Global Cement News

Oman: Oman Cement has been included on a list of Sharia-compliant companies for the first quarter of 2018 compiled by the Muscat Securities Market. The 32 companies on the list conform to the requirements of Islamic Sharia according to the rules approved by the Accounting and Auditing Organization for Islamic Financial Institutions, according to the Oman Daily Observer newspaper. Companies on the list cover a cross-section of industry including building materials, banking, food production and more.

South African cement producer PPC reported this week that its annual profits rose due to ‘strong’ performance in Rwanda and Zimbabwe. Unfortunately it had no such luck in the Democratic Republic of the Congo (DRC) where its new plant near Kimpese in Kongo Central province has suffered from political instability, lower cement demand and subdued selling prices.

As the group went on to describe the local market as ‘challenging’ with production capacity above market demand. Research from the International Finance Corporation (IFC) suggests that the country will only reach a cement supply deficit by 2022. On top of this the country’s elections have been delayed from December 2017 to December 2018, creating uncertainty in the construction market and delaying infrastructure projects. Following an impairment assessment PPC took an impairment cost of US$14m on the unit. Or in other words it concluded that the value it might gain from selling its new 1.2Mt/yr plant was less than the estimated US$280m it cost to build it.

This outcome is depressing given that the plant was only commissioned during the last quarter of 2017 and the fundamental need for development in the DRC. The unit is run by local subsidiary PPC Barnet DRC, a joint venture 69% owned by PPC, 21% owned by Barnet Group, with the remaining 10% owned by the IFC. The plant was 60% debt funded by the IFC and Eastern and Southern African Trade and Development Bank. In January 2018 PPC agreed with its lenders to reschedule debts from the project until 2020. Then in April 2018 it was reported that PPC was in talks with China National Materials (Sinoma) over selling its stake in the plant. PPC chief executive officer (CEO) Johann Claassen said that the deal was dependent on the price and the on going merger between Sinoma and China National Building Material (CNBM).

With the merger between the Chinese cement giants close but yet to be confirmed, PPC remains stuck with a cement plant it’s losing money on. No doubt also the Chinese producers will aim for a bargain on the unit, especially since Sinoma built the plant. This also raises one potential method how the merged Sinoma-CNBM might expand internationally by scooping up plants it builds that have subsequently gotten into financial trouble.

All in all it’s a cautionary tale about how fast cement companies are able to expand in Sub-Saharan Africa. The demographics are enticing to investors but if the market isn’t there or if competitors get there first then building cement plants can go wrong. A 1.8Mt/yr joint-venture plant run by Lucky Cement started up in late 2016 also in the Kongo Central province. On top of this neighbouring countries have targeted DRC for exports. A local ban on imports of cement was implemented in mid-2017 and reportedly renewed in the west of the country for another six months in February 2018. However, Nigeria's Dangote Cement said in its first quarter results for 2018 that its operations in the Republic of Congo were targeting exports at the DRC. As PPC has discovered, investing in Sub-Saharan African has its risks.

China: Peng Shou has been appointed as the president of China National Building Materials (CNBM). Other new appointments announced in the wake of the company’s annual general meeting include the assignment of Chang Zhangli as a non-executive director and Yu Kaijun as secretary to the board.

Peng Shou, aged 57 years, holds has over 30 years of experience in business and management in the building material industry with various senior roles at both CNBM and Triumph International Engineering. Peng holds a bachelor’s degree in engineering from Wuhan Institute of Building material industry (now Wuhan University of Technology) and a master’s degree in management from Wuhan Polytechnic University (now Wuhan University of Technology).

Chang Zhangli, age 47 years, has held a variety of senior management roles at companies including CNBM, Jushi Group, Southwest Cement, China Triumph International Engineering, China United Cement, China Composites Group, North Cement and Beijing New Building Materials.

Yu Kaijun, aged 55 years, is a vice president of CNBM. He holds over 35 years of experience in financial management and corporate governance with positions at Sinoma, BBMG, Xinjiang Tianshan Cement, Ningxia Building Materials Group. Notably he was the chief financial officer of Sinoma from 2010 to 2018 and Sinoma International Engineering from 2001 to 2011. He holds a masters degree in accounting from the Hong Kong Polytechnic University.

China: Yang Yongzheng has resigned as a non-executive director of China Tianrui Group Cement Company due to a prison sentence. Yang has also resigned as a member of the group’s nomination committee. He has been replaced on the nomination committee by Li Liufa, the chairman of the company.

Spain: LafargeHolcim España has appointed Carmen Díaz as its commercial director. Díaz was previously the general manager of the group’s ReadySet Mix digital venture. She succeeds Simón Kronenberg in the post who has moved on to a new role with the group in Switzerland.

Díaz is a chemical engineer from the University of Oviedo and she also holds an MBA. She joined LafargeHolcim in 2002 and has held various roles including Area Manager in Madrid and the Vice President of Commercial Performance and Head of Ready Mix Commercial in France.