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India: The Competition Commission of India has approved the proposed acquisition by UltraTech Cement of selected cement assets from Jaiprakash Associates and its associated company Jaypee Cement. The deal concerns 21.2Mt/yr of cement production capacity at a cost of US$2.47bn. The transaction is expected to complete in early to mid 2017.
Half-year roundup for European cement multinationals
Written by David Perilli, Global Cement
10 August 2016
LafargeHolcim was the last major European cement producer to release its second quarter financial results last week. The collective picture is confused. Cement sales volumes have risen but sales revenue have fallen.
Most of the producers have blamed negative currency effects for their falls in revenue during the first half of 2016. Holding a mixed geographical portfolio of building materials production assets has kept these companies afloat over the last decade but this has come with a price. The recent appreciation of the Euro versus currencies in various key markets, such as in Egypt, has hit balance sheets, since the majority of these firms are based in Europe and mostly use the Euro for their accounting. Meanwhile, sales volumes of cement have mostly risen for the companies we have examined making currency effects a major contributor.
Graph 1 - Changes in cement sales volumes for major non-Chinese cement producers in the first half of 2016 compared to the first half of 2015 (%). Data labels are the volumes reported in 2016. Source: Company reports.
As can be seen in Graph 1, sales volumes have risen for most of the producers, with the exception of LafargeHolcim. Despite blaming shortages of gas in Nigeria for hitting its operating income, LafargeHolcim actually saw its biggest drop in sales volumes in Latin America by 13.2% year-on-year to 11.8Mt. The other surprise here was that its North American region reported a 2.7% fall to 8.8Mt with Canada the likely cause. Vicat deserves mention here for its giant boost in sales volumes due to recovery in France and good performance in Egypt and the US, amongst other territories.
Graph 2 - Changes in sales revenue for major non-Chinese cement producers in the first half of 2016 compared to the first half of 2015 (%). Data labels are the sales reported in 2016. Source: Company reports.
Overall sales revenue for these companies presents a gloomier scenario with the majority of them losing revenue in the first half of the year, with most of them blaming negative currency effects for this. Titan is included in this graph to show that it’s not all bad news. Its growth in revenue was supported by good performance in the US and Egypt. Likewise, good performance in Eastern Europe and the US helped Buzzi Unicem turn in a positive increase in its sales revenue. They remain, however, the exception.
Looking at sales revenue generated from cement offers one way to disentangle currency effects from performance. Unfortunately, only about half of the companies looked at here actually published this for the reporting period. Of these, LafargeHolcim reported a massive rise that was probably due to the accounting coping with the merger process that finalised in 2015. Of the rest - HeidelbergCement, Italcementi and Vicat – the sales revenue from each company’s cement businesses fell at a faster rate than overall sales. Like-for-like figures here would help clarify this situation.
Meanwhile, a mixed global patchwork of cement demand is focusing multinational attention on key countries with growing economies like Egypt and Nigeria. Both of these countries have undergone currency devaluation versus the Euro and are facing energy shortages for various reasons. The exposure of the multinational cement producers to such places may become clearer in the second half of the year.
Fatality at Kosmos Cement plant 10 August 2016
US: A person has died at the Kosmos Cement plant in Louisville, Kentucky. Local police told the WDRB local television station that the male victim was aged in his 30s or 40s and was pronounced dead on the scene. Officials say the death was a workplace accident involving a pulley system.
Canada: McInnis Cement has commissioned NovaAlgoma Cement Carriers to supply it with a 15,000t deadweight cement carrier ship using a cement unloading system delivered by Van Aalst Marine & Offshore. The self-discharging dry bulk cement carrier will be time chartered by McInnis Cement under a long-term agreement. The ship, which was built in 2011, is currently undergoing conversion in China to a cement carrier by its owner NovaAlgoma. The conversion will include the installation of the cement unloading system and a hybrid exhaust gas scrubber system capable of operating in both fresh and salt waters. The ship is scheduled for delivery in early 2017.
“We are pleased to establish this new relationship with NovaAlgoma and Van Aalst that will allow us to take advantage of their cutting edge technology, attention to ecological details and their long-term marine transportation and cargo handling expertise,” said McInnis Cement Vice President Logistics and Distribution, Mark Newhart. The ship will be registered in Canada and use Canadian crew.
“The McInnis project will be a showcase of how the Van Aalst signature vacuum – pressure technology in cement carriers will result into high performance, low emissions and an unsurpassed reliability. The productive and professional partnership approach between McInnis, NovaAlgoma and ourselves has proven to be very successful in achieving and exceeding the requirements of the project,” said Wijnand van Aalst, CEO of Van Aalst Group.
The scrubber system will enable the ship to be fully compliant with the International Maritime Organization (IMO) Marpol Annex VI Sulphur Oxide (SOx) regulations, regardless of the fuel being used within the North American ECA (emissions control area) which includes Canadian and US coastal waters and the Great Lakes.
The time charter agreement for the ship was brokered by Barry Rogliano Salles, a diversified global shipping services group offering a range of maritime activities. The company’s core business is ship brokering and has been active for over 150 years, operating 20 offices worldwide.
Nigeria: Production managers at Lafarge Africa’s cement plants at Ewekoro and Sagamu, Ogun State have complained about poor supplies of gas. Segun Shoyoye and Hannes Diedericks made comments to the Nigerian Guardian following a shutdown period of six weeks. They said that the situation started in early 2016 and has led to low production at the plants. The pair made their comments to the press in connection to an inspection of the two plants by officials from the Standards Organisation of Nigeria (SON), led by the Acting Director-General, Paul Angya.
"The major issue is lack of gas supply because of the blowing up of oil and gas pipelines by militants in the Niger Delta region. We are now using a mixture of gas and black oil for our operations, which is highly costly, and also drops our production from 100% to 75% at the Ewekoro plant. This has been going on since February 2016,” said Shoyoye. He added that production at Sagamu stopped for six weeks in May 2016. Production has dropped from 3000t/day to 1000t/day due to the issue. Lafarge Africa is currently sourcing alternative sources of energy for its cement plants.