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France: Vicat’s sales revenue from cement has fallen by 1.5% year-on-year to Euro761 in the first half of 2016 from Euro773m in the same period in 2015. The group has blamed the decline on a fall in selling prices in most of its market regions except for the US. It was also hit by negative currency effects in relation to the high value of Euro. Overall, Vicat’s sales fell by 0.4% to Euro1.24bn but its EBITDA rose by 2.3% to Euro208m.
Despite this, its cement sales volumes rose by 12.1% to 11.1Mt from 9.88Mt. Volume increases were noted in India, Turkey, Egypt, France, the US and, to a lesser extent, by Kazakhstan, Italy and West Africa. Switzerland was the only country to record a fall in sales volumes of cement the first six months of the year. Alongside this the construction materials company reported that its earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 3.3% to Euro168m from Euro163m. It noted particular profit indicator gains in Egypt, due to sales volumes growth and lower energy costs following the commissioning of two coal mills in the second half of 2015 and increased prices and sales volumes of cement in the US.
“The Vicat Group delivered a good performance in the first six months of the year. The positive trends from the first quarter continued, with our business growing across most of our markets, with especially renewed growth momentum in France and in Egypt,” said Guy Sidos, the group’s chairman and CEO.
Titan buys stake in Cimento Apodi 04 August 2016
Brazil: Greece’s Titan Cement has agreed to acquire an equity stake in Companhia Industrial de Cimento Apodi, a Brazilian cement producer that operates in Ceará in Northeast Brazil. Through a joint venture agreement, Cimento Apodi will be jointly owned and controlled on a 50/50 basis by the Dias Branco Group and a TITAN-Sarkis subsidiary, in which Titan is the majority shareholder. Titan’s investment in the purchase will be determined when the deal closes but it is expected to be about US$100m.
The assets of Cimento Apodi include an integrated cement plant in Quixeré that has operated since 2015 and a cement grinding plant in Pecém port, near to Fortaleza, that has operated since 2011. Cimento Apodi has cement production capacity of over 2Mt/yr.
Dangote Cement slows its pace of expansion
Written by David Perilli, Global Cement
03 August 2016
Shock news this week: Dangote Cement has decided to slow its expansion in Africa. The announcement from CEO Onne van der Weijde topped a half-year financial report that trumpeted high revenues and sales volumes of cement but one that also had to explain why earnings before interest, taxes, depreciation, and amortisation (EBITDA) had fallen by 10% year-on-year. The decline was blamed on lower cement prices and higher fuel costs, as well as the costs of setting up new cement plants.
The mixed bag of results can be demonstrated by a 38.8% leap in cement sales volumes in Nigeria to 8.77Mt for the half year. Dangote attributed this in part to price cut in September 2015. This then netted an increase in revenue of 4.2% to US$677m but its EBITDA in Nigeria fell at a faster rate than the group total.
As an indication of some the pressures facing Dangote at home, it reported that its fuels costs rose by 32.3% to US$14.4/t in the reporting period. The backdrop to this has been the general poor state of the Nigerian economy. The International Monetary Forum (IMF) forecast that its gross domestic product (GDP) will fall by 1.8% in 2016 in its World Economic Outlook Update published in mid-July. Given that over three-quarters of Dangote Cement’s sales revenue came from Nigeria in 2015 this might explain the decision to slow its expansion plans down.
Outside of Nigeria, Dangote did extremely well in its West & Central Africa region, pushing up sales volumes, revenue and EBITDA by triple figure percentages helped by commissioning of a new plant in Ethiopia. Exports were also highlighted as a key part of this region’s strategy to neighbouring countries. It also stated that its recent procurement of about 1000 trucks in Ghana would ensure that an increased share of that country’s imported cement would come from Dangote’s Ibese plant in Nigeria. South & East Africa was a different story, however with sales volumes and revenues rising as new cement plants bedded in but the region was dogged by currency devaluations and poor economies.
Dangote Cement’s response to its current situation is to protect its margins through cost cutting, by adjusting its prices and by slowing its expansion strategy to a five-year programme. However, it isn’t alone in its struggles to preserve profit in its Nigerian business. LafargeHolcim also reported a ‘challenging’ market in its first quarter results for 2016. Its cement sales volumes fell in that quarter due to what it said were energy shortages and logistics-related issues. Its mid-year financial report, out on 5 August 2016, will make interesting reading to see if its experience in Nigeria matches Dangote’s.
Elsewhere, it appears that both PPC and LafargeHolcim have also been struggling in South Africa. PPC’s revenue from cement sales within the country fell by 5% year-on-year to US$171m its half-year to the end of March 2016. It blamed the drop on increased competition. LafargeHolcim noted similar problems in South Africa without going into too much detail in its first quarter.
With the Nigeria Naira-US Dollar exchange rate devalued by over 50% since the start of 2016 and the Nigerian economy bracing itself for a recession, it seems unlikely that Dangote Cement could do anything else than slow down its expansion plans given how much of its revenue comes from within Nigeria. As we also report this week, PPC is in a similar bind. Its CEO had to reassure shareholders that the group’s new plant in Zimbabwe would be finished on schedule later in the year. Controlling imports and exports of cement in Africa has suddenly become more important than ever.
Both companies need to expand internationally to protect themselves from regional economic downturns but the current situation in each of their home territories is preventing this. In the meantime their own export markets are set to become more important than ever. Any target markets that declare themselves ‘self-sufficient’ in cement will be a big impediment to this.
Fecto Cement issued US$4m fine for ‘illegal’ mining 03 August 2016
Pakistan: The Capital Development Authority (CDA) has cancelled the mining lease for Fescto Cement and issued a fine against it of US$4m for illegally operating in the Margalla Hills National Park near Islamabad. The CDA has also requested that the local explosives inspector ask the cement producer to remove explosives dumped in the park area and it has asked police to take action.
A report by the CDA says that the cement producer’s 30 year lease was extended for another 18 years by the director of the Industries and Mineral Development department of the Islamabad Capital Territory in June 2012. However, a forestry director raised objections to the extension.
Tanga Cement to inaugurate second production line 03 August 2016
Tanzania: Tanga Cement plans to inaugurate its second clinker production line in mid-August 2016. The 775,000t/yr line will increase production capacity at the cement plant to 1.25Mt/yr. The company has spent US$125m on the upgrade. Minister for Industry, Trade and Investment Charles Mwijage is expected to attend the ceremony according to the Tanzania Daily News newspaper.