Displaying items by tag: Thailand

Thailand: Siam Cement (SCG) has recorded a profit of US$2.64bn in 2019, down by 13% year-on-year from US$3.05bn in 2018. Revenue fell by 8.5% to US$14.1bn from US$15.4bn.

Thailand: Siam Cement Group’s concrete and aggregates division SCC Concrete Products and Aggregates (CPAC) has entered into a joint venture agreement with Swedish digitisation specialist BIMobject for the formation of BIMobject Thailand Co., Ltd. (BIMobject TH) on a 51:49 basis in favour of CPAC. This will provide building information modelling (BIM) - a service platform for use in conceptual design, material selection, and construction simulation of customers’ projects. Siam Cement Group president and CEO Roongrote Rangsiyopash said, “This is in line with SCC’s strategic plan to extend its breadth of innovative construction solutions.” The joint venture will have US$170,000 registered capital.

Thailand: Siam City cement has appointed Benjamin Birks to its board of directors. The appointment will take effect on 1 October 2019. Birks will also assume membership of the company’s Nomination and Compensation Committee (NCC).

The publication of CNBM’s financial results presents a good opportunity to take stock of the Chinese cement industry in the first half of 2019. Looking at the big picture first, cement sales rose by 5% year-on-year to 1.03Bnt in the first half of 2019 from 0.98Bnt in the same period in 2018. Graph 1 below shows the sales over the last five years since 2014. Generally, sales are decreasing each year but there has been some variation in the half-year periods.

Graph 1: Cement sales in China, 2014 – 2019. Source: National Bureau of Statistics of China.

As the China Cement Association (CCA) pointed out in its summary for the first half of 2019, the cement industry ‘swelled in volume and price’ as industry efficiency grew but that the growth rate dropped ‘significantly’ compared in 2018. By region, as Graph 2 shows, variation can be seen between the south-east of the country where growth was slow or even fell compared to stronger performance elsewhere. Cement production increased by above 20% in Jilin, Shanxi, Shandong, Tibet and Heilongjiang and by over 10% in Hebei, Gansu, Tianjin, and Liaoning. However, it fell in Hainan, Beijing, Qinghai, Guizhou, Guangxi, Hunan, Guangdong and Ningxia. Most of these changes were attributed to either rising or falling demand for cement, except for Jilin where reduced imports from neighbouring provinces pushed up its demand. In most of these latter regions it attribute the decline to falling demand for cement.

Graph 2: Cement production growth by province in first half of 2019. Source: China Cement Association.

Other points of note from the CCA include the surge in imports to China. Imports of cement and clinker rose by 149% year-on-year to 8.97Mt in the five months from January to May 2019. Vietnam supplied 68% of this followed by 11% from Thailand. On the production side, 10 new production lines with a total capacity of 15.5Mt/yr were commissioned in the period. These were fairly scattered across nine provinces, in Shanxi, Anhui, Hubei, Fujian, Guangxi, Hunan, Guizhou, Gansu and Yunnan respectively.

Sales and profits were supported by growing demand and prices on the corporate side. CNBM’s operating income for its cement businesses grew by 16% to US$8.14bn from US$7.04bn. Its adjusted profit increased by 40% to US$2.76bn from US$1.98bn. Anhui Conch’s sales rose by 17.9% to US$2.15bn from US$2.11bn. It blamed poorer profits in the south of the country on adverse weather leading to weakened demand.

The weaker sales in the south could be seen in China Resources Cement’s (CRC) results with its turnover down by 6% to US$2.22bn from US$2.36bn. Likewise, its earnings before interest, taxation, depreciation and amortisation (EBITDA) dropped by 8.5% to US$820m from US$896m. The majority of its cement plants are based in Guangxi, Guangdong and Fujian. Jidong Cement was also reported as having received US$30m in subsidies from the government during the first half of 2019 in relation to its ‘daily activities.’

As is usual for these kinds of roundups the dynamic in China is between government industrial policies, like peak shifting and pollution mitigation, and local demand and price trends. One of the latest spins on peak shifting, for example, is a rating system that is being considered to decide which companies should be subject to production limits and for how long. General cement sales are slowly falling each year but the rise of imports into the word’s biggest cement producing nation (!) mark an interesting trend. Also, it may not be connected, but lots of those provinces with falling demand so far in 2019 are those on the south coast facing the heavy clinker exporting nations of South-East Asia. Given the decisiveness with which the Chinese government dispensed with imports of waste materials under its National Sword initiative since 2017, those countries importing cement to China should beware. It could change very quickly. The Chinese cement market is never dull.

Predictably, the recent investigation by the Tariff Commission in the Philippines on whether to maintain duties on imported cement recommended that the safeguard duty be kept. It even suggested raising the rate to nearly US$6/t from US$4/t at present. The report has been passed to the Department of Trade and Industry (DTI), which will make the final decision on the matter.

Graph 1: Market share of the Philippines cement industry between local producers and traders, 2013 - 2018. Source: Tariff Commission of the Philippines.

As the commission built its argument it released a great snapshot of the local cement industry and it’s well worth a read for anyone who is interested. One key graph here was the speed at which the market share of cement sold by local producers fell compared to importers from 2013 to 2018. As Graph 1 shows above, traders imported 0.29Mt in 2015 and this rose to 4.66Mt 2018. Imports by local producers also grew during this time but at a far slower rate. They were 0.45Mt in 2015, grew to a high of 1.65Mt in 2016 and then stabilised at around 1Mt/yr since then. Seven of the top 10 cement exporters were Vietnamese companies followed by two from China and one from Thailand. However, the local producers were importing clinker on a far larger scale during this period. 16.8Mt of clinker was imported from 2013 to 2018 led by Holcim Philippines with 5.54Mt or a 33% share. In Holcim’s case this was coming from China, Indonesia, Japan, South Korea, Malaysia, Thailand and Vietnam.

Elsewhere, the report established the various production capacity upgrades the local cement producers had invested in or were planning to in the near future. Taiheiyo Cement Philippines, for example, was reported as planning an expansion to its Cebu plant production line from 2022 to 2025. It then looked at kiln capacity utilisation rates, prices and how profits have changed amongst much else. It concluded that the import surge from 2015 to 2018 had depressed prices and decreased the profitability of the local producers. This fitted its definition of ‘serious injury’ as one reason to impose a safeguard duty on imports.

Importers presented a different scenario to the commission during its investigation and afterwards. Phinma, for example, told local press that the commission’s comparison calculation of the costs behind local and imported cement didn’t take into all the costs the importers endured such as a local distribution and handling once in the country. The Philippines Cement Importers Association reiterated the view of its members that they were simply meeting market demand, that local producers had caused their own problems through overcapacity and that profits varied considerably amongst local producers, amongst other arguments. This has been borne out by some of the half-year results amongst the local producers. Eagle Cement, for example, saw its earnings before interest, taxation, depreciation and amortisation (EBITDA) grow by 21% year-on-year to US$80.6m.

With the publication of the commission’s report the DTI has been handed the impetus to hold up or even raise the duty on imported cement. Based on its actions in recent years the ministry seems likely to do so. This presents a contrast to Trinidad & Tobago where importer Rock Hard Cement won a legal battle earlier in August 2019 against competitor and Cemex-subsidiary Trinidad Cement over the classification of imported cement products. These kinds of trade conflicts are likely to proliferate whilst global production capacity outstrips demand but the outcomes may vary.

One of the long running trends in the cement industry is that of production overcapacity. Sure enough more than a few news stories this week covered this, as various players reacted to international trade in clinker and cement. The Bangladesh Cement Manufacturers Association wants its government to cut import duties on clinker. Algeria’s shift from an importing cement nation to an exporting one continues.

Armenia and Afghanistan are coping with influxes of cement imports from neighbouring Iran. Pakistan’s cement exporters, who have been losing ground in Afghanistan, are once again lobbying to remove anti-dumping measures in South Africa. The argument between Hard Rock Cement and Arawak Cement in Barbados may have swung Hard Rock Cement’s way as the Caribbean Court of Justice (CCJ) has ruled in favour of lower tariffs for imports. Last week it was reported that the Rwanda Bureau of Standards had blocked cement imports from Uganda on quality requirement grounds.

The summarised version is that all this excess clinker and cement can cause arguments and market distortions as it finds new markets. Typically, the media reports upon the negative side of this, when the representatives of national industries defend their patch and speak out about ‘quality concerns,’ potential job losses and blows to the local economy. However, it isn’t always like this as the Afghan story shows this week. Here, although the Chamber of Commerce and Industries wants to promote locally produced cement, imports are welcome and the relative merits of different sources are discussed. Ditto the situation in Bangladesh where a predominantly grinding-based industry naturally wants to cut its raw material costs.

We’ve covered clinker and cement exports more than a few times, most recently in September 2018 when the jaw-dropping scale of Vietnam’s exports in 2018 started to become clear. Yet as the continued flow of news stores this week makes clear it’s a topic that never grows old.

Graph 1: Top cement exporting countries in 2018. Source: International Trade Centre.

Looking globally raises a number of issues. First, a warning. The data in Graph 1 comes from the International Trade Centre (ITC), a comprehensive source of trade statistics. Most of its figures are in line with data from government bodies and trade associations but its export figure is around a tenth of the estimated export figure for Iran of around 13Mt for its 2018 - 2019 year. Last time this column looked at exports similar issues were noted with a discrepancy between Vietnam’s exports from the ITC compared to government data.

Iran aside, all the usual suspects are present and correct. A point of interest here is that the list is a mixture of countries that make the headlines for their exports, like Vietnam, and those that are quietly just getting on with business. Japan for example exported 10.7Mt in 2018. More telling are the changes in exports from 2017 to 2018. Exports fell in Japan, China and Spain. They rose in Vietnam, Thailand, Indonesia, Pakistan and South Korea.

Looking globally, China is the elephant in the room in this topic given its apparent massive production overcapacity. The industry here is structurally unable to export cement on the scale of other countries but, as its major companies expand internationally, this may change. Despite this China still managed to be the third biggest exporter of cement to the US in 2018 at 2Mt and the fifth biggest in the world. Yet, as the ITC data shows, its exports fell by 30% year-on-year to 9Mt in 2018.

Vietnam, Pakistan and Turkey continue to be some of the key exporting nations with production capacities rising in defiance of domestic realities. Pakistan, for example, is coming off a building boom from the China–Pakistan Economic Corridor infrastructure project and all those plants are now looking for new markets. Vietnam says it is benefitting from industry consolidation in China. Its exports grew by 55% year-on-year rise to 31.6Mt. It shipped 9.8Mt to China in 2018. Its main export markets in 2019 are expected to be the Philippines, Bangladesh, China, Taiwan and Peru. Turkey, meanwhile, struggled with general economic issues in 2018. Its cement exports fell by 6% to 7.5Mt in 2018 according to Turkish Cement Manufacturers Association data. Once again this is at odds with ITC data, which reports nearly twice as many exports.

This touches the tip of the iceberg of a big issue but while production over-capacity continues these kinds of trade arguments will endure. Vietnam, for example, may be enjoying supplying cement in China as that country scales down production. Yet, what will happen to all of those Vietnamese plants once Chinese consumption stabilises?! Similar bear traps lie in wait for the other major exports. Alongside this many of the multinational cement companies are pivoting to concrete production. This may be in recognition of the fact that in a clinker-abundant world profits should be sought elsewhere in the supply chain. A topic for another week.

For an overview of some of these themes and more read Dr Robert McCaffrey’s article ‘The Global Cement Industry in 2050’ in the May 2019 issue of Global Cement Magazine and his forthcoming keynote presentation at the 61st IEEE-IAS/PCA Cement Conference 2019 at St Louis in Missouri, US.

Thailand: Siam Cement Group has appointed Thammasak Sethaudom as its Vice President-Finance & Investment. He succeeds Chaovalit Ekabut. The appointment will take affect from 1 September 2018.

Thailand: Amir Reza Sinai has been appointed as the managing director of Beumer Group’s subsidiary in Thailand. The local company, which has 59 employees, acts as Beumer’s regional headquarters in South East and East Asia, where it covers the divisions Conveying & Loading Systems and Palletising & Packaging Systems. It also provides solutions for the cement industry.

Prior to working for Beumer, Amir Reza Sinai was the chief executive officer of the Indonesian subsidiary of a global plant engineering and construction company. He joined Beumer’s Thai subsidiary in early 2017, and for almost a year he headed the company’s office in Jakarta, Indonesia. He took up his current post on 1 January 2018.

Thailand: Siam Cement has appointed Cholanat Yanaranop as its Executive Vice President. He will also retain his role as President of Siam Cement Group Chemicals. The promotion will take effect from 1 January 2017.

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.