Global Cement Newsletter

Issue: GCW620 / 09 August 2023

Headlines


Adani Group announced this week that it was set to acquire a majority stake in Sanghi Cement. Its subsidiary Ambuja Cements said it was going to spend an enterprise value of just over US$600m on buying a 57% share in Sanghi Industries. The acquisition will be fully funded through internal accruals. The transaction works out at about US$99/t of clinker production capacity, a similar amount to what Adani Group paid Holcim to buy Ambuja Cements and ACC in 2022.

The acquisition has generally been perceived as consolidation in a crowded market. Profits have been under pressure in recent years due to the coronavirus pandemic lockdowns, logistics issues and then energy and other input price rises. However, commentators from ICICI Securities, cited in the local press, took the alternative view that Adani Group might be trying to start a price war in the west of India. They noted that demand for cement was 70Mt/yr in the region versus a production capacity of 82Mt/yr. Yet Sanghi Cement has reportedly been operating at less than a third of its capacity. Adani Group also revealed its intention to increase the cement production capacity at Sanghi Cement’s Sanghipuram plant to 15Mtyr by mid-2025 from 6.1Mt/yr at present. If the plant were upgraded it would potentially increase Adani Group’s market share from 19% to 37%.

Another aspect to consider with any large corporate action by Adani Group is the political angle. Adani Group’s chair Gautam Adani is often linked in the local press to the country’s ruling Bharatiya Janata Party (BJP) and Prime Minister Narendra Modi. So, every time Adani Group does something newsworthy, opponents of the BJP play up the perceived connections. This time the Indian National Congress (INC) simply noted publicly that a rival bidder for Sanghi Cement had encountered a tax investigation before it withdrew from the auction. There is no evidence suggesting that anything underhand happened here. Yet the point to consider going forward is that anything that Adani Group does is likely to be subject to more scrutiny than its peers. This may have unexpected consequences.

The financial results for the India-based cement producers covering the first quarter of the 2023 - 2024 year have been released in recent weeks. Generally, revenue and sales are up strongly but profits less so. Due to this, there has been a lot of attention placed on the costs these companies are incurring. Inflation on energy costs reportedly peaked in late 2022, but as Graph 1 below shows, it has been a mixed situation for the larger cement companies.

Graph 1: Comparison of Power & Fuel costs for selected Indian cement producers in first quarter of 2021, 2022 and 2023 financial years. Source: Company financial reports. 

Graph 1: Comparison of Power & Fuel costs for selected Indian cement producers in first quarter of 2021, 2022 and 2023 financial years. Source: Company financial reports.

UltraTech cement said that its energy cost grew by 3% year-on-year in the first quarter of the 2024 fiscal year and it blamed this mainly on negative currency exchange effects. It also reported higher raw material costs due to the growing price of fly ash and slag. Ambuja Cements (and subsidiary ACC) managed to cut both its fuel costs and increase its earnings, which, while impressive, is not entirely unexpected following the takeover by Adani Group in mid-2022. Similarly to UltraTech Cement, neither Shree Cement nor Dalmia Cement were able to grow earnings faster than revenue, so earnings per tonne of cement fell. Birla Corp, however, did manage to pull off this trick due to a “substantial decline in fuel and power costs.”

One consequence of a competitive cement market with lower profits than previously, is a renewed emphasis on marketing. Adani Group’s subsidiaries Ambuja Cements and ACC both highlighted the companies’ branding and marketing activities in the first quarter. Ambuja Cements has resurrected its television advert with wrestler The Great Khali, ACC is highlighting its part in the building industry since the 1930s with its own campaign and both companies are targeting sporting events such as the India versus Australia World Test Championship. Adani Group is building up brand awareness following the acquisition and potentially leading up to a name change in the future.

The other companies are also doing this but one campaign that sticks out has been Shree Cement’s use of classic video games such as the ‘Shree Cement Bros” video on its website. Computer game character Mario has done a lot of things in his time but he also worked in a cement plant back in the 1980s Game & Watch title ‘Mario’s Cement Factory.’ We are still waiting for the 4k remake with online multiplayer for some reason! Until then, it is worth reflecting that brand awareness is important in the world’s second largest cement market and it may become more so as Adani Group continues to establish itself.


India: Amubja Cements has appointed Hitesh L Marthak as its company secretary and compliance officer. Hitesh holds 25 years professional experience. He was appointed to the same positions at subsidiary ACC in late July 2023. Both Ambuja Cements and ACC are part of Adani Group.


Italy: Alpacem subsidiary W&P Cementi has concluded a deal to buy Buzzi’s Fanna cement plant in Friuli-Venezia Giulia. The plant has a clinker capacity of 660,000t/yr. As a part of the deal, Buzzi will obtain a 25% stake in Alpacem’s Austrian subsidiary Alpacem Zement Austria. Alpacem said that the deal expands the companies’ existing strategic partnership into the Austrian market. The parties expect to conclude the deal, pending the approval of competition authorities, in 2024.

Alpacem chief executive officers Bernhard Auer and Lutz Weber said “We are pleased to be expanding the strategic partnership. There are many future challenges in the cement sector that we can solve better together than we can individually.”


Colombia: Cementos Argos reported first-half sales of US$6.71bn for 2023, up by 25% year-on-year. Wet weather in the US and a slowing residential construction market in Colombia contributed to a 2.7% drop in cement sales to 7.9Mt. The company’s earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 45% to US$1.3bn, while its net profit rose by 56% to US$179m.

President Juan Esteban Calle said "In the first half of 2023 we achieved relevant milestones that demonstrate our commitment to generating value for our shareholders and other stakeholders. The progress in the execution of our share price recovery initiative, the growth in revenues and the expansion in the profitability margins of the businesses in our main markets motivate us to continue working every day to generate value for all our stakeholders."


India: Birla Corporation reported consolidated sales of US$293m in the first quarter of its 2024 financial year, up by 9.3% year-on-year from the previous first quarter. This was partly due to a 12% rise in the company’s cement sales volumes to 4.41Mt, which offset ‘subdued prices’ in its core markets. The producer increased its earnings before interest, taxation, depreciation and amortisation (EBITDA) by 15% to US$37.9m. United News of India has reported that Birla Corporation recorded a capacity utilisation of 91%, which was among the highest in the Indian cement industry.

The company said that it will ‘maintain its relentless thrust on cost rationalisation, shoring up sales of premium products in high realisation geographies, route-to-market optimisation and increasing leadership bench strength and depth.’


Saudi Arabia: Saudi Cement recorded US$204m in sales in the first half of 2023, up by 15% year-on-year from US$177m in the first half of 2022. The producer reported a net profit of US$55.7m, up by 28% from US$43.6m.


India: Wonder Cement has concluded a memorandum of understanding (MoU) with authorities to build a cement production facility in Desar, Gujarat. The Times of India newspaper has reported that the producer plans to invest US$66.4m in the new facility.


Pakistan: Lucky Cement's sales were US$1.62bn in the 2023 financial year (1 July 2022 - 30 June 2023), up by 16% year-on-year from US$1.4bn in the previous financial year. Its profit after tax was US$210m, up by 63% from US$129m.


Japan: Taiheiyo Cement's sales were US$1.35bn in the first quarter of the 2024 financial year, up by 9.6% year-on-year. Meanwhile, its profit before tax rose by 36% to US$20.8m.

Nikkei Financial Summary News has reported that Taiheiyo Cement has maintained its forecast of sales of US$6.43bn and profit before tax of US$392m for the full 2024 financial year, which ends on 31 March 2024.


Japan: Sumitomo Osaka Cement says that it expects sales to rise by 14% year-on-year to US$761m during the first half of the 2024 financial year. Nikkei Financial Summary News has reported that the producer expects a drop in its cement volumes, offset by price hikes. Currency effects will also impact its result. Meanwhile, coal prices remained lower than expected. The company expects to record a net profit of US$26.6m, compared to a loss of US$20.4m in the first half of the 2023 financial year. It previously forecast a US$13.3m loss.

Sumitomo Osaka Cement recorded US$52.8m in sales in the first quarter of the 2024 financial year (1 April - 30 June 2023). This corresponds to year-on-year growth of 16%. Nonetheless, it made a net loss of US$7.6m.

Throughout the first quarter of the 2024 financial year, Japanese cement despatches fell by 15% to 10.1Mt. Exports declined most sharply, by 43%, to 1.51Mt.


India: Germany-based Gebr. Pfeiffer says that it has received orders for two MVR 3750 C-4 vertical roller mills from Dalmia Cement (Bharat). The producer plans to install one mill at its Ariyalur grinding plant in Tamil Nadu and the other at its Kadapa grinding plant in Andhra Pradesh. Gebr. Pfeiffer says that the mills will be employed in grinding clinker and pond ash. Each will produce 160t/hr of cement or fly ash cement. The supplier said that the mills' vertical design will help them to dry pond ash, as well as grinding and classifying it.


Sweden: CemVision has reported the successful conclusion of a large-scale production pilot of its ultra low carbon alternative clinker. CemVision produces the clinker using up to 100% recycled industrial secondary materials from the steel and mining sectors. CemVision says that its production process heats the raw materials using renewable electricity, and without the use of fossil fuels. The alternative clinker offers CO2 reductions of up to 100% compared with ordinary Portland cement (OPC) clinker. CemVision has opened an invitation to possible collaborators to help scale up production, with a target of hundreds of thousands of tonnes per year.

Chief technical officer Claes Kollberg said "We are a climate-first company, making high performance cement. With our competence and experience, it is our duty to produce the most environmentally friendly cement for each application."


Austria: Alpacem's Austrian subsidiary W&P Zement has announced its rebranding to Alpacem Zement Austria. Alpacem said that the rebrand in Austria will be the first step of a roll-out of the Alpacem brand across its local subsidiaries.

Alpacem has subsidiaries in Austria, Italy and Slovenia.


Mexico: Cooperativa La Cruz Azul has inaugurated the new Kiln 5 at its Oaxaca cement plant in Lagunas. Local press has reported that the new kiln will increase the plant's clinker capacity by 3700t/day. Additionally, the producer has inaugurated a new weighbridge at the plant. The equipment is capable of weighing trucks of up to 100t in mass. Cooperativa La Cruz Azul's investments in the latest upgrades to the Lagunas cement plant totalled US$301m.

Cooperativa La Cruz Azul said "With these projects, multiple benefits are generated for the community, and the cooperative reaffirms its commitment to the progress and development of the region."


South Africa: PPC South Africa Holdings says that it has concluded a deal to sell 10% of its shares to employees via the PPC Employee Share Ownership Trust. News24 Online News has reported that all South African employees of the company will be eligible to buy shares, provided that they are not already currently participating in its long-term incentive programme. The total value of shares transferred under the deal will be US$20.4m

CEO Roland van Wijnen said "PPC has been built upon the shoulders of its employees, and this transaction provides a meaningful way of rewarding those in South Africa who do not participate in PPC’s long-term incentive plan to share in the creation of shareholder value. We are pleased that the terms of the transaction are such that it stands to benefit employees for many years to come.”


Israel: Nesher-Israel Cement Enterprises has received an order from the Ministry of Environmental Protection to reduce emissions from its Ramle cement plant. BALLEG News has reported that the plant violated pollution rules over non-focal emissions and particle emissions values. Nesher-Israel Cement Enterprises also reportedly failed to submit data about defects, malfunctions and abnormal emissions, following 'several incidents.'

The producer previously paid a US$1.64m pollution fine in August 2022.


India: Prism Johnson has ordered US$2.42m-worth of coal for use as cement fuel from Vikas Ecotech. Press Trust of India News has reported that the supplier will complete the order by 31 October 2023.


US: Heidelberg Materials North America reported the death of a man at its Port Everglades cement terminal in Florida on 5 August 2023. Local press has reported that the body of the man was found inside equipment, where he is believed to have fallen. He was an external contractor who had been carrying out repair work. Authorities are currently investigating the tragedy.

Heidelberg Materials North America said "We are working closely with the appropriate authorities to ensure a thorough investigation into the cause of the accident."


Morocco: Members of the Professional Association of Cement Producers (APC) delivered a total of 6.98Mt of cement during the first seven months of 2023. This corresponds to a year-on-year rise of 2.1%, compared with seven-month 2022 levels. Agence Marocaine de Presse News has reported that ready-mix concrete plants consumed 4.29Mt (61%), and precast concrete plants 1.37Mt (20%), of cement deliveries. Producers despatched 367,000t (5.3%) of cement to infrastructure construction sites, and 271,000t (3.9%) to other building sites.


Mexico/Switzerland: Cemex and industrial solar heat specialist Synhelion have achieved constant clinker production on an industrially viable scale using only solar heat. The partners say that this confirms the technology's potential for industrial-scale implementation.

Cemex chief executive officer Fernando A González said “I am convinced we are getting closer to the technologies that will enable net-zero CO2 cement and concrete production. The solid progress I see here proves that solar cement is not just a dream: it is achievable through continued collaboration, and backed up by rigorous research and testing.”


Italy: Buzzi's revenues rose by 14% year-on-year in the first half of 2023, to Euro2.15bn from Euro1.88bn in the first half of 2022. This was despite an 8.3% decline in its sales and volumes of cement and clinker, to 5.12Mt from 5.83Mt. The group recorded a rise in its earnings before interest, taxation, depreciation and amortisation (EBITDA) of 58% to Euro575m from Euro365m. It noted an 'unfavourable economic situation,' with a slowdown in many of its markets.

Buzzi said "In the second quarter of 2023, the performance of the manufacturing segment was still weak, and contributed to limiting the growth prospects of international trade. In early 2023, consumer price inflation slowed down, thanks to the decrease in the energy component, although it remained at historically high levels. The decline in inflation was more evident in industrial goods, which incorporated the trend of energy prices." It added "Prospects continue to be negatively affected by persistent inflation and the consequent restrictive orientation of monetary policies in the major advanced economies, as well as by the uncertainty associated with the continuation of geopolitical tensions on a global scale, first of all the ongoing conlict in Ukraine."


Rwanda: West China Cement subsidiary Anjia Cement has inaugurated its Muhanga grinding plant at the Muhanga Industrial Park in Gitarama. Xinhua News Agency has reported that West China Cement invested US$50m in the plant's construction. It subsequently aims to raise its total investments in Rwanda to US$100m.

Rwanda Development Board chief executive officer Clare Akamanzi said "Over the past five years, we have registered investments from China worth close to US$1bn, which will collectively generate up to 25,000 jobs for Rwandans."


Australia: Alternative cement and concrete producers have welcomed a new Australian civil engineering standard that allows builders to use reduced-CO2 geopolymer concrete in infrastructure projects. Wagners, which produces Earth Friendly Concrete (EFC), said that the revision has removed on if its key barriers to wider market acceptance. EFC replaces 100% of cement with supplementary cementitious materials, including ground granulated blast furnace slag (GGBFS) and pulverised fly ash, by virtue of its binder technology. Wagners previously supplied EFC for the London Power Tunnels project in the UK, based on local technical approval-based building codes. The producer now expects a new standard like the Australian one to follow in the EU.


Australia: Cement Australia has commemorated the 100th anniversary of the start of operations at its Railton cement plant in Tasmania with a centenary dinner.

Production manager Garry Bissett said "When it opened up in 1923, they built the small kiln, and it was only capable of cement production of 25,000t/yr; now we're producing 1.4Mt/yr." He added that the workforce has fallen to less than half of its original size of 300 people, to 140. Bissett concluded "We're doing some major work, with a lot of capital upgrades in the near future."


China: Huaxin Cement has blamed a fall in its profits in the first half of 2023 on falling clinker prices and sales volumes in its home market. In a preliminary results announcement, it reported that its net profit dropped by 25% year-on-year to US$166m in the first half of 2023 from US$221m in the same period in 2022. Despite this, the group’s operating income rose by 10% to US$2.20bn from US$2.00bn. Its overall sales volumes of cement and clinker increased by 2% to just under 30Mt. However, domestic sales volumes decreased by 0.76%. It also reported that concrete sales volumes grew by 82% to 10.9Mm3.


India: Ambuja Cements has concluded a deal to acquire a 57% stake in Sanghi Industries for US$202m. Reuters has reported that the company has offered to subsequently increase its stake in Sanghi Industries to as much as 83% for up to US$295m in total. It will fund the acquisition of any stake through internal accruals. Sanghi Industries operates the 6.1Mt/yr Sanghipuram cement plant, which is equipped with a 130MW captive power plant and a 13MW waste heat recovery (WHR) plant. The cement plant, in Gujarat, also has a single-jetty port on the Arabian Sea coast. Ambuja Cements' parent company Adani Group plans to more than double the Sanghipuram cement plant's capacity to 15Mt/yr.

Adani Group chair Gautam Adani said “By joining hands with Sanghi Industries, Ambuja is poised to expand its market presence, strengthen its product portfolio and reinforce its position as a leader in the construction materials sector. With this acquisition, Adani Group is well on course to achieve its target of 140Mt/yr of cement manufacturing capacity by 2028 ahead of time.”


Saudi Arabia: Yamama Cement recorded revenues of US$134m during the first half of 2023, up by 17% year-on-year from US$115m during the first half of 2022. The producer's net profit rose by 75% to US$56.2m from US$32.1m.


India: UltraTech Cement has concluded an agreement to buy a 26% stake in renewable power provider VEH Radiant Energy. UltraTech Cement says that VEH Radiant Energy will help it to increase its reliance on renewable power in its operations.


US: Prometheus Materials' microalgae-based biocement has demonstrated 12 times greater sound absorption than ordinary Portland cement (OPC). Prometheus Materials produces its biocement at ambient temperature, with no process CO2 emissions.


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.