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Philippines: Albert Manifold, the chief executive officer of CRH, has defended his company’s investment of up to Euro350m in the Philippines despite reporting a 12% drop in sales in the first quarter of 2017. Under questioning from analysts in a conference call admitted that about a quarter of cement demand in the country is currently being served by imports from Southeast Asia that is also reducing local prices, according to the Irish Times. However, he insisted that local producers, including CRH, will have an advantage as they increase production capacity due to constant production and ‘guaranteed’ regulation and certification. Manifold also conceded that his company’s performance in the Philippines illustrates the ‘volatility of emerging markets.’
Vietnam: Cement sales rose by 6% year-on-year to 17.8Mt in the first quarter of 2017, according to data from the Vietnam Cement Association (VNCA). The total includes 12.9Mt of domestic sales and 4.8Mt of exports sales according to the Viet Nam News newspaper. Local cement production rose by 3.8% to 14.3Mt.
Thailand: Siam Cement Group’s Building Materials division’s sales fell by 2% year-on-year to US$1.29bn in the first quarter of 2017 due to lower prices and falling volumes in the local market. The group reported that domestic cement demand fell by 7% in the quarter due to flooding in the south of the country. Earnings before interest, taxation, depreciation and amortisation (EBTIDA) for the division were also negatively affected by the weather falling by 10% to US$181m. Overall the group’s sales and EBITDA rose due to earnings from its Chemical division.
Mexico: Cemex’s net sales for the first quarter of 2017 have been hit by poor sales in the US, Europe and Asia, Middle East and Africa. Its overall net sales rose by 1% year-on-year to US$3.14bn in the quarter from US$3.11bn in the same period in 2016. However, net sales fell by 2% to Euro834m in the US, by 2% to Euro711m in Europe and by 20% to Euro326m in Asia, Middle East and Africa. The group’s overall cement sales volumes remained stagnant at 15.6Mt.
“We continued to see favourable results from our value-before-volume strategy during the quarter. Sequential and year-over-year pricing increased in the low- to mid-single digits for our three core products. This, together with favourable volume dynamics in Mexico and our Europe and South, Central America and Caribbean regions led to solid growth in consolidated sales and operating EBITDA, on a like-to-like basis. In addition, net income increased close to a tenfold during the quarter,” said chief executive officer Fernando A Gonzalez. He added that the group reduced its total debt by US$470m in the quarter.
By region the group reported a more mixed situation with cement sales volumes increases in all territories except for the US and Asia, Middle East and Africa with particular strong performance in Mexico and Central and South America. In the US sales volumes suffered from poor weather in the western states and a decreasing infrastructure spend. In South, Central America and the Caribbean despite overall gains in sales Colombia reported falling cement sales volumes due to local economic issues. In Europe cement sales volumes fell by 10% in the UK yet growth was recorded notably in Spain and France. Finally, cement sales volumes fell by 9% in the Philippines and by 32% in Egypt.
Serenity when? LafargeHolcim and Syria
Written by David Perilli, Global Cement
26 April 2017
LafargeHolcim’s investigation into its conduct in Syria claimed its biggest scalp so far this week with the shock resignation of chief executive officer (CEO) Eric Olsen. His decision landed with the publication of the group’s investigation into the conduct of the legacy Lafarge operations in the country in 2013 and 2014. As per the initial findings of the investigation that were released in March 2017, it confirmed that selected personnel had engaged in dealings with terrorists in connection to one of its cement plants in the country during 2013 until the unit closed in September 2014. The board decided that Olsen had no connection or even awareness of the misconduct. However, he decided to quit anyway in order to restore ‘serenity’ to the company.
In its latest public statement on the investigation, LafargeHolcim outlines five weaknesses with its compliance led by improper payments related to Lafarge Syria’s security and supply chain. It then goes on to list a failure of line management, inadequate controls over expenses and a failure to detect improper payments and improperly recorded payments. It’s all presented as ‘chaos reigned’ or wayward staff in tough circumstances trying to do their muddled best for the company. Unfortunately for this narrative, selected members of group management were aware of the situation and appeared to have done nothing about it. This then begs the question: who knew what when?
Olsen may have been exonerated by the board on his departure but he was Lafarge’s Executive Vice-President of Operations for Lafarge in 2014. If he didn’t know what was going on in Syria during his watch then he wasn’t doing his job properly or it was being hidden from him. The head of Lafarge itself at the time, Bruno Lafont, might also have been a viable target for discipline but he decided to stand down from the board of LafargeHolcim in early April 2017. No doubt other former members of the Lafarge management team may bear more responsibility. LafargeHolcim’s implementation of its remedial measures may turn up more culprits, as may the on-going criminal complaints process continues in France.
French newspaper Le Monde, the newspaper that originally broke the story, is probably on the money with its assessment that Olsen’s departure is actually the continuation of the boardroom battle between the board and its shareholders that has raged since before Lafarge and Holcim formally merged. Bruno Lafont was originally lined up to become the CEO of the new company until Lafarge’s worsening financial position compared to Holcim’s prompted a backlash from Holcim shareholders. Le Monde describes how LafargeHolcim’s shareholders include four prominent billionaires: Switzerland’s Thomas Schmidheiny, Belgium’s Albert Frère, Canada’s Paul Desmarais and Egypt’s Nassef Sawiris. Schmidheiny, readers may remember, was one of the principal actors who sunk Lafont’s bid to be CEO back in early 2015.
Placed in this context, Olsen’s departure might seem forced, especially if he had no connection to the debacle in Syria. LafargeHolcim has faced a tough couple of years following its formation with consistently falling sales revenue. Asset divestments and cuts have been the cure as the group struggled to find its new size. Yet, the group saw its adjusted operating earning before interest, taxation, depreciation and amortisation (EBITDA) start to rise in 2016 suggesting that the remedial action was starting to work. LafargeHolcim’s management and shareholders will be acutely aware of its performance so far in 2017 ahead of the public release of its first quarter results in early May 2017. Under these circumstances it seems unlikely that serenity will be restored to the upper echelons of LafargeHolcim any time soon.