Global Cement News

Eagle Materials has picked up two cement plants in the US from Lafarge with a combined capacity of 1.6Mt/yr for US$446m. The deal also included six distribution terminals, two aggregates quarries, eight ready-mix concrete plants and a fly ash business.

Following our column in August 2012 following an acquisition in India we decided to ask a similar question: how much are American cement plants worth?

Eagle's acquisition now increases its presence in the Midwest and South Central regions of the US, giving it a rough line of plants across the country nearly connecting Lake Michigan to the Gulf of Mexico. As shown in our industry report on the US between 2005 and 2011 cement consumption fell in both the states the plants are located in. Missouri's consumption fell by 45% from 2.82Mt to 1.56Mt, just above the US national average. By contrast Oklahoma's consumption only fell by 11%, from 1.6Mt to 1.43Mt, the fourth smallest decline in the country.

However, Eagle has demonstrated financial health in contrast to the US sector as a whole, reporting a 21% rise in total revenue in the quarter to 30 June 2012 and a 60% rise in operating earnings year-on-year in the quarter to 31 March 2012. The combined operations at the two plants generated about US$178m in revenue during the year ending in June 2012. By contrast Eagle Materials' revenue totalled US$529m during the same period. The plants' additional capacity will increase Eagle's total by about 60%.

Lafarge are still thinking big though, with the proviso that Eagle will supply certain Lafarge operations with cement for four to five years, as well as an agreement with a Lafarge affiliate to supply low-cost alternative fuels to the acquired operations. According to its 2011 annual report North America comprised 11% of Lafarge's cement sales. Lafarge's sales in the US remained flat in 2011. In that year the company's capacity was 12.8Mt with a 12% market share. This picture has started to change in 2012 with a reduced loss in earnings before interest, tax, depreciation and amortisation (EBITDA) in the first quarter followed by volume and sales increases of above 10% in the second quarter.

Back in June 2011 Cementos Argos picked up two plants from Lafarge in Roberta, Alabama and Harlyville, South Carolina for US$760m with a combined capacity of 2.7Mt/yr. As with the Eagle deal the sale included a number of peripheral assets including a clinker mill, cement mixer lorries and a marine port.

Cementos Argos recently put the world average at US$250m/t when publicising the expansion of its Rioclaro plant. The European Cement Association reports the figure at being above US$200m/t on its website. In August 2012, at the time of the potential CRH acquisition in India, the cost of Indian cement production capacity was placed at US$110/t-US$120/t.

Perhaps the question we should ask is how much is a US cement plant worth when it used to belong to Lafarge. Both the Cementos Argos sale and the Eagle deal worked out at US$280/t including all the ancillaries. The actual question we should ask is why has Lafarge chosen these specific plants to sell to a competitor in the US market?

Germany: Loesche has announced that Andreas Huster has joined Loesche Automatisierungstechnik GmbH (LAG) in Luenen as its sales director. He joined Loesche in July 2012.

Huster is 37 years old, married and was formerly responsible for distribution, sales and marketing of automation technology at Miebach group in Dortmund. At Loesche Huster will take over the responsibility for all clients and develop new market potential for LAG. Huster will also support projects for Loesche GmbH in Duesseldorf and their subsidiaries worldwide.

France: Carlos Espina has been appointed as director of research and development for the Lafarge Group, with effect from 1 October 2012. Espina was previously the chief executive officer at ArcelorMittal Méditerranée, a position he had held since July 2009.

He began his career in the UK as a researcher at AEA Technology. In 1995 he joined the research and development (R&D) Centre of Aceralia Corporación Siderúrgica as manager of the product applications engineering department, before becoming vice president of intellectual property, knowledge management and artificial intelligence upon the merger with Arcelor in 2002. Within the Arcelor Mittal Group, he successively held the positions of vice-president in charge of R&D, Europe, and vice-president in charge of R&D, automotive.

Carlos Espina will be based at Lafarge's Research Centre near Lyons, with more than 250 researchers of 12 different nationalities. He holds a degree from Oviedo College of Mines in Spain.

Indonesia: Chinese producers are expected to increase their capacity in Indonesia to 65Mt/yr from 60.56Mt/yr, according to an Indonesian industry official.

"Production will increase by 7% because the capacity of the factories will be ramped up and there will be additional investment in the cement business as well," said Director General for Basic Manufacturing Industry, Panggah Susanto. The plans for investment have been approved by the Capital Investment Coordinating Board (BKPM).

Chinese producer Anhui Conch Cement Co Ltd has said that it will will build a 10Mt/yr plant in either South Kalimantan, East Kalimantan, West Kalimantan or West Papua.

China Trio Bit Engineering Co Ltd will build a 1.5Mt/yr plant in Subang, West Java. Another Chinese firm, State Development and Investment Corperation (SDIC), will build a 1.8Mt/yr plant in Papua. In addition, Siam Cement, the largest cement producer in Thailand, has also expressed interest in building a 1.8Mt.yr plant in West Java.

Saudi Arabia: Box International Consulting LP, a US-based cement industry consulting firm, has been issued with a Grant of Authorisation by Al Jouf Cement Company in Saudi Arabia to provide a variety of services to Al Jouf's plant in Turaif.

"Box International is very pleased to work with Al Jouf Cement regarding its plant expansion and to support its vision of furthering the construction sector and cement market in Saudi Arabia," said Thomas D Box, president of Box International.

Box International will assist Al Jouf Cement in developing a third line at the plant with an intended capacity of 5000t/day. This will involve providing consultation and recommendations regarding plant layout and design, process upgrades, equipment, plant and facility specifications and recommendations of vendors, along with the considerations regarding integration of the plant and infrastructure.

Box International will also manage the proposal and bidding process, propose training programmes for staff, manage financing for the expansion and propose an operation and management plan for the completed plant. Currently Al Jouf Cement's plant has one line with a capacity of 5000t/day with a second line under construction with the same capacity.