Global Cement News

Ireland: Irish cement conglomerate Cement Roadstone Holdings (CRH), has released its results for the first half of 2013, which show that it made a loss of Euro7.1m before tax for the six month period. This compares to a Euro102m pre-tax profit in the first half of 2012. Its operating profit came in at Euro41m, down from a restated Euro162m operating profit in the first half of 2012.

Commenting on the results, CRH's Chief Executive Myles Lee said, "Although recent economic indicators suggest that the Eurozone may be emerging from recession, overall construction activity remains weak and we expect challenging trading conditions in Europe for the remainder of 2013. In the United States, economic growth is estimated to have strengthened over recent quarters and we expect second half EBITDA to be ahead of last year."

"Overall for CRH, we expect EBITDA for the second half of the year to be in line with 2012 (Euro1.04bn)," continued Lee. "The group continues to focus on cost management, operational excellence, value-adding acquisitions and strong cash generation and is well-positioned to progress as markets recover."

CRH's sales revenue was down by 3% (by 6% on a like-for-like basis). This was made up of 7% year-on-year fall in the four months to April 2013, moderating to a 3% decline in May and June 2013.

CRH's earnings before interest, tax, depreciation, amortisation and impairment charges (EBITDA) amounted to Euro400m. Its first half acquisitions/investments came to Euro470m and it made Euro202m from asset disposals.

Belarus: President Alyaksandr Lukashenka has approved the creation a new cement company, the Belarusian Cement Corporation. The new holding company is expected to control three cement manufacturers: Belarusian Cement Plant in Kastsyukovichy, Mahilyow region, Krasnaselskbudmateryyaly in Vawkavysk, Hrodna region, and Krychawtsementnashyfer in the Mahilyow region, as well as a transport and logistics company.

The Belarusian Cement Corporation is to be established in 2014 and attract a strategic investor in 2015. The establishment of the corporation is intended to decrease production costs, increase profits and raise exports. After project capacity is achieved in 2015, the company will have a cement production capacity of 9.5Mt/yr.

China: Anhui Conch has reported that its net profit rose by 4.9% year-on-year to US$501m for the first six months of 2013 from US$477m in the same period of 2012. The leading Chinese cement producer attributed its result to lower input costs such as coal and cutting operating costs.

Conch reported a 14.7% increase in revenue year-on-year to US$3.86bn from US$3.36bn. However, its net cash flow generated from operating activities fell by 5.61% to US$1.04bn from US$1.10bn.

By region, sales revenue fell by 1.0% in its East China territory, the cement producer's biggest sales area, due to a decrease in prices to combat increased competition. Sales rose markedly in its Central and West China territories at 33.7% and 39.6% respectively. Sales rose more modestly in South China and for exports.

Projects that Conch completed in the first half of 2013, including three 5000t/day clinker production lines and eleven grinding plants, added 5.4Mt/yr of clinker production capacity and 12.1Mt/yr of cement production capacity. Two waste heat recovery systems were installed at Jianghua Conch and Guiding Conch adding 18MW of power. The group also successively implemented staged combustion technology modification for 45 clinker production lines and SNCR flue gas denitration technology modification for 25 clinker production lines.

Switzerland: Swiss multinational cement producer Holcim has seen a rise in its net income and cash flow in the first half of 2013 with increased operating earnings before interest, tax, depreciation and amortisation (EBITDA) in Latin America and Europe. However, the group said that it saw lower sales volumes in India, which affected its results badly. Despite this, it said that its EBITDA growth and operating profit were in line with its outlook for 2013.

Holcim's consolidated net sales decreased by 5.1% to Euro7.75bn. A 3.4% decline in operating EBITDA to Euro1.45bn was largely attributable to its two Indian group companies as well as Holcim Canada, Holcim Mexico, Holcim Morocco and Holcim France. Consolidated operating profit fell by 3.3% to Euro810m, but on a like-for-like basis moderate growth of 0.1% was recorded. Group net income increased by 23.8% to Euro613m. The group's net financial debt was down by Euro970m compared to the same period of the previous year at Euro8.87bn.

Europe and Latin America reported year-on-year increases in operating results. On account of Canada, North America was not able to match the figures of the previous year and Asia Pacific and Africa Middle East fell considerably short of the previous year's levels owing to India and Morocco, respectively. Holcim Philippines, Aggregate Industries UK, Holcim Ecuador and Holcim US achieved substantially improved operating results. Overall, like-for-like operating EBITDA at group level fell by 0.6% in the first half. At 0.1%, like-for-like operating profit developed moderately positively. The corresponding figures for the second quarter were positive at 2.8% and 5.4% respectively.

Holcim achieved its financial results based on marginally lower cement sales compared to the first half of 2012. Consolidated cement sales were down by 3.7% to 68.6Mt. Price development in all regions continued to be positive with the exception of Europe.

Holcim said that it anticipates an increase in sales of cement in 2013. While Holcim's group regions Asia Pacific and Latin America are expected to witness higher cement sales volumes, Holcim is somewhat less optimistic with regard to Europe and Africa Middle East. In North America, cement sales are expected to reach similar levels to 2012.

Turning to operating EBITDA and operating profit, the board of directors and executive committee expect a further improvement in margins. Holcim says that its development and efficiency programme, the Holcim Leadership Journey is gaining further momentum, and will continue to contribute to this development. Under similar market conditions, organic growth in operating EBITDA and operating profit should be achieved in 2013.

In the January 2013 issue of Global Cement Magazine, we featured a review of the Ethiopian cement industry. At the time we were hopeful with respect to the country's future cement demand, buoyed along by Ethiopia's own bold targets for development of the sector. It seemed only a matter of time before international and regional producers went to Ethiopia and cashed in on a cement plant-building bonanza.

Ethiopia's government is keen to further develop Ethiopia's cities and infrastructure and wants to increase its per-capita cement consumption from 35kg/yr at present to ~300kg/yr in the period to 2017. To do this, it is encouraging the cement sector to swell from its current capacity (7.4Mt/yr integrated capacity with additional grinding capability) to over 27Mt/yr by the same year. At the same time, the country has banned cement imports, a bold statement of intent designed to protect its own growing industry.

This week, we have learned that the country is hitting its bold production targets, largely without assistance from outside players. However, it seems that Ethiopia is incapable of consuming the volumes of cement that have been produced. As of 12 August 2013, the Ministry of Industry announced that Ethiopia made 12Mt of cement in the year to 7 July 2013, more than double the 5.4Mt/yr that it demanded over the same period. This revelation casts the government's future predictions for rapid cement demand growth in serious doubt.

While it takes effort to picture Ethiopia producing 27Mt/yr of cement by 2017, such rapid development is happening in west Africa, where Nigeria's Dangote Cement is achieving 'regional-giant' status.

However, it would take a very great leap of imagination to believe that Ethiopia could consume 27Mt/yr in 2017, five times what it does today, even with the development of major projects like the Millennium Renaissance Dam (a US$4.2bn hydroelectric project), major city and road-building projects and a rapidly growing population. Its cement capacity would have to grow by 4.9Mt/yr, representing average year-on-year cement demand growth of 52.5%/yr. Even with a cement industry the size of Ethiopia's, this represents almost impossible growth. To support this increase in demand, GDP/capita, which is often closely correlated to cement demand, would probably also have to raise fivefold, from US$374 to US$1870. This difference would take it from the bottom 20% of African nations well into the top third by this measure.

If this over-production trend continues, it does not bode well for Ethiopia's domestic cement industry. While exports may appear attractive, options are limited. Kenya to the south has a larger and more well-established cement industry, Somalia has major economic and security drawbacks and Ethiopia's relationships with Eritrea and Djibouti, both of which declared independence from Ethiopia, are tense. With no coast of its own, maritime exports will be difficult, especially with low-cost cement flowing from India, Pakistan and Iran. South Sudan, with its lack of cement production facilities, plentiful oil and major trade/border dispute with Sudan, could offer a small market for Ethiopian exports, but not enough to satisfy a ~20Mt/yr overcapacity.

Read Global Cement's January 2013 review of the Ethiopian cement industry here.