Displaying items by tag: shareholders

LafargeHolcim’s investigation into its conduct in Syria claimed its biggest scalp so far this week with the shock resignation of chief executive officer (CEO) Eric Olsen. His decision landed with the publication of the group’s investigation into the conduct of the legacy Lafarge operations in the country in 2013 and 2014. As per the initial findings of the investigation that were released in March 2017, it confirmed that selected personnel had engaged in dealings with terrorists in connection to one of its cement plants in the country during 2013 until the unit closed in September 2014. The board decided that Olsen had no connection or even awareness of the misconduct. However, he decided to quit anyway in order to restore ‘serenity’ to the company.

In its latest public statement on the investigation, LafargeHolcim outlines five weaknesses with its compliance led by improper payments related to Lafarge Syria’s security and supply chain. It then goes on to list a failure of line management, inadequate controls over expenses and a failure to detect improper payments and improperly recorded payments. It’s all presented as ‘chaos reigned’ or wayward staff in tough circumstances trying to do their muddled best for the company. Unfortunately for this narrative, selected members of group management were aware of the situation and appeared to have done nothing about it. This then begs the question: who knew what when?

Olsen may have been exonerated by the board on his departure but he was Lafarge’s Executive Vice-President of Operations for Lafarge in 2014. If he didn’t know what was going on in Syria during his watch then he wasn’t doing his job properly or it was being hidden from him. The head of Lafarge itself at the time, Bruno Lafont, might also have been a viable target for discipline but he decided to stand down from the board of LafargeHolcim in early April 2017. No doubt other former members of the Lafarge management team may bear more responsibility. LafargeHolcim’s implementation of its remedial measures may turn up more culprits, as may the on-going criminal complaints process continues in France.

French newspaper Le Monde, the newspaper that originally broke the story, is probably on the money with its assessment that Olsen’s departure is actually the continuation of the boardroom battle between the board and its shareholders that has raged since before Lafarge and Holcim formally merged. Bruno Lafont was originally lined up to become the CEO of the new company until Lafarge’s worsening financial position compared to Holcim’s prompted a backlash from Holcim shareholders. Le Monde describes how LafargeHolcim’s shareholders include four prominent billionaires: Switzerland’s Thomas Schmidheiny, Belgium’s Albert Frère, Canada’s Paul Desmarais and Egypt’s Nassef Sawiris. Schmidheiny, readers may remember, was one of the principal actors who sunk Lafont’s bid to be CEO back in early 2015.

Placed in this context, Olsen’s departure might seem forced, especially if he had no connection to the debacle in Syria. LafargeHolcim has faced a tough couple of years following its formation with consistently falling sales revenue. Asset divestments and cuts have been the cure as the group struggled to find its new size. Yet, the group saw its adjusted operating earning before interest, taxation, depreciation and amortisation (EBITDA) start to rise in 2016 suggesting that the remedial action was starting to work. LafargeHolcim’s management and shareholders will be acutely aware of its performance so far in 2017 ahead of the public release of its first quarter results in early May 2017. Under these circumstances it seems unlikely that serenity will be restored to the upper echelons of LafargeHolcim any time soon.

Mexico: Cemex has retained a 9.5% stake in Grupo Cementos de Chihuahua (GCC) following a sale of some of shares in the Mexican cement producer. Cemex said that the underwriters did not exercise their over-allotment option to acquire shares in GCC. Originally Cemex said in late 2016 that it intended to sell its full 23% minority stake in GCC.

US: The shareholders of Headwaters have approved the acquisition of the company by Australia’s Boral. Over 98% of the votes cast were in favour of the deal. Boral will now continue to seek regulatory approval for the purchase and it plans to complete the deal by mid-2017. Headwaters’ Construction Materials division is one of the largest marketers of fly ash in the US.

Trinidad & Tobago: The directors of Trinidad Cement have once again advised shareholders to reject an offer by Cemex to buy the company. In a circular to shareholders the cement producer said that the amended offer made by Cemex in early January 2017 was still below the value its auditors had calculated. Cemex previously made an offer to Trinidad Cement in December 2016.

People matter in cement companies. Just ask Bruno Lafont, the originally proposed CEO of LafargeHolcim before the merger plans between Lafarge and Holcim changed in mid-2015. Another example is Zhang Bin, the chairman of Shanshui Cement. Some of the shareholders at Shanshui Cement are working hard to remove him. The next attempt has been scheduled for 1 December 2015.

Shanshui Cement, one of the biggest Chinese cement producers, called for the liquidators this week possibly in response. It decided to apply for provisional liquidation after determining that it would default on onshore debt payments due on 12 November 2015. Earlier in the month it had announced doubt whether it could pay its debts.

The scale of this liquidation is monumental for the cement industry. It is broadly similar to a producer at least the size of Dangote going bust. Shanshui Cement is one of China's top ten cement producers. It defaulted on a US$314m onshore debt payment on 12 November 2015.

Based on Global Cement Directory 2015 data, Shanshui Cement is the seventh largest cement producer in the country with 15 cement plants and a cement production capacity of 30.5Mt/yr. Shanshui Cement itself reports that it has a production capacity of 102.6Mt/yr making it the country's fourth largest cement producer. In its 2014 annual results Shanshui Cement reported sales revenue of over US$2.4bn. Its net profit was over US$48m. Sales and profits were down year-on-year in 2014 compared to 2013 and its interim report for 2015 reported the same downward trend. Sales revenue fell by a third to US$793m year-on-year for the first half of 2015. In 2014 its total debt was reported to be US$2.5bn with a gearing ratio of 56.9%, a relatively high figure leaving it vulnerable to decreasing profits.

As the Wall Street Journal and others have reported, the situation has as much to do with corporate politics as it does with over-borrowing. Hot on the heels of Shanshui's liquidation announcement came an offer of help to pay the debts from local rival Tianrui Group if its attempts to change the board of Shanshui were finally successful. Tianrui became the largest shareholder of Shanshui in April 2015 when it increased its stake to 28%. In the process it beat China National Building Material Company and Asia Cement Corporation, who hold 16.7% and 20.9% stakes in Shanshui respectively.

The heart of the Shanshui debacle is the 'key man' clause as reported by Reuters. Borrowing to the company is dependent on current chairman Zhang Bin retaining his position. As soon as he leaves it triggers the repayment of offshore bonds worth US$500m. Normally not due for payment until 2020, the bonds contain a clause that forces the company to sell them within 30 days should Zhang Bin depart.

Shanshui seems likely to be able to pay its debts judging from its sales revenue, assets and the strength of its main shareholders. However, it has chosen to default for the moment. The question for analysts watching this from outside China is whether it masks deeper problems in the Chinese economy as growth continues to slow and industrial overcapacity lingers. Shanshui is the sixth mainland Chinese company known to have defaulted on a bond this year, according to Bloomberg. It's also likely to be operating at a cement production utilisation rate of around 50%.

If the Shanshui Cement situation is more to do with markets than personalities, then it may represent an alarming acceleration of the slowdown of the Chinese economy for the cement industry. If personalities matter more, then the situation is a battle comparable to the politics on the television show 'Game of Thrones.'

Europe: In accordance with Article 20 of the Federal Act on Stock Exchanges and Securities Trading (Stock Exchange Act), LafargeHolcim Ltd was informed by Schweizerische Cement-Industrie-Gesellschaft (Thomas Schmidheiny), Groupe Bruxelles Lambert (Jacqueline Desmarais, André Desmarais, Paul Desmarais Jr, Albert Frère), Eurocement Holding AG (Filaret Galchev-Kaltsidis), NNS Jersey Trust (Nassef Sawiris), Dodge & Cox and Harbor Funds about their number of voting rights and of the registered share capital they hold in LafargeHolcim Ltd as of 15 July 2015. The data is as follows:

- Schweizerische Cement-Industrie-Gesellschaft (Thomas Schmidheiny): 11.872%;
- Groupe Bruxelles Lambert (Jacqueline Desmarais, André Desmarais, Paul Desmarais Jr, Albert Frère): 9.84%;
- Eurocement Holding AG (Filaret Galchev-Kaltsidis): 6.38%;
- NNS Jersey Trust (Nassef Sawiris): 4.97% (3.99% in reg. shares);
- Dodge & Cox: 3.41%;
- Harbor Funds: 1.8609%.

Trinidad: An appeal by Trinidad Cement to challenge an injunction by minority shareholders to block its annual general meeting has been postponed, according to Radio Jamaica News. The hearing was originally scheduled for Monday 30 September 2013.

Trinidad Cement 's annual general meeting on 12 July 2013 was stopped by a high court injunction with just one hour's notice. The injunction was part of legal action by a group of shareholders holding 5.68% of the company who want to nominate five directors to the cement producer's board.