have overlapping facilities and distribution networks in a number of countries, and any merged company will probably be required to sell some of them to its competitors. Other companies might be licking their lips at the prospect, as usual CRH is already being lined up in the Irish press, but the units will be sold at a market rate - and not a penny less. It might be that the merged company cannot control which facilities are sold, meaning that they might end up with a less than optimised system. Not so good after all.

If the deal goes through, it will create a Europe-based behemoth with a production capacity of over 200Mt, enough to retain a place on the global top 10 companies with the ever-rationalising and concatenating Chinese companies. When the news first broke we asked what might the new company called? We liked a short mash-up of the two names, like Lolcim (a humorous nod to today's 'youth-speak' perhaps) or Hafarge. However, the level of preparation backing the merger plan soon became clear from financial due-diligence right down to a new name: LafargeHolcim.

Yet for all this co-ordinated work from companies that were meant to be competitors until as recently as March 2014, we should remember what happened to the proposed BHP Billiton-Rio Tinto takeover. Valued at a high of US$170bn it shrivelled up as the global economy collapsed in 2008 amidst concerns from regulators. The idea may be out there but LafargeHolcim has a long way to go before it actually exists.

UK: Lafarge and Anglo American have appointed the chairman, chief executive office (CEO) and CFO of their joint-venture in the UK. Jamie Pike is appointed as non-executive Chairman, Cyrille Ragoucy as CEO and Guy Young as CFO of the joint-venture. The appointments are subject to the completion of the joint-venture and final clearance from the UK Competition Commission. It is anticipated that the joint-venture will commence operations in early 2013.

Jamie Pike, aged 57, is the non-executive chairman of Lupus Capital, a leading international supplier of building products to the door and window industry, RPC Group, a leading international supplier of rigid plastic packaging and MBA Polymers, a private US plastics recycling business. He was chief executive of Foseco, an international business serving the foundry and steel-making industries, until its acquisition by Cookson Group in April 2008. He led the buy-out of Foseco from Burmah Castrol in 2001, which culminated in flotation on the main market in 2005.

His early career was as a consultant with Bain and Co and A T Kearney before joining Burmah Castrol in 1991. He rose to chief executive of Burmah Castrol Chemicals before leading the Foseco buy-out. Pike was educated at the University of Oxford, holds an MBA from INSEAD and is a member of the Institute of Mechanical Engineers.

Cyrille Ragoucy, aged 56, is currently senior vice president for Health and Safety at Lafarge. From 2005 to 2009 he was CEO and regional president for Lafarge's cement operations in China (Lafarge Shui On Cement) where he was responsible for 25 plants and 10,000 people. Between 1999 and 2005 he was regional president for Aggregates, Concrete, Asphalt and Paving for Lafarge in Eastern Canada. Ragoucy joined the Lafarge group in 1998 as vice president Cement Strategy for Lafarge North America.

Guy Young, aged 43, has been CFO of Tarmac since 2010 with responsibility for Tarmac's financial, IT and legal operations as well as the pre-integration planning for the joint venture. Guy has been with Anglo American for 15 years in a variety of roles, including CFO of Scaw Metals, Group Procurement and within the CEO's Office. Guy was educated at the University of Cape Town and qualified as a chartered accountant after doing articles at Deloitte.

Back in May 2012 we asked who would buy Lafarge's Hope cement plant in Derbyshire. The answer was, of course, a company with an Indian background: Mittal Investments.

The sale was a condition of the UK Competition Commission in response to the proposed joint venture between Lafarge and Tarmac. It also included 172 ready mix concrete plants, five aggregates quarries, two asphalt plants, one marine aggregates wharf, one rail-linked aggregates depot and the sale of Tarmac's 50% ownership interest in Midland Quarry Products. Mittal has paid Euro339m for the assets, including up to Euro37m dependent on the performance of the assets over the next three years.

At the time we predicted that it might be a company from a fast growth area, with excess cash and a desire for technical knowledge, perhaps from China or the Middle East. Far more fitting for the UK, however, was a company with Indian roots, especially considering the cultural links between the two countries dating back to the colonial era.

Originally from India but based in London, owner Lakshmi Mittal runs steel multinational ArcelorMittal and he frequently tops UK rich lists. The Mittal family even own shares in Premier League football team Queens Park Rangers. The sale follows acquisitions of well-known British brands such as car manufacturers Jaguar Land Rover and British Steel/Corus to the Tata Group.

The sale to Mittal leaves the UK cement market with four companies. Mittal's new plant in the UK joins Lafarge's four plants, Cemex's two plants, Hanson Cement's three plants and Tarmac Buxton, Lime & Cement's single plant, which is soon to join with Lafarge's plants in the joint-venture. Geographically the sale to Mittal breaks up a concentration of three Lafarge and Tarmac plants in Derbyshire in the southern Pennines. Presumably this was the aim of the Competition Commission in the first place.

Selling the Hope plant makes sense for Lafarge and Tarmac. The sale leaves Lafarge's generous spread of plants across the UK in key locations except the south of England. The combined cement production capacity of Lafarge and Tarmac will fall from 4.35Mt/yr to 3.85Mt/yr. The reduction may actually help Lafarge, given its 9% fall in cement sales volumes so far in 2012 and the pessimistic outlook for the UK cement sector in 2013. The reduction in capacity manages this decline closely at 11%.

The UK cement industry has likely become more competitive with the range between the production capacities of the four companies reduced. However the price Lafarge and Tarmac have paid the Competition Commission for their joint venture was almost certainly worth it. Lafarge-Tarmac retains Lafarge's dominant position in a streamlined shape now matching the market reality.

Update: This article was corrected on 27 November 2012. The UK temporarily has five cement producers until the Lafarge-Tarmac joint venture gains approval from the UK Competition Commission. Then it will return to four.