Displaying items by tag: diversification

US: CRH subsidiary Oldcastle APG has acquired France-based Saint-Gobain's fence, railing and decking business in the US. The business consists of two production locations, in Buffalo, New York, and Orem, Utah. Together, the sites employ 210 people. The business generated US$65.6m in sales in 2022.

Saint-Gobain said that the divestment serves to advance its profile optimisation strategy under its Grow & Impact plan.

Switzerland: Holcim recorded 7.4% year-on-year growth in its organic sales to US$15.3bn in the first half of 2023. However, in real terms, its sales fell by 11% year-on-year from US$17.1bn during the first half of 2022. Its sales of cement grew by 13.8% on an organic basis to US$7.93bn, down by 21% in real terms from US$10bn. Cement constituted 52% of revenues, compared to 58% in the first half of 2022. Holcim's group share of net income rose by 9% to US$1.47bn from US$1.35bn.

Chair and chief executive officer Jan Jenisch noted 'continued profitable expansion' in the growing North American market and 'accelerated green growth' in the group's Europe and Latin America regions. He said “In line with our Strategy 2025 - Accelerating Green Growth, we reduced our overall CO₂/net sales by 18% while building billion-dollar brands with ECOPact and ECOPlanet. It’s exciting to be at the forefront of decarbonising Europe with three additional grants from the EU Innovation Fund for our carbon capture, utilisation and storage projects, making us the first in our sector with five projects supported by the EU. We look forward to finishing the year strong and to further decarbonising building.” Jenisch concluded that the results 'confirm Holcim’s strong positions across all markets, delivering superior profitability and growth with leading sustainable building solutions and brands.'

Taiwan Cement said this week that it is aiming for cement to account for less than half of its sales by 2025. At the annual shareholders’ meeting chair Nelson Chang defended the cement sector as a core business but said that the company was expanding more into the green energy sector through its energy storage and vehicle charging lines. Chang directly linked the strategy to growing carbon taxes around the world, such as the European Union Emissions Trading Scheme, where the carbon price has been occasionally close to pushing past Euro100/t since early 2022. Taiwan Cement formed a joint venture with Türkiye-based Oyak Group in 2018 that runs Cimpor in Portugal.

Table 1: Cement business share by revenue of selected cement producers. Source: Corporate annual reports.

Taiwan Cement’s plan to decrease its reliance on cement is becoming a familiar one. Holcim notably revealed in 2021 that it was growing its light building materials division. Its cement division represented 60% of sales in 2020 with concrete and aggregates making up most of the rest to 92% and the remaining 8% on other products including light building materials. This started to change with the acquisition of roofing and building envelope producer Firestone Building Products in 2021. Other similar acquisitions have followed. Holcim’s current target is to grow the Solutions & Products division to around 30% by 2025, with cement reduced to somewhere between a third and half of sales. Earlier this year Japan-based Taiheiyo Cement said it was doing a similar thing as part of its medium-term strategy to 2035. In its case cement represented 70% of its sales in 2022 but it is now aiming to reduce this to 65% by 2025 and 50% by 2035.

A common pattern for the business composition of European cement companies is a mixture of heavy building materials made up of cement, concrete and aggregate. However, not every cement company follows the same route. Some cement companies are simply parts of larger conglomerates. UltraTech Cement, for example, is mostly just a cement company. However, it is also part of Aditya Birla Group, which runs a wide range of industries including chemicals, textiles, financial services, telecoms, mining and more. Depending on how one looks at it, UltraTech Cement’s cement business ratio is large or Aditya Birla Group’s ratio is small. Siam Cement Group (SCG) in Thailand is another example of a cement producer operated by a conglomerate with other major businesses.

A different approach that some cement producers take is to mix cement production with complimentary businesses outside of heavy building materials. A good example of this is Votorantim Cement in Brazil, which manufactures cement and steel. Companhia Siderúrgica Nacional (CSN) is another Brazil-based cement producer that is also well known for steel production. Adani Group in India, meanwhile, was well known for logistics, power generation and airports before it purchased Ambuja Cements and ACC from Holcim in 2022.

The driver for cement companies looking to reduce cement as a proportion of their businesses has varied between the three examples presented above. Holcim’s approach has been in response to growing European carbon costs but it also fits with a general desire to broaden its business as the company has sought to reshape itself following the merger between Lafarge and Holcim. Taiheiyo Cement’s plans also have a sustainability angle but the Japanese market has been in slow decline since the 1990s and this has been made worse by the spike in energy prices since 2022. Investing in new businesses makes sense for either of these reasons. Lastly, Taiwan Cement says it is taking action in response to carbon prices around the world. However, its proximity to many other large-scale producers in the Far East may also be a factor. Whether more companies follow suit and also start to reduce the ratio of their cement businesses remains to be seen. Yet, mounting carbon taxes and global production overcapacity look set to make more of the larger cement producers consider their options in certain places.

Taiwan: Taiwan Cement Corporation aims to diversify its business away from cement by increasing its sales from energy storage and vehicle charging. It aims to derive over 50% of its revenues from other activities besides cement by 2025. The Taipei Times newspaper has reported that the producer will continue to produce 80Mt/yr of cement. The company said that the reason behind its planned diversification is its responsibility to help reduce global net CO₂ emissions.

Chair Nelson Chang said “Carbon reductions must be fast and efficient, and the use of solar and other green energy resources in producing cement is not enough to offset carbon emissions. That means Taiwan Cement has to press ahead and develop carbon capture techniques that would help mitigate the negative impact of cement production on the environment.”

Mexico: Switzerland-based building materials group Holcim concluded a deal to acquire the Mexican roofing producer PASA on 3 May 2023. PASA employs 250 people, and generated sales of US$38m throughout 2022.

Holcim said that the deal will help to expand its products and solutions business, an area in which it has now made five acquisitions to date in 2023. Chief executive officer Jan Jenisch expects the group to acquire 30 companies throughout 2023, of which it already acquired 12 during the first quarter of the year.

Argentina: Holcim Argentina has advanced its diversification strategy with the acquisition of coatings company Quitam. Quitam produces the Quimexur range of paints and liquid membranes. Holcim Argentina said that the range will join its GacoFlex Technoprotect waterproofing and roofing offering.

Holcim Argentina CEO Christian Dedeu said "This is a business opportunity strongly aligned with Holcim's growth strategy in Argentina, allowing us to expand our portfolio of solutions and products for construction, taking advantage of our channel of distributors and the over 450 points of sale of our Disensa retail network." Dedeu added "This agreement helps us to consolidate our 2025 strategy, with a focus on integral solutions to reinforce our leadership and continue to support the development of the construction sector.”

Paint and membranes currently constitute 11% of the Argentinian building products market.

Mexico: Switzerland-based Holcim has acquired building materials retailer INDAR. INDAR operates nine distribution centres across Mexico, as well as a fulfilment centre in Guadalajara. The retailer will join the group’s Disensa Latin American retail network. Holcim says that the acquisition expands Disensa’s product range with the addition of 10,600 new products. It says that the chain stocks goods from across 80 different brands. The group added that the acquisition advances its Strategy 2025 – Accelerating Green Growth plan, under which its solutions and products business is expected to reach 30% of sales globally by 2025.

Holcim’s Latin America regional head Oliver Osswald said “With its powerful logistics network and a focus on delivering the best in service, quality and customer experience, INDAR will make a perfect fit with our Disensa network by strengthening its product range and value proposition. I look forward to welcoming INDAR’s 420 employees into the Holcim family as we reach our next era of growth together.”

Switzerland: Holcim recorded sales of US$31.2bn during 2022, up by 8.8% year-on-year from US$28.7bn in 2021. Its recurring earnings before interest and taxation (EBIT) were US$5.08bn, up by 3% from US$4.93bn. The group's cement business recorded sales of US$17.5bn, up by 14% on a like-for-like basis. Its EBIT grew to US$3.53bn, up by 1% on a like-for-like basis.

In its Asia Pacific region, Holcim faced high cost inflation in India and reduced demand in China, but reported 'good performance' in Australia. In Europe, the group's cement volumes were ‘softer’ but 'strong pricing' offset cost inflation. It recorded 'strong profitable growth' in Latin America and 'over-proportional recurring EBIT growth' in Middle East - Africa and North America.

Chief executive officer Jan Jenisch said “As we enter 2023, we are continuing our fast pace. We’ve already made seven acquisitions in the first two months of the year, including Duro-Last, a roofing systems leader in the most attractive North American market. We also acquired German roofing leader FDT to expand our commercial roofing presence in Europe, as well as a range of bolt-ons across Europe and the US. I look forward to another year of continued profitable growth and fast-paced transformation, to become the global leader in innovative and sustainable building solutions.”

US: Holcim has signed an agreement with Duro-Last to acquire the roofing systems producer for US$1.29bn. Reuters has reported that the acquisition will be Holcim's largest for all of 2022 and 2023 so far. Once the parties complete the transaction, Duro-Last's business will join Holcim's products and systems division. Holcim expects the deal to yield synergies of US$60m/yr, primarily through a reduction in the cost of materials.

Holcim expects its products and systems division to contribute a majority of its profit in North America once increased investment under the US government's Inflation Reduction Act begins to take effect. In 2022, the division accounted for 40% of regional profit. The group is committed to a global target of 30% of sales being attributable to the products and systems division by 2025, compared to 19% of sales in 2022.

Ireland: CRH has announced the launch of its new innovation investments company CRH Ventures. The new subsidiary has funds of US$250m and will focus on the technologies that address the construction sector's core challenges. The group said that CRH Ventures' investment decisions will assess potential for decarbonisation, automation and the development of advanced sustainable building products, among other factors.

CRH's CEO Albert Manifold said "The launch of CRH Ventures demonstrates our continued commitment to investing in new technologies that will shape the built environment of tomorrow. CRH Ventures will serve as a valuable partner to start-ups and entrepreneurs, which will benefit from the technical capabilities, knowledge and expertise of a global industry leader, to pilot and scale new technologies and innovations that will enable safer, smarter and more sustainable construction.”