Displaying items by tag: US
How much is an American cement plant worth?
03 October 2012Eagle Materials has picked up two cement plants in the US from Lafarge with a combined capacity of 1.6Mt/yr for US$446m. The deal also included six distribution terminals, two aggregates quarries, eight ready-mix concrete plants and a fly ash business.
Following our column in August 2012 following an acquisition in India we decided to ask a similar question: how much are American cement plants worth?
Eagle's acquisition now increases its presence in the Midwest and South Central regions of the US, giving it a rough line of plants across the country nearly connecting Lake Michigan to the Gulf of Mexico. As shown in our industry report on the US between 2005 and 2011 cement consumption fell in both the states the plants are located in. Missouri's consumption fell by 45% from 2.82Mt to 1.56Mt, just above the US national average. By contrast Oklahoma's consumption only fell by 11%, from 1.6Mt to 1.43Mt, the fourth smallest decline in the country.
However, Eagle has demonstrated financial health in contrast to the US sector as a whole, reporting a 21% rise in total revenue in the quarter to 30 June 2012 and a 60% rise in operating earnings year-on-year in the quarter to 31 March 2012. The combined operations at the two plants generated about US$178m in revenue during the year ending in June 2012. By contrast Eagle Materials' revenue totalled US$529m during the same period. The plants' additional capacity will increase Eagle's total by about 60%.
Lafarge are still thinking big though, with the proviso that Eagle will supply certain Lafarge operations with cement for four to five years, as well as an agreement with a Lafarge affiliate to supply low-cost alternative fuels to the acquired operations. According to its 2011 annual report North America comprised 11% of Lafarge's cement sales. Lafarge's sales in the US remained flat in 2011. In that year the company's capacity was 12.8Mt with a 12% market share. This picture has started to change in 2012 with a reduced loss in earnings before interest, tax, depreciation and amortisation (EBITDA) in the first quarter followed by volume and sales increases of above 10% in the second quarter.
Back in June 2011 Cementos Argos picked up two plants from Lafarge in Roberta, Alabama and Harlyville, South Carolina for US$760m with a combined capacity of 2.7Mt/yr. As with the Eagle deal the sale included a number of peripheral assets including a clinker mill, cement mixer lorries and a marine port.
Cementos Argos recently put the world average at US$250m/t when publicising the expansion of its Rioclaro plant. The European Cement Association reports the figure at being above US$200m/t on its website. In August 2012, at the time of the potential CRH acquisition in India, the cost of Indian cement production capacity was placed at US$110/t-US$120/t.
Perhaps the question we should ask is how much is a US cement plant worth when it used to belong to Lafarge. Both the Cementos Argos sale and the Eagle deal worked out at US$280/t including all the ancillaries. The actual question we should ask is why has Lafarge chosen these specific plants to sell to a competitor in the US market?
Eagle Materials to acquire two Lafarge plants in US
27 September 2012US: Eagle Materials Inc. has issued a press release announcing that it has entered into a definitive agreement with Lafarge North America to purchase Lafarge's Sugar Creek plant in Missouri and Tulsa plant in Oklahoma, which have a combined cement capacity of 1.6Mt/yr. The deal also includes six distribution terminals, two aggregates quarries, eight ready-mix concrete plants and a fly ash business.
Eagle will also enter into a transition sales agreement to supply certain Lafarge operations with cement for four to five years and an agreement with a Lafarge affiliate to supply low-cost alternative fuels to the acquired operations.
The purchase price for the group of assets is US$446m, subject to customary post-closing adjustments. The acquisition will increase Eagle's cement capacity by 60% and it is expected to close in November or December 2012, pending regulatory approvals.
Steven Rowley, Eagle Materials' President and Chief Executive Officer, said that the agreement represents a major milestone event for the company. "Our stated strategy has been to grow the cement and aggregates side of our business. Our first priority has been to acquire cement plants that connect but do not overlap with the market reach of our existing plants."
"These two high-quality Lafarge cement plants are a compelling fit with our objectives and the transaction meets our stringent criteria for new investment," continued Rowley. "These assets will allow us to participate more fully in the US construction industry recovery. Additionally this transaction further positions the company near energy growth markets, where there is growing demand for our specialty oil well cement, along with our newly-offered high-quality northern white frac sand. These new cement, concrete and aggregates assets will immediately contribute earnings and cash flow for our stockholders. Moreover they will provide significant near-term opportunities for synergies and earnings growth."
Staff movements at Holcim
19 September 2012US/Switzerland: Holcim US has announced that its president and CEO, Bernard Terver, will join the executive committee of the company's parent Holcim Ltd.
As part of the 'Holcim Leadership Journey,' an initiative which streamlines and strengthens operations, Terver will also assume responsibility for the new group region of North America, comprising Holcim US, Holcim Canada, Aggregate Industries (US) and Aggregate Industries UK. Filiberto Ruiz will serve as deputy chief executive officer of Holcim (US) and Aggregate Industries US. Prior to his promotion, Ruiz was senior vice president of sales and marketing for Holcim US.
"I'm confident that these management changes will reinforce our commitment to customer excellence and to the development of our employees as they become the next generation of leaders," said Bernard Terver, president and CEO of Holcim US. "Filiberto's experience makes him an excellent choice for this new role and I am looking forward to collaborating as the company advances."
"I am honoured to have been appointed to lead US operations," said Filiberto Ruiz, deputy chief executive officer of Holcim (US) and Aggregate Industries US. "Holcim US and Aggregate Industries US are solid organisations and I look forward to continuing to build on the work that has taken place under Bernard's leadership."
Terver has been president and CEO of Holcim US since October 2008 and Aggregate Industries US since 2010. In the same year he also became area manager. He joined Holcim in 1994 when his employer CEDEST was acquired by Holcim France. In 1999, he became chief executive officer of Holcim Colombia and in 2003 was appointed area manager for the Andes nations, Central America and the Caribbean.
Ruiz began his career with the Holcim Group in 1986 as electrical supervisor with Holcim Apasco in Mexico, later becoming plant manager. In 1999 he became regional vice president for manufacturing at Holcim US. He returned to Holcim Apasco as cement operations, vice president and moved back to Holcim US in 2006 as senior vice president for manufacturing. He has been in his current role, senior vice president for sales and marketing, since 2010.
Holcim US announces new deputy chief executive officer
05 September 2012US: Holcim US has announced that Filiberto Ruiz will serve as its deputy chief executive officer of Holcim and Aggregate Industries US as part of its 'Leadership Journey.' Prior to his promotion, Ruiz was senior vice president, sales & marketing for Holcim US.
Ruiz began his career with the Holcim Group in 1986 as electrical supervisor with Holcim Apasco, Mexico, later becoming plant manager. In 1999, Filiberto became regional vice president, manufacturing for Holcim US. He returned to Holcim Apasco as cement operations, vice president, and moved back to Holcim US in 2006 as senior vice president, manufacturing. He has been in his current role, senior vice president, sales & marketing, since 2010.
Texan standoff
29 August 2012Texas Industries (TXI) made the surprising move this week of appealing to the US authorities to investigate 'unfair' imports from Greece and the Republic of Korea. Of note was the accusation that imports from these countries had risen by 40% from 2009 to 2011, with a further rise over the first six months of 2012.
Given the distances involved and the rising optimism shown for the North American market in the latest financial results for the cement industry, targeting imports might at first seem odd. However looking at US Geological Survey (USGS) data shows that for January to May 2012 the top cement importers to the US, after Canada, were the Republic of Korea and Greece. Mexico, the USA's other land neighbour, could only manage fourth.
According to USGS data Texas was the leading cement-producing state in the US in 2011. In 2011 total imports of hydraulic cement and clinker from South Korea rose by 64% to 1.40Mt from 0.86Mt in 2009.
By customs districts Texas imported 0.99Mt in 2011 or 15% of the US total. Alarmingly though, Texas has already imported 0.77Mt from January to May 2012. If this rate continues for the rest of 2012 Texas could be facing a total imported figure of 1.84Mt, a rise of 85%!
Given that the Global Cement Directory puts Texan capacity at just under 14Mt/yr this might explain why one of the state's biggest producers has decided to take action. The problem of 'cheap' Greek imports looks likely to get worse as the economic troubles of the Eurozone drag on, especially if Greece exits the zone. If that happens, any Greek producer that can still afford to make cement may well be able to undercut the domestic production of any country willing to import it. TXI's move might be seen as a pre-emptive strike 'shot across the bows' to discourage increasing US demand for sucking in more imports, in order to shore-up demand for domestic production (and to firm up domestic pricing).
However, one place Greece or South Korea will have difficulty exporting their cement to is the moon.
Serious thought on creating cementituous materials on the moon dates back decades but last week NASA awarded US$135,000 to UC San Diego structural engineer Yu Qiao for research on the subject using materials that are readily available on the moon. Given that it currently costs from at least US$4m/t to put mass into low earth orbit, the lunar cement industry can rest easy from the threat of cheap Greek imports for the time being.
Jose Llontop takes top job at Giant
29 August 2012US: Jose Llontop has joined Giant Cement as its new CEO and president. He joins the company with 14 years of experience in the industry. Previously he has held senior level positions at Cemex, including being the regional president for a US$1bn sales operation for countries in Central Eastern Europe and being the president of Cemex Egypt.
"Llontop is a professional with a long and successful career in the cement industry, who has held positions of high responsibility in different countries and achieved excellent results," said Juan Bejar, chairman and CEO of Cementos Portland Valderrivas, the Spanish company that owns Giant.
Llontop received his undergraduate degree in mechanical engineering from the University of Virginia, Charlottesville, VA, completed his MBA at Rice University, Houston, Texas, USA, and attended the Harvard Business School's General Manager Program in Cambridge, Massachusetts, USA.
Llontop served as chairman of the Cemex supervisory board in Austria and as vice chairman of the Cemex board in Egypt. Since 2010 Llontop was the president of Saudi Readymix, and the senior vice president of Building Materials for Alturki Group in Al Khobar, Saudi Arabia.
US: Texas Industries (TXI) has requested that the US Department of Commerce and the Interagency Trade Enforcement Center investigate and counteract 'unfairly' priced portland cement imports from Greece and the Republic of Korea.
In a letter to the organisations, TXI, the largest producer of cement in Texas and a major cement producer in California, stated that it believes that imports from Greece and Korea are being sold at less than a 'fair' value and are benefiting from government subsidies. In addition it alleged that these imports have materially injured Texas cement producers and their employees.
Imports from Greece and Korea to Texas increased by almost 40% from 2009 to 2011, and increased another 14% from the first half of 2011 to the first half of 2012. Allegedly these imports have taken substantial sales volumes from Texan producers resulting in underutilisation of local production capacity and reduced profits.
EPA signs rule to cut Montana’s haze pollution
20 August 2012US: The Environmental Protection Agency (EPA) has approved a new measure meant to help approve US state Montana's levels of haze pollution. The signing follows widespread criticism by industry, conservationists and even other federal agencies.
The proposal aims to reduce emissions of sulfur dioxide and nitrogen oxides that cause haze. It details US$85m in upgrades needed at the state's major contributors of small particles that contribute to park haze, mainly at the Colstrip coal power plant. Holcim's cement plant near Three Forks requires selective non-catalytic reductions totalling US$1.32m to achieve annual NOx emissions reductions of 556t/yr. Ash Grove cement plant near Montana City requires selective non-catalytic reductions and low NOx burners totalling US$1.19 to achieve annual NOx emissions reductions of 1088t/yr.
Many of the commenters, including Holcim and Pennsylvania Power and Light, questioned the computer models used to calculate the effect of various technologies on emissions. Companies also complained that the EPA underestimated the costs required to retrofit their plants with new equipment. In response to a Holcim comment, the EPA decided that Holcim did not have to install lime injection and scrubbers because the reduction in emissions didn't justify the cost. The total price tag for Holcim was originally estimated at US$6.2m.
Under the Clean Air Act, the air in national parks and wilderness areas in the US is supposed to be as clean as possible. To achieve that goal, regional haze programmes in several states set pollution limits on industries. The goal is to restore visibility to natural conditions in national parks and wilderness areas from Idaho to North Dakota by 2064.
PCA forecasts growth in 2012 but fears slide in 2013
08 August 2012US: Growth in home construction and favourable weather conditions have helped to boost the consumption of cement in the first half 2012, according to a report released on 3 August 2012 by the Portland Cement Association (PCA).
In its report the PCA forecasts that cement consumption will be 6.9% higher by the end of 2012 compared with the end of 2011. The association, however, warned that there is some uncertainty about the state of the industry going beyond 2012. In a news release, it put much of the blame for the uncertainty on the US Congress.
Economists worry that the inability of Congress to find common ground on tax cuts expiring and the automatic spending cuts set to kick in at the end of 2012 could force the nation over a 'fiscal cliff', driving the economy back into recession.
"If Congress fails to address the fiscal cliff issue during the first or second quarter of 2013 there is the potential for severe adverse economic consequences that could slow the recovery process, potentially leading to a severe decline in 2013 cement consumption," said Ed Sullivan, the PCA's chief economist.
Eagle Materials revenue up by 29% in Q1
02 August 2012US: Eagle Materials Inc has reported a 29% rise in total revenue for the first quarter of the 2013 fiscal year which ended on 30 June 2012. The North American building materials producer noted revenue of US$154m for the quarter, up from US$120m in the same period in 2011.
Cement sector revenues for the first quarter, including joint venture and intersegment revenues, totalled US$76m, a 26% increase year-on-year from US$59m in 2011. Sales volumes rose by 26%, including wholly-owned and joint ventures, to 848,000t from 674,000t. The revenue improvement reflects a 26% increase in first quarter cement sales volume. Cement price increases were achieved in both the Texas and Mountain regions during the first quarter but were offset by the increased pace of high-volume, lower-priced bid work in the company's other markets.
Operating earnings from cement for the first quarter were US$9.9m, a 12% increase from US$8.8m year-on-year. The earnings impact from increased cement sales volumes was mostly offset by higher maintenance costs associated with scheduled maintenance at all of Eagle's cement facilities. The company calculated that first quarter operating earnings were negatively impacted by approximately US$8m due to this maintenance.