Global Cement News

China: China's cement industry has maintained its rapid growth in production, sales and profits so far in 2011, according to the latest data released by the Ministry of Industry and Information Technology (MIIT).

According to MIIT statistics China produced 198Mt of cement in June 2011, an increase of 19.9% over June 2010. This represents record highs for both monthly cement output and monthly growth rate. In the first half of 2011, China's cement production increased by 19.6% year-on-year to 950Mt.

Cement and clinker exports stood at 5.6Mt during the same period with an export value of USD310m for June 2011, down 35.5% and 14.9% year-on-year respectively.

According to the statistics provided the cement industry witnessed sales of USD50.4bn in the first five months this year with profits of USD5.4bn, up by 48% and an extraordinary 170% year-on-year respectively. Chinese cement production statistics are viewed with skepticism by some in the cement industry, who believe that they may be inflated.

Greece: Titan Group has recorded a poor set of financial results for the second quarter and first half of 2011, in line with independent forecasts. Turnover in the first six months of 2011 was down by 18.2% year-on-year to Euro557m, earnings before interest, tax, depreciation and amortisation (EBITDA) declined by 12.4% to Euro141.4m and the group's net profit was Euro23.4m, down a massive 65.7% on 2010.

The weakening of the Egyptian pound and Turkish Lira, as well as the US Dollar versus the Euro, led to negative foreign exchange effects. At stable exchange rates, the decline in Group turnover would have stood at 14.1% and the decline in EBITDA would have been 6.6%. The group's results were also negatively impacted by increases in the price of fuels.

The deterioration in operating results was mainly attributed to the sharp decline in construction activity in Greece (reaching a nearly 40-year low), in conjunction with the deep and persisting depression of construction activity in the USA. In contrast, Group's activities in developing countries, particularly in the Eastern Mediterranean region, increased their contribution to the group's operating results.

In Greece, the combination of growing uncertainty regarding employment and attendant future household income, coupled with the decline in new loans issuance on the part of banks and the existing surplus housing stock, resulted in a sharp decline in demand for building materials. The repeated cutbacks in public investment programmes and the state's inability to cover its arrears, have brought public works to a standstill. In Greece Titan's EBITDA consequently declined by 49.4% compared to the first six months of 2010 to stand at Euro26.9m.

In the USA, construction activity continues to be faced with a very poor set of circumstances. Uncertainty regarding the timing of the economy's turnaround in conjunction with the country's debt crisis, the containment of public expenditure and the high levels of unemployment are preventing the recovery of the construction sector. Activity in the south east states, where Titan is primarily active, remains particularly stagnant at the very low levels witnessed in recent years. EBITDA in the USA recorded a loss of Euro4.8m in the first six months of 2011.

In south east Europe, indications emerged that the recovery in the region's economies is gradually beginning to have a positive impact on construction activity. Within the context of its stated goal of reducing its carbon footprint, the group completed the installation of a new unit in Bulgaria within the plant's perimeter for the pre-processing and recycling of municipal waste, which is expected to come on stream in the third quarter of 2011. EBITDA in the region of south east Europe recorded marginal growth, reaching Euro42.7m.

The social upheaval in Egypt is gradually affecting the country's growth rates and subsequently also pulling down the construction sector. In contrast, the growth of the Turkish economy has led to higher demand in the construction sector as well. EBITDA in the eastern Mediterranean region grew by 19.5% to Euro76.5m.

The prospects for Greece in the second half of 2011 remain very poor. Cement demand for the full year is forecast to stand at just 35% of 2006-7 levels. Support from the EU, which aims to kick-start investments and public works, is not expected to lead to a meaningful improvement in the coming year. In line with poor expectations in Greece and Titan's other major areas of interest, the group has said that it will continue to focus its efforts on the generation of free cash flow aiming at improving its financial flexibility.

Japan: Taiheiyo Cement Corporation has announced that it will install equipment at its Ofunato plant in Iwate Prefecture later in 2011 so that it can remove salt from the wood debris created as a result of the March 2011 tsunami.

Massive amounts of wood are currently being incinerated at the site but the resulting ash is being buried. This is because the debris was soaked in seawater by the tsunami, which results in ash with a very high salt content, potentially causing damage to the kiln when it is used for cement production.

Taiheiyo Cement will install machinery to pulverise and wash the debris to remove the salt, which will make its ash suitable for use in cement. It expects to be able to process 300-500t/day of debris a day in this fashion. This investment is significant, because it has been specifically brought about because of tsunami-derived waste materials.

Taiheiyo Cement expects to restore the other kiln at the plant and resume cement production by November 2011 and so will attempt to install the debris-processing equipment as soon as possible.

Both kilns at the Ofunato factory were damaged in the earthquake but since the end of June 2011, the least damaged plant has been put to use incinerating debris from Ofunato and nearby Rikuzentakata.

US: The US House of Representatives has introduced the Cement Sector Regulatory Relief Act of 2011 (H.R. 2681). The proposal directs the Environmental Protection Agency (EPA) to develop 'achievable and workable standards' for the nation's cement manufacturing facilities and replace a series of complex rules affecting the sector that are projected to impose significant cost increases, forcing plant shutdowns and job losses. The bill was offered by a group of both Republican and Democrat Representatives from across the US.

Members introducing the Cement Sector Regulatory Relief Act of 2011 issued the following statement, "Cement is essential for the construction of our nation's buildings, roads, bridges, tunnels and crucial water and wastewater treatment infrastructure. This is a sector that provides jobs here at home, jobs we could lose in the face of regulations that are technically or economically unachievable."

"The EPA's current rules threaten to shut down 20% of the nation's cement manufacturing plants in the next two years, sending thousands of jobs permanently overseas and driving up cement and construction costs across the country. Our goal is to ensure effective regulations that protect communities both environmentally and economically."

"This legislation would give the EPA time to develop achievable standards that protect public health without threatening jobs or the global competitiveness of America's industries. We look forward to working with our colleagues on both sides of the aisle and the administration to see this legislation become law."

The Cement Sector Regulatory Relief Act would; 1) Provide EPA with at least 15 months to re-propose and finalise achievable rules for cement manufacturing facilities; 2) Extend compliance deadlines from three to at least five years to allow facilities adequate time to comply with standards and install necessary equipment; 3) Direct the EPA, when developing the new rules, to adopt definitions that allow cement-manufacturing plants to continue to use alternative fuels for energy recovery and; 4) Direct the EPA to ensure that new rules are achievable by cement manufacturing facilities in the US and impose the least burdensome regulatory alternatives consistent with the President's Executive Order 13563.

The new rule is in response to the EPA's three 'interrelated, complex rules' impacting the nation's 100 cement plants. While the EPA estimates that the MACT Cement Rule (dealing with hazardous pollutants in airbourne emissions) will impose USD2.2bn in total capital costs when it is introduced in 2013 but the Portland Cement Association (PCA) estimates that the capital costs for MACT could exceed USD3.4bn, more than half of the industry's annual income (USD6.52bn) and that the 'Standards of Performance and Emissions Guidelines for Existing Sources: Commercial and Industrial Solid Waste Incineration Units,' (CISWI) rules would impose costs of another USD2bn, causing 18 plants to close with the loss of 3000 - 4000 direct jobs and a further 12,000 - 19,000 in the wider construction sector.

Europe: Several European cement producers have announced financial results for the second quarter and the first half of 2011. On 28 July 2011 Lafarge, the world's largest cement producer, announced that its profit fell by 16%, in part due to higher material costs (Read full story here). Other European producers have seen a mixed bag of results for the quarter, with Ciments Français and HeidelbergCement both reporting improvements over the year. Unlike the multinationals however, Cementos Molins and Titan, which both have significant interests in markets that are currently depressed, have had bad quarters.

Ciments Français took a consolidated revenue of Euro2.04bn in the first six months of 2011, down by 1.8% on the year. The group's recurring earnings before interest, tax, depreciation and amortisation (EBITDA) were down more significantly, by 12.8%, at Euro386.4m and its net profit was Euro232.2m. This compares favourably with the Euro166.9m made in the six months to 30 June 2010. The group's net debt was down by Euro218.2m to Euro1.19bn. Group sales volumes in the first six months of 2011 remained relatively stable (-0.7%) for cement and clinker at 21.9Mt. Sales volumes increased in India (+16.3%), France and Belgium (+10.8%), Thailand (+6.6%) and Morocco (+6.0%). Volumes dropped in Greece (-26.1%), Bulgaria (-25.0%) and Egypt (-14.1%). Volumes remained fairly steady in the group's other markets.

HeidelbergCement (HC) announced that its net profit grew to Euro208m in the second quarter, up by 25% on the same period of 2010. Revenue rose only slightly (3%) on the year to Euro3.4bn, burdened by negative exchange rate effects. The group's operating profit dropped by more than 10% to Euro441m, which the company attributes to rising energy costs that have not been offset by the implemented price increases. "Despite a positive development of revenue and results, we are not satisfied with the second quarter," said HC's CEO Bernd Scheifele, who added that the group's FOX 2013 fiscal savings programme had so far generated savings of some Euro134m. Its turnover for the second quarter was Euro3.39bn.

The attributable profit of the Spanish cement company Cementos Molins for the first half of 2011 went down by 57.8% year-on-year to Euro11.64m. Its turnover inched up by 0.6% to Euro400.23m. The 15% increase in the company's international operations offset a massive 24.7% fall that it registered in the domestic market. Its EBITDA amounted to Euro76.19m between January and June 2011, an annual decline of 16.2%.

Meanwhile, analysts are predicting an even worse time for Greece's Titan when it announces its results on 2 August. They expect its profit to drop by a staggering 64% amid the ongoing weakness in the Greek and US markets where Titan has a significant majority of its assets.