US: Summit Materials has appointed Joseph S Cantie as a new director, also serving on the Audit Committee. With the appointment of Cantie, Summit’s board now comprises eight members.

Cantie is the former Executive Vice President and Chief Financial Officer of ZF TRW, a division of ZF Friedrichshafen, a global automotive supplier, a position he held from May 2015 until January 2016. He served in similar roles at TRW Automotive Holdings Corp., which was acquired by ZF Industries in May 2015, since 2003. Prior to that time, Cantie held other executive positions at TRW, which he joined in 1999. From 1996 to 1999, Cantie served in several executive positions with LucasVarity, including serving as Vice President and Controller. Prior to joining LucasVarity, Cantie spent 10 years with KPMG. He is currently a director for TopBuild Corp. where he serves on the Audit, Compensation and Governance Committees, and for Delphi Automotive PLC where he serves on the Audit and Finance Committees.

Cantie is a certified public accountant and holds a Bachelor of Science degree from the State University of New York at Buffalo.

LafargeHolcim has officially opened a new cement line at its Barossa cement plant in Brail. It is unfortunate timing given that the Brazilian cement industry has not had an easy time of it of late. The wider economy in the country has been in recession since it was hit by falling commodity and oil prices and gross domestic product (GDP) fell by 3.8% in 2015. The International Monetary Fund (IMF) has predicted currently that the GDP will fall by a similar amount in 2016. Alongside this, the Petrobras corruption inquiry has enveloped construction companies and led to the suspension of president of Dilma Rousseff. The Instituto Brasileiro de Geografia e Estatística (IBGE) reported that the national construction industry contracted by 7.6% in 2015.

Graph 1: Brazilian cement production from 2011 to 2015. Source: SNIC.

Graph 2: Brazilian cement production by quarter from 2015 to March 2016. Source: SNIC.

Graph 1 summarises, with National Union of the Cement Industry (SNIC) data, what happened to cement production in 2015. It fell by 9.6% to 64.4Mt in 2015 from 71.3Mt in 2014. Unfortunately, as Graph 2 shows, the downward production trend is accelerating into 2016. Production fell by 5.76% year-on-year to 15.6Mt in the first quarter of 2015 from 17.1Mt in the first quarter of 2014. Now, production has fallen by 11% to 13.9Mt in the first quarter of 2016. April 2016 figures also appear to be following the same trend.

Amidst these conditions Votorantim somehow managed to hold its cement business revenue up; increasing it by 6% to US$3.82bn in 2015. Despite this its cement sales volumes fell by 6% to 35Mt. As a result, Votorantim announced plans to temporarily shutdown kilns and plants and sell off selected concrete assets. Cimento Tupi reported that its cement and clinker sales volumes fell by 23% to 1631Mt in 2015 from 2119Mt in 2014. It blamed the fall of the ‘retraction’ of the cement market and a wide-scale maintenance campaign it had implemented on its kilns. Its revenue fell by 26% to US$98.8m from US$134m.

LafargeHolcim pulled no punches when it blamed challenging conditions in Brazil for dragging its financial results down globally in 2015. It didn’t release any specific figures for the country but it described its cement volumes as falling ‘significantly’ with competition and cost inflation adding to the chaos. This has gotten worse in the first quarter of 2016 with volumes further affected. Its cement sales volumes in Latin America fell by 10.7% year-on-year for the period principally due to Brazil. Companhia Siderúrgica Nacional (CSN) has reported an 8% rise in production to 531,000t in the first quarter of 2016 and an 8% rise in sales volumes to 571,000t in the same period. This was partly achieved by the ramp-up of production at its new plant at Arcos in Minas Gerais.

In the wider cement supplier sector the knock-on from falling cement demand has hit refractory manufacturer Magnesita. Its revenue fell by 17% year-on-year to US$66.9m for the first quarter of 2016. This was due to falling steel production in various territories and the negative effects of the construction market in Brazil hurting its cement customers.

It is unsurprising that companies like LafargeHolcim commissioned new capacity in Brail a few years ago given the promise the market seemed to hold. Both the CSN project at Arcos and Holcim’s Barroso project were announced in 2012 near the height of the market. Both are also based in Minas Gerais, the country’s biggest cement producing state. Predicting both the drop in the international commodities markets and a local political crisis would have been hard to predict. All these producers can do now is sit back and wait out the situation with their efficiency gains until the construction rates pick up again. Hopefully the first quarter results for Brazil’s two leading cement producers, Votorantim and InterCement, will not be too depressing.

Switzerland: LafargeHolcim has appointed Caroline Luscombe as the group’s new Head of Organisation and Human Resources and member of the Executive Committee. Her role starts from 1 July 2016 and she will be based in Zurich. She succeeds Jean-Jacques Gauthier.

Luscombe joins LafargeHolcim from Syngenta where she has been Head of Human Resources since January 2010 and a member of the Executive Committee since 2012. Prior to joining Syngenta, Luscombe held senior human resource roles in the financial and healthcare businesses of the GE Group, and in the speciality chemical company, Laporte.

Having led the human resource integration between Lafarge and Holcim, Jean-Jacques Gauthier will be appointed as the Country Chief Executive Officer in Algeria from 1 September 2016. On taking up his new role, Jean-Jacques will relinquish his position on the Executive Committee.

Nigeria: Lafarge Africa has appointed Michel Puchercos as its new group Managing Director and chief executive officer. He assumed his post on 1 April 2016. He replaces Peter Hoddinott.

Puchercos, a French national, started his career in 1982 at the French Ministry of Agriculture before working at other companies in the biochemistry and food industry. He joined Lafarge as Head, Strategy and Purchasing in Orsan, Lafarge Biochemistry, and in 1998 became Director of Cement Strategy and Information Systems, Lafarge Gypsum. Puchercos became the Director of Cement strategy, Lafarge Group in France in 2003 before becoming the CEO for Lafarge operations in Kenya and Uganda in 2005. He then became the CEO of Lafarge South Korea in 2009.

Puchercos is a graduate of Ecole Polytechnique, and the National School of Rural Engineering, Waterways & Forests, France.

Delegates at the IEEE-IAS/PCA Cement Industry Technical Conference in Dallas, Texas this week may have smiles upon their faces if the following data is correct. The US cement industry has rocketed into 2016 with solid sales growth. Multinational cement producer balance sheets are being propped up by the good news and data from the United States Geological Survey (USGS) backs it up.

LafargeHolcim led the pack with an 18.9% bounce in its cement sales volumes to 3.4Mt in the first quarter of 2016. Most of this rise was driven by high demand for building materials in the US supported by a ‘vigorous’ housing market and positive infrastructure spending. HeidelbergCement followed this up with a 13.8% in its cement sales volumes to 2.5Mt in North America. Cemex reported a 8% rise, Buzzi Unicem reported a 16.3% rise, Martin Marietta reported a 13.8% rise and Cementos Argos reported a 47.3% rise.

Graph 1: Portland and blended cement shipments by US Census Bureau region for 2016 to February 2016. Source: USGS

USGS data shows this ‘bounce’ in cement sales shipments at the start of 2016 quite well. Although the publicly released preliminary data only goes as far as February 2016 you can clearly see an up-tick at the start of the year. By comparison shipments in each of the main US census regions fell from January to February 2015 before picking up as the spring started. The main reason for this was the harsh winter in 2015. Overall, cement volumes rose by 11.6% year-on-year for the mainland US in January and February 2016. These were led by Maine, New York and Illinois in the Northeast and Midwest, presumably recovering from the previous winter, before a load of southern states, including Northern Texas and South Carolina, kicked in with growth of above 20%. As an aside it is also worth pointing out the seasonal variation between the Midwest and the West. The Midwest has a more pronounced summer production peak most likely due to the colder winters the region endures.

The reason for that bounce at the start of 2016 is important because it determines whether the US cement party will continue or not. A few of the cement producers in their financial reports mentioned that sales were up due to pent up demand following the harsh winter in 2015. HeidelbergCement gave a much more considered assessment than its rivals. They pointed out that, despite the growth in construction markets, economic growth slowed in the country in the quarter. This fits more in line with the Portland Cement Association’s (PCA) more cautious assessment that the construction industry in the US should be growing but that an uncertain economic outlook is messing with this. It seems that the US cement industry has growth for the moment but that certainty that this will continue is far more elusive. This week’s news that plans have been scrapped to build a third kiln at the Lafarge North America Joppa cement plant just adds to this feeling.

For further information on the US cement industry take a look at the May 2016 issue of Global Cement Magazine.

Indonesia: Semen Indonesia has appointed Rizkan Chandra as its new president director at its annual general meeting. He will hold the post of president director until 2020. Rizkan Chandra replaces Suparni.

Rizkan Chandra, aged 47 years, has previously served as the director of Semen Indonesia (Persero) and worked for Telekomunikasi Indonesia (Persero), Telkomsel and Sigma Cipta Caraka. He holds an undergraduate degree in Informatics Engineering and a master’s degree in Management of Technology from the National University of Singapore.

Cemex took a major step towards cutting its debts last week when it announced the sale of selected assets in the US for US$400m. Two cement plants in Odessa, Texas and Lyons, Colorado were included in the deal along with three cement terminals and businesses in El Paso, Texas and Las Cruces, New Mexico. Grupo Cementos de Chihuahua (GCC) was announced as the buyer.

Together the two plants being sold hold a cement production capacity of 1.5Mt/yr giving a rough cost of US$267/t for the assets. This compares to the cost of US$170/t that the European Cement Association (CEMBUREAU) estimates is required to build new capacity. Back in August 2015 when Taiheiyo Cement’s Californian subsidiary CalPortland purchased Martin Marietta Materials’ two cement plants in the state it paid US$181/t. Summit Materials paid far more at US$375/t in July 2015 when it purchased Lafarge’s cement plant in Davenport, Iowa, although that deal included seven cement terminals and a swap of a terminal. Other sales in 2014 to Martin Marietta Materials and Cementos Argos also hit values of around US$450/t involving lots of other assets including cement grinding plants and ready mix concrete plants.

Back on Cemex, the current sale to GCC maintains its position as the third largest cement producer in the US after the HeidelbergCement acquisition of Italcementi completes in July 2016 subject to Federal Trade Commission approval. However, it holds it with a reduced presence. Its cement production capacity will fall to 13Mt/yr from 14.5Mt/yr. It loses cement production presence in Colorado although it may retain distribution if it holds on to its terminal in Florence. In Texas it retains the Balcones cement plant near San Antonio and up to nine cement terminals depending on which ones it sells to GCC.

Selling assets in the US must be a tough decision for Cemex given that a quarter of its net sales came from the country in 2015. This was its single biggest territory for sales. This share has increased in the first quarter of 2016 as the US market for construction materials has continued to pick up.

Withdrawing from western Texas with its reliance on the oil industry makes sense. The plant it has retained in that state, the Balcones plant, is within the so-called Texas Triangle and so can hopefully continue to benefit from Texas’ demographic trends for continued housing starts and suchlike. Colorado is one of the middling US states in terms of population and likely to be a lower priority than other locations. The sales will see Cemex retrench its cement production base in southern and eastern parts of the country with the exception of the Victorville plant in California.

We’ve been watching Cemex keenly as other multinational cement producers have merged and laid out plans to merge in recent years. Saddled by debts, Cemex has appeared unable to either buy more assets itself and has remained distant from any talk of merger activity itself. The sales announcements in the US reinforce the image of a company taking action to relieve itself of its debts in 2016 following sales in Thailand, Bangladesh and the Philippines, and amended credit agreements and more borrowing. However, sales of cement plants in west Texas and Colorado outside of the strong markets in the US don’t quite suggest a company that has really committed yet to reducing its debt burden. Cemex continues to walk a tightrope between keeping the creditors at bay and riding the recovery in the US construction market.

This article was updated on 14 June 2016 with amended production capacity data for the Odessa cement plant

Nigeria: AshakaCem, a subsidiary of Lafarge Africa and member of the LafargeHolcim group, has appointed Alhaji Rabiu Abdullahi Umar as its new managing director. AshakaCem said in a statement that Umar was appointed to succeed Leonard Palka, a Polish national, who has resigned from the company.

AshakaCem in Gombe State is one of the four cement companies controlled by Lafarge Africa in Nigeria. Formerly the companies were known as Lafarge Cement WAPCO Nigeria before the name was changed in 2014.

In April 2016 the shareholders of BP voted against a pay package of US$20m for the company's chief executive officer (CEO) Bob Dudley. The vote was non-binding to BP but it clearly sent a message to the management. Subsequently, the chairman Carl-Henric Svanberg acknowledged the mood amongst the company's investors and stated in his speech at the annual general meeting that, "We hear you. We will sit down with our largest shareholders to make sure we understand their concerns and return to seek your support for a renewed policy."

The link to the cement industry here is that many of the world's major cement producers are public companies. Similar to BP they internally set CEO and leading executive pay and remuneration packages. Just like BP, cement companies too could run into similar complaints from their shareholders, for example, should the construction and cement markets have similar jolts that the oil industry has faced since mid-2014.

To be clear: this article is not attempting to pass judgement on how much these CEOs are being compensated. It is merely seeing how compensation compares amongst a selection of leading cement companies. LafargeHolcim's revenue in 2015 was greater than the gross domestic product of over 90 countries. Running companies of this size is a demanding job. What is interesting here is how it compares and what happens when it is perceived to have grown too high, as in the case of BP.

It should also be noted that this is an extremely rough comparison of the way CEO pay and wage bills for large companies are presented. For example, the CEO total salary includes incentives, shares and pension payments. The staff wage bills includes pension payments, social charges and suchlike.

Graph 1: Comparison of CEO total remuneration from selected cement companies in 2015. Source: Company annual reports. 

There isn't a great deal to comment here except that compared to the average wage these are high from a rank-and-file worker perspective! The total salary for Eric Olsen, the CEO of LafargeHolcim, is lower than HeidelbergCement and Italcementi, which seems odd given that LafargeHolcim is the bigger company. However, Olsen has only been in-post since mid-2015. By contrast, Bernd Scheifele became the chairman of the managing board of HeidelbergCement in 2005. Carlo Pesenti, CEO of Italcementi and part of the controlling family, took over in 2004. Albert Manifold, CEO of CRH, also sticks out with a relatively (!) low salary given the high revenue of the company.

Graph 2: Comparison of CEO remuneration to average staff cost and total company revenue in 2015. Source: Company annual reports. 

This starts to become more interesting. HeidelbergCement's higher CEO/staff and CEO/revenue ratios might be explained by Scheifele's longer tenure. Yet Italcementi definitely sticks out with a much higher CEO wage compared to both the average staff wage and the company's revenue. Again, CRH stands out with a much lower CEO/staff ratio. Dangote's CEO/staff ratio is low but its CEO/revenue ratio is in line with the other companies' figures.

Consider the figures for China Resources and this suggests that CEO/revenue ratio may be more important than the CEO/staff ratio. The implication being that the market will only tolerate a ratio of up to about 0.05%. Any higher and the CEO's family has to own the company. Which, of course, is the case with Carlo Pesenti and Italcementi. Until HeidelbergCement takes over later in 2016 that is.

That’s as far as this rough little study of CEO remuneration at cement companies will go. So, next time anybody reading this article from a cement company asks for a pay rise, consider how much your CEO is receiving.

Kenya: Central Bank of Kenya (CBK) deputy governor Sheila M’Mbijiwe is seeking re-election to the board of LafargeHolcim majority-owned Bamburi Cement. A notice sent to shareholders stated that the CBK senior executive will be seeking a new mandate when the company holds its 65th annual general meeting on 2 June 2016 in Mombasa. The 58-year-old senior CBK executive, who also sits on the regulator’s Monetary Policy Committee, was set to retire by rotation but is seeking to retain the seat.

Others seeking re-election are Daniel Patterson and D Drouet who are also retiring by rotation but are eligible to seek to be elected again.