Global Cement News

Spend, spend, spend has been the advice for CRH this week. The suggestion by an industry analyst this week that Irish building material conglomerate CRH should go on a shopping spree seems almost perverse! Or at least like stockbrokers trying to drum up excitement.

Just as all of the big multinational cement producers are selling assets and tightening management structures to cope with the ongoing financial turmoil, CRH is the only player that hasn't ruled out acquisitions in 2012. The analyst from Dublin stockbroking firm Davy predicted that CRH could spend up to Euro3.5bn on acquisitions while remaining within its banking agreements; a more level-headed figure was given as Euro1.5bn.

CRH broke down its revenue in 2011 to 55% to the European divisions and 45% to the American ones, with European Distribution, Americas Materials and European Materials being its top three sections. European Materials, the worldwide division containing cement assets generated Euro2.99bn, 16.5% of total group revenue.

With 85% of CRH's European Materials division concentrated on Switzerland, Finland, Benelux, Eastern Europe, Turkey and Asia its exposure to the Eurozone economic slowdown has been reduced compared to the competition. Yet what to buy next is fraught with risk. If Greece exits the Euro for example, then there may be some bargains going, but how long it would take these assets to become profitable is a big unknown.

Similarly, the over-indebted Mediterranean countries present opportunities and challenges. CRH's decision to transfer its 49% holding in Portuguese cement joint venture Secil to Semapa in May 2012 may indicate CRH's intention to stay well away from the Eurozone until the dust settles. Given the amount of cash that CRH could potentially throw around however, it seems odd that the company didn't try to disrupt the ongoing Cimpor takeover by two Brazilian firms. If anything happened to the bid by Camargo Corrêa and Votorantim then CRH would be in a prime position to benefit should it wish.

Whatever CRH decides to do with its money, it's a good problem to have! Lafarge, Cemex, HeidelbergCement and Holcim must all wish they had the same dilemma.

Qatar: The Qatari Investors Group has appointed Faisal Abdulla al-Mana as the managing director of its subsidiary, Al Khalij Cement Company. Al-Mana was elected as member of the board of directors of the group in 2011. He has also been the vice chairman of Redco Construction Company since 2004.

It is hoped that his appointment will bring about further progress and prosperity, enhancing confidence and further development within the cement company. He brings a wealth of experience in the sector, which plays an important role Qatar's economic development, according to an Al Khalij spokesman.

Qatari Investors Group chairman Abdulla bin Nasser al-Misnad expressed optimism and confidence in al-Mana's abilities and visions, as his performance as one of the members of the board of directors of the Qatari Investors Group had been 'outstanding'.

UK: To celebrate the Queen's Diamond Jubilee, Cemex UK has decorated a cement tanker, aggregate tipper, concrete mixer and curtain sider with the Union Jack. The company's fleet of over 1000 vehicles travel thousands of miles every week to deliver essential building materials for construction projects, helping the company to build a 'Greater Britain.'

The Union Jack vehicles will be travelling around the country visiting Cemex sites and delivering loads to key customers.

Image courtesy of Cemex UK

Ireland: CRH could benefit as some of its bigger European competitors sell assets to strengthen their balance sheets, according to one senior industry analyst.

Robert Gardiner of Dublin stockbroking firm Davy says that CRH could spend up to Euro3.5bn on acquisitions while remaining within its banking agreements. However, the group's commitments to ensuring that its earnings are over six times net interest payments means that a more realistic estimate of the amount it has to spend on buying up rival businesses is closer to Euro1.5bn.

Gardiner says that the Irish group is alone among European operators in saying it intends to continue spending money on acquiring businesses. Many of its rivals, including Holcim, HeidelbergCement and Lafarge, are preparing to sell off assets to boost their own balance sheets. Gardiner adds that CRH can hopefully 'cherry pick' some of these businesses as they come on the market.

Lafarge sold Euro2.1bn worth of businesses in Asia, Australia and the US in 2011. Gardiner points out that it has signalled that there is another Euro1bn to come in 2012. He says there is speculation that its South African cement business is likely to be put on the block soon. In addition, the British authorities want Lafarge and Tarmac to sell some businesses, including cement, asphalt and readymix concrete plants, and a number of quarries, in return for allowing them to pursue a joint venture in that market. Similarly Holcim's new chief executive, Bernard Fontana, has signalled it could 'selectively' dispose of some of its businesses in 2012 as it moves ahead with a cost-cutting programme, while the group will restrict spending on expansion.

Mexican giant Cemex, which in is in the process of completing the takeover of the old Readymix plc in Ireland, wants to sell US$1bn worth of assets by the end of 2013, and intends to offload about US$500m in 2012. US operator Vulcan is looking at disposing of a similar level of assets.

CRH, which had revenues of Euro18m in 2011, spent Euro230m on acquisitions in the first four months of 2012. Much of the group's growth over the last 30 years has come through acquisition. In 2009, it raised Euro1.2bn through a rights issue in what was the largest such exercise in Irish corporate history. Its aim was to use the cash to buy businesses which it believed its rivals would be forced by to put on the market by high debts repayments. However, a fall in interest rates and other factors helped ease the burden on some of the industry's players and the opportunities that CRH foresaw did not materialise. Acquisition activity at the group has since picked up. In 2011 it spent over Euro600m on 45 purchases.

Spain: Spanish competition authority CNC has fined Cementos Portland Valderrivas Euro1.28m for submitting incomplete information. In May 2012 the CNC launched a probe into Cementos Portland over allegedly incorrect information about revenues, volume of products and corporate structure. Cementos Portland was obliged in January 2012 to pay a Euro5.72m fine for participating in a cartel fixing the prices of concrete.