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Lafarge Syria managers arrested in Paris 30 November 2017
Syria: Three managers of LafargeHolcim were arrested in Paris on 29 November 2017 over allegations that Lafarge Syria, now part of the group, paid money to the Islamic State group in Syria in 2013 and 2014. They included Bruno Pescheux and Frédéric Jolibois. Pescheux was in charge of Lafarge Syria’s plant from 2008 until 2014. Jolibois took over in 2014 for a short while before the plant was abandoned. A third detainee was not named. Investigators are seeking to determine whether executives at Lafarge in Paris knew that payments were being made in Syria to insurgent groups.
LafargeHolcim has not commented on the arrests but has previously admitted ‘errors’ in its handling of events in Syria. It denies criminal wrongdoing and said that it had ‘put everything in place to ensure that this situation cannot be reproduced.’
A preliminary inquiry opened in France earlier in 2017 amid claims that Lafarge Syria had paid insurgent groups to keep roads clear around its plant in Jalabiya after the outbreak of war in Syria. In 2013, Islamic State representatives reportedly summoned two company managers in Syria to demand a cut of operations. They reportedly threatened to stop supplies to the plant and deliveries from it if they did not receive the money. The business is alleged to have paid Islamic State about Euro20,000/month, which represented 10% of the Euro5m that had reportedly been paid to a variety of armed groups.
Authority sets out terms for Italcementi’s Cementir purchase 30 November 2017
Italy: The Italian Competition Authority (ICA) has approved the purchase of Cementir Italia by HeidelbergCement’s subsidiary Italcementi, subject to the sale of certain assets. They are: The Cagnano Aminterno (L'Aquila) cement plant and the terminal at Reggio Calabria, currently owned by Cementir; the Maddaloni (Caserta) plant, currently owned by Cementir; the production facility at Spoleto,, currently owned by Cementir, and the production plant at Salerno, currently owned by Italcementi.
The ICA says that the sales are necessary to prevent excessive concentration in the sector.
CMS profit increases in third quarter 30 November 2017
Malaysia: Cahya Mata Sarawak’s (CMS) pre-tax profit rose to US$23.4m for the third quarter of 2017 from US$23.1m in the same quarter of 2016. The group said the better profit before tax was attributable to the cement division’s lower production costs. Its revenue, however, declined to US$85.0m from US$87.0m a year earlier. CMS said that the cement division’s clinker and cement operations’ combined profit before tax for the third quarter was 2% ahead of the corresponding quarter of 2016.
The company said that the operating environment was expected to remain challenging and the group’s healthy financial position would help weather the challenging environment. “We remain focused on growing our portfolio of businesses by taking advantage of the business opportunities in Sarawak,” said the company in a statement. “Our strong fundamentals and resilience will enable us to perform and to deliver a satisfactory financial performance for 2017. Coupled with other measures that the management is taking, we are positioning for long-term sustainable revenue and profitability growth.”
Melon struggling against Chilean headwinds 30 November 2017
Chile: Cementos Melon has recorded a 56.8% drop in its profit to US$7.8m in the three quarters to 30 September 2017. The company said that a drop in sales had been partly mitigated by greater focus on margins and operational efficiency gains. Its revenue fell by 13.6% to US$210m.
PPC turns the tables
Written by Peter Edwards
29 November 2017
There are two significant cement producers around the world up for sale at the moment. Last week we dealt with India’s Binani Cement, which has so far attracted 15 separate bids from a number of international and domestic players. Now, we turn our attention to South Africa, where PPC remains the target of approaches by LafargeHolcim and CRH.
This week PPC rejected a partial offer from Canada’s Fairfax Holdings, which it considered neither fair nor reasonable. Like a mutual friend at a party that insists two people ‘really are perfect for each other,’ Fairfax had stipulated in its terms that PPC should merge with AfriSam to create a South African super-producer. It does not appear that this idea went down well and that particular combination now seems further away than ever.
When the news broke that it had rejected Fairfax, we thought that PPC’s stance seemed a little ‘too cool.’ However, looking just at the oversized and import-addled South African market does not give the full picture of what’s happening for PPC at the moment. It has significant and growing activities in the rest of Africa too.
Later this week PPC released its results for the first half of its 2018 fiscal year. Suddenly, its handling of the Fairfax offer made more sense. Over the six months to 30 September 2017, PPC nearly tripled its profit to US$21.1m. Crucially, sales from outside South Africa grew far more rapidly than those at home. While domestic earnings before interest, tax, depreciation and amortisation (EBITDA) rose by 4%, EBITDA from elsewhere increased by 25%. These results bode well for a potential bidding war that now favours PPC.
Even from this greatly enhanced position, PPC was not finished with its announcements for the week. Today it revealed that it plans to build a new ‘mega-factory’ in the Western Cape. Johan Claassen, the interim chief executive of PPC, said there would probably be a formal announcement about new capacity in the Western Cape in 2018. He said that PPC had decided to conduct a feasibility study into a possible replacement for its Riebeeck plant. An Environmental Impact Assessment (EIA) is in progress and the plant is reported to be ‘semi-brownfield.’ Claassen said that the new facility would use around 25% of the current Riebeeck equipment and cost US$200/t of installed capacity.
The news of its results and announcement of the new plant represent a good PR move by PPC given the difficulties faced by the wider South African market. The new information will certainly give cause for CRH and LafargeHolcim to think again about the values of their offers, should PPC also be of the view that these also undervalue the company.