Displaying items by tag: Votorantim Cimentos

On 6 November 2024, Donald Trump appeared before followers in Florida, US, to declare victory in the 47th US presidential election. A sea of red baseball caps reflected the promise of the former president, now once again president-elect, to Make America Great Again. What Trump’s triumph means for the cement industry is not so straightforward. One lesson of President Trump’s 2017 – 2021 tenure as 45th president is that a Trump presidency comes with winners and losers.

Alongside the international heads of state posting their congratulations to Trump via social media was the Portland Cement Association (PCA), which represents US cement producers. In a post to LinkedIn, it took the chance to set out its priorities for the upcoming presidency, set to commence on 20 January 2025. These include collaborating on ‘market‐based initiatives’ to further reduce US cement’s CO₂ emissions, addressing ‘regulatory burdens’ that currently hinder the uptake of alternative fuels (AF) and ensuring favourable policies and funding for the use of alternative cements under federal transport programmes, which are up for renewal in 2026, as well as collaborating on carbon capture, utilisation and storage.

The post was suitably diplomatic for an organisation that will have to work with the incoming administration for the next four years. Reading the policy priorities against some of Trump’s campaign promises, however, they may be more pointed. As part of his plan to stimulate economic growth, Trump has proposed an unspecified reduction of the ‘regulatory burden’ of environmental standards. He also purports to want to replace renewables with increased use of fossil fuels – in direct opposition to the PCA’s goal to slash the US cement industry’s coal and petcoke reliance from 60% to 10% by 2050. The PCA’s stance is not merely ideological: its roadmap is founded on the legally-binding Paris Agreement on climate change mitigation. Trump, who considers the Paris Agreement a ‘disaster,’ has the stated aim of withdrawing the US from the treaty – for a second time!

The PCA included a positive note that “We can all agree that the ultimate goal of our industry and the government is to best serve the American people.” In case there were any doubt as to what it feels best serves those people, it concluded that it will work with all federal officials to help communities in the US to build ‘a more resilient, sustainable’ country.

Producers themselves, in the US and many other markets, had been finalising first-half or nine-month financial results when the Trump news broke. Now came half-anticipated strategy discussions – and a surprise: in market after market, trading in cement stocks opened on the up. Ireland-based CRH’s share price spiked by 15%, before settling on a rise of 6% day-on-day. Mexico-based Cemex’s rose by 7% and Switzerland-based Holcim’s by 5%. Investors, clearly, glimpsed opportunity in uncertainty for these US-involved operators.

Trump’s campaign successfully positioned him as the disruptive outsider, despite being the known (or, at least, known-to-be-unpredictable) quantity of the two candidates. His promise to Americans was increased affordability; to corporations, deregulation. Either way, he stands to overhaul the past four years’ policy on the economy. All of this may keep Wall Street high-ballers placing their bets on Cemex or CRH, or on Holcim North America after it eventually joins them on the New York Stock Exchange. The prospect of more money in homebuyers’ pockets is attractive, especially to allied sectors like property development, where Trump himself worked for over 40 years. The cement industry, meanwhile, will be taking a hard look at what the Trump proposition might mean for its market.

US Geological Survey (USGS) data tracks a favourable market trend under the present Biden Administration – to date – for a US cement industry that has also grown in production terms. Consumption was 120Mt in 2023, up by 14% over the three-year-period from 2020, while production was 91Mt, up by 4% over the same period. President Biden has signed into law two major pieces of legislation – the Inflation Reduction Act and Infrastructure Investment and Jobs Act – with a combined value of US$1.94tn in additional public spending, to President Trump’s none. However, the Republican president previously proposed investing an additional US$200bn in 2018.

Trump voters may have perused the USGS’ most recent monthly cement figures, for July 2024, before casting their votes. The figures recorded a 5.2% year-on-year decline in total cement shipments in the year-to-date, to 58.6Mt. Both Eagle Materials and Italy-based Buzzi noted a recent lack of growth in US sales volumes in their latest financial results. Another possibly alarming trend for the industry – and anyone with a protectionist mindset - is the growth of imports, which rose from 14.8Mt in 2019 to 26Mt in 2023.

A defining feature of Trump’s original presidency, alongside Covid-19 lockdown, was his still-ongoing trade wars. We can expect Trump to resume his roll-out of new tariffs as soon as he can. This might include cement plant equipment produced in other jurisdictions, such as the EU. Compared to the roster of goods he previously denied entry to the US, however, 26Mt/yr of cement will be less easy to wrangle with in a country with a domestic shortfall of 29Mt/yr.

Whatever happens in politics, the US cement sector remains very strong, with historied local ownership and some of the most innovative plants in the industry globally. Global players continue to seek to maximise their US-facing presence, as evidenced by Brazil-based Votorantim Cimentos’ contemplation of an initial public offering (IPO) for Votorantim Cimentos North America, announced on 7 November 2024. For the industry, the day-to-day grind – and pyroprocess – goes on.

After all, Trump did not enact many of his more disruptive proposals, such as building a Mexican border wall, after his win in 2016. See Global Cement’s analysis of that proposal here. But even this record is an unreliable guide for what to expect in 2025 – 2029. Not only did Trump himself win the popular mandate this time around, but his allies also gained majorities in the House of Representatives and Senate, comprising the US legislature. This betokens a different pace and scale of possible changes.

In 10 weeks’ time, the US cement sector will be lobbying an entirely new regime. Now is the time for it to prepare whatever arguments will appeal to incoming lawmakers to allow it make the best of such opportunities as may be available.

Brazil: Votorantim Cimentos has reported that its net profit surged by 24% in the third quarter of 2024 compared to the same period of 2024, to reach US$179m. Its net revenue increased by 6% year-on-year to reach US$1.33bn.

However, when excluding currency fluctuations, revenue decreased by 1%. This highlights the significant impact of foreign exchange rates on Votorantim's global operations. Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) rose by 20% to US386m. Cement sales volume increased by 3% to 10Mt during the quarter.

The company said that these figures indicate resilient demand across Votorantim's markets, despite challenging economic conditions in some regions. The company's diversified geographical presence has helped balance market fluctuations.

In the sustainability arena, Votorantim Cimentos also says that it has made significant progress. The company reduced its specific embodied CO₂ emissions by 4% to 556kg/t of cement in 2023. It has also increased its alternative fuel thermal substitution rate (TSR) from 26.5% in 2022 to 30.9% in 2023.

US: Votorantim is in the early stages of preparing for a potential initial public offering (IPO) of its North American cement business. The offering could occur as early as 2025, contingent on market conditions, according to InvestNews. The company is reportedly still in talks and has not made a final decision regarding the launch of the IPO.

Brazil: Votorantim Cimentos has launched Blenture, a new brand of cement and concrete designed to reduce CO₂ emissions and promote sustainable construction practices. Blenture products, developed through significant investment in research and development, align with the company’s decarbonisation strategy to utilise recycled materials and non-fossil fuels. Blenture cements and concretes, certified with environmental product declarations by AENOR, reportedly offer a 30% lower carbon footprint while maintaining quality, strength and performance.

Spain: Votorantim Cimentos and gas company Enagás have signed an agreement to jointly develop projects for the sustainable management of CO₂. Votorantim Cimentos will focus on CO₂ capture technology at its cement plants, while Enagás will explore solutions for the transport, liquefaction, storage and loading of CO₂ at its regasification terminals. The partnership also includes potential joint applications for European funding to further these initiatives.

Enagás CEO Arturo Gonzalo said "Enagás and Votorantim Cimentos have clear synergies to jointly advance their commitments to reduce their carbon footprint and, based on the knowledge of their areas of activity, they have the opportunity to take the initiative to develop more effective sustainable CO₂ management technologies, which will be key to achieving the decarbonisation objectives of Spain and Europe.”

Brazil: China-based Sinoma Overseas has signed an engineering and supply contract for the Z02 cement grinding plant and a technical cooperation framework agreement with Votorantim Cimentos. The agreements were signed by Sinoma chair Zhu Linhe and Votorantim’s global projects director Alvaro Lorenz. This collaboration marks the third cement grinding plant project between the two companies and is part of Votorantim's ‘2028 Development Strategy.’ The contract encompasses the design, equipment supply, and technical services for a 150t/hr cement grinding plant.

Zhu Linhe said "Votorantim is the most valuable client for Sinoma Overseas, this contract and agreement strengthens the strategic partnership between the two companies. It is the strong commitment of Sinoma Overseas to support Votorantim in achieving its '2028 Development Strategy' with Sinoma’s extensive industry expertise, advanced technology and mature localised operations.”

Morocco: Heidelberg Materials has signed a strategic agreement to acquire Votorantim Cimentos' assets in Morocco, including a 63% share in cement and ready-mix concrete producer Asment de Témara and the entire stake in aggregates supplier Grabemaro through its subsidiary Ciments du Maroc. This acquisition positions Ciments du Maroc to expand its operations in Northern Morocco, adding a cement plant with a production capacity of 1.4Mt/yr, two aggregates sites and eight ready-mix concrete plants. The acquisition includes access to an alternative fuels platform enhancing the fuel rate at the newly acquired cement plant to 70% by 2027, reportedly contributing to reduced environmental impact and optimised production-related energy costs. The completion of the transaction awaits regulatory approval from Moroccan competition authorities, and financial details remain undisclosed.

Chair of the managing board of Heidelberg Materials Dominik von Achten said "Our latest investment marks an important step as part of our ongoing portfolio optimisation to strengthen our core markets. Expanding our presence in the attractive Moroccan market while increasing our use of alternative fuels will generate substantial financial synergies and thus help us accelerate our ambitious decarbonisation efforts throughout our sites in the country and grow our local offering of sustainable solutions."

Brazil: Votorantim Cimentos has appointed Antonio Miguel Sousa Pelicano as Executive Vice President of Finance and Investor Relations. He has succeeded CEO Osvaldo Ayres Filho in the role. Filho took the position of Chief Financial Officer (CFO) and Investor Relations in May 2024 on a temporary basis when Bianca Nasser Patrocínio resigned.

Sousa Pelicano, a Portuguese national, holds a degree in economics from the University of Coimbra in Portugal and an International MBA in Administration from Rutgers Business School in the US. He has held executive positions at Cimpor and Votorantim Cimentos EAA (VCEAA). He worked at Cimpor from 2003 to 2012 starting his career as an IT Project Manager and eventually becoming the Country CFO. He also gained experience working in various countries, such as Morocco, Tunisia, Türkiye, China and Mozambique. Since 2012, he has been working at VCEAA, where he held the position of CFO in China. In 2019, he was responsible for creating the holding company VCI in Luxembourg, where he worked as CFO. In 2020, he took the position of CFO of VCEAA.

Spain: Votorantim Cimentos will construct a solid recovered fuel (SRF) production plant at its subsidiary Cementos Cosmos’ plant in Oural, aiming to produce up to 0.15Mt/yr of alternative fuel, reports Digital Economia newspaper. The facility, spanning 5800m², will utilise non-recyclable industrial byproducts and various discarded materials from the local community such as plastic, paper and wood, to partially fuel the combustion in its cement kilns. The plant, currently in the public exhibition phase, will start production at 60% capacity, producing 85,000t/yr of alternative fuel. Plans include ramping up to full capacity to produce roughly 0.15Mt/yr. The new plant will create 15 jobs.

Votorantim Cimentos has not detailed the investment in the new facility, although the budget presented to the local council amounts to €12m.

Votorantim Cimentos released its half-year results this week giving us the opportunity to assess how well some of the larger cement producers are doing so far 2024. The general picture from the western multinational cement companies has been one of sluggish sales in the first half of the year but respectable earnings. So, for example, both Holcim and CRH were reporting static sales or revenue but earnings increases of over 10%. Heidelberg Materials and Cemex noted similar situations.

Graph 1: Sales revenue for selected multinational cement producers in the first half of 2024 and the first half of 2023. Source: Company financial reports.

Holcim was keen to play up that its net sales actually rose on a local currency basis. However, its recurring earnings before interest and taxation definitely rose, by 12% year-on-year to €2.33bn. Net sales were down in both North America and Europe, the group’s main two regions, but earnings were strong in both. Sales revenue for cement and aggregates may have been down across the group but earnings were up sharply. No such luck for ready-mixed concrete though, with both sales and earnings down overall. Another trend to watch is that sales and earnings were both up in the group’s Solutions & Products division. This part of the business has been growing due to merger and acquisition activity, and it is nearly the group’s second largest division after Europe.

CRH reported similar things overall. However, it has been busy selling off its Europe-based lime business, finishing the acquisition of its new assets in Texas and buying a majority stake in Australia-based AdBri. Its Americas Materials Solutions division reported both increasing revenues and earnings in the second quarter of 2024, at least, and the acquisitions in Texas helped too. Revenue in its Europe Materials Solutions division fell by 5% on an organic basis and this was blamed on subdued markets in Western Europe and poor weather.

Heidelberg Materials had a tougher time of it in the first half of 2024, with revenue down by 5% to around €10bn. It attributed the falling revenue to decreasing sales volumes across all business lines. It described its second quarter as follows, “The pressure on volumes is largely attributable to prolonged weak activity in the construction industry and adverse weather conditions in individual core markets. Active cost and price management largely offset the impact.” For clinker and cement this was noticed prominently in Europe despite volumes increasing in North America and Asia-Pacific. However, its result from current operations rose slightly. One reason for this appeared to be a ‘significant’ fall in material costs including energy.

Similarly, Cemex’s net sales were flat but its operating earnings were positive. Drilling down between its main geographical markets revealed a strong market in Mexico, a stable one in the US and declines in Europe, Middle East, and Africa (EMEA). In the US Cemex apportioned falls in cement and ready-mix concrete sales volumes to “...difficult weather conditions, a softening residential sector, portfolio rationalisation, competitive dynamics in certain micro markets and timing of several large projects.” Operating earnings were also hit by higher maintenance costs. In its EMEA region the trend was downwards but this was due to volume declines in Western Europe and geopolitical issues in the Middle East.

Votorantim Cimentos’ net revenue and adjusted earnings were down slightly in the first half of 2024 stemming from softer results in North America and Brazil in the first quarter. Revenue in Brazil was flat for the half year after a better second quarter. Revenue in North America though was hit by a slowdown in demand although price rises staved off some of this. Meanwhile, the group’s Europe, Africa and Asia region reported higher revenue due to higher volumes in most places.

Finally, UltraTech Cement is the odd company out in this group. The size of its annual revenue earns it a place in the list but it is more like some of the large China-based cement companies because it mostly sticks to one territory: India in this case. Yet, its revenue rose by nearly 6% to €4.2bn in the first half of 2024, making it the best performer in this article’s grouping. Domestic sales volumes increased at a similar rate in the April - June 2024 quarter. Similar to Heidelberg Materials, UltraTech Cement also reported that its energy costs fell by 17% year-on-year mainly due to reduced fuel prices. Its profit didn’t grow by much especially but the company is racing against Adani Cement to build capacity. It added 8.7Mt/yr alone in the April - June 2024 period compared to 13.3Mt/yr in its entire 2024 financial year that ended in March 2024.

The picture from the companies covered above suggests that the US market may have cooled for some since 2023. Despite this the earnings have mostly held up and cement companies enthusiasm for the market remains high led by Holcim’s impending market spin-off. Europe has been mixed, with declines in the west and stronger markets towards the east. Energy costs have finally fallen following the market shock when Russia invaded Ukraine in 2022 and this is helping earnings. That last point may be universal here given that it has affected both western multinationals and a large regional player such as UltraTech Cement. That’s it for now. In a future week Global Cement Weekly will take a look at how well the large China-based cement companies have done in so far in 2024.