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South Africa: The South African Bureau of Standards (SABS) has confirmed to Pretoria News that Longkou Fanlin Cement had been approved for sale in the country. However, the mandate is only part of the process the Chinese cement producer needs to secure to allow it to import cement into the country.
Thato Chabeli, the interim group manager of marketing, public relations and communications at SAB, confirmed to local press that ‘two schemes’ for Longkou Fanlin Cement had been approved by the SABS. He added that the trade body had not received any other applications from Chinese cement producers. The SABS certifies cement as being compliant with the South African compulsory specification before it can be sold in the domestic market. However, Chabeli, added that the Chinese cement producer also needed to secure a letter of approval from the National Regulator for Compulsory Specifications (NRCS) before the company would be permitted to export its cement to South Africa. The NRCS has not responded to queries by local press on the matter.
Industry commentators have compared potential cement imports from China to those of Pakistan. Local cement producers filed a dumping complaint with the International Trade Administration Commission (ITAC) about cement imported into South Africa from Pakistan. ITAC made a final determination in December 2015 on the anti-dumping duties and imposed duties ranging between 14.29 - 77.15% on cement imported from Pakistan. Subsequently, cement imports to South African from Pakistan fell by 30% year-on-year. The Pakistan government has since approach the World Trade Organisation (WTO) for arbitration on the dispute.
Ghana acts against cement imports 17 March 2016
Ghana: Ekwow Spio-Garbrah, the Minister of Trade and Industry, has proposed legislation to parliament to cap imports of cement into the country. Spio-Garbrah also announced that all cement importers must register with the ministry by 31 March 2016 to apply for a permit, according to the Daily Trust.
"The Ministry of Trade and Industry proposes through legislative instrument to impose a ceiling on the annual importation of cement into Ghana. Companies that wish to import bagged cement shall be issued a permit to avoid the chaos that has lately saddled the sector," the ministry said in a statement. Companies legitimately licensed under the ECOWAS Trade Liberalization Scheme will be exempt from applying for permits.
Ghana has a cement production capacity of 9Mt/yr but it only consumes 6Mt/yr giving it an excess of 3Mt/yr. However the country imports over 1Mt/yr of cement. Complaints about cement imports from Nigeria and China have been made in local press since the start of 2016.
LafargeHolcim cement sales stay static in 2015 17 March 2016
Switzerland: LafargeHolcim’s sales volumes of cement remained static at 255.7Mt in 2015, up by 0.2Mt compared to 255.2Mt in 2015. However, the group’s overall net sales across all businesses fell by 6.2% year-on-year to Euro26.8bn from Euro28.6bn. It described having faced challenging emerging markets in China and Brazil and that it plans to further cut costs to cope with this.
“In a challenging environment in selected markets, we have exceeded all our 2015 commitments in terms of CAPEX, synergies, and net debt reduction…. We have also made significant progress on our divestment plan, while accelerating the pace of integration across the group and cost management actions,” said Eric Olsen, the CEO of LafargeHolcim. He added that the group has taken action to cut costs particularly in ‘difficult’ markets. It expects to see demand in its markets grow by 2 – 4% in 2016.
For the fourth quarter of 2015, LafargeHocim reported that its sales volumes of cement rose by 4.8% year-on-year to 66.5Mt from 63.4Mt.Overall net sales fell by 5.9% to Euro6.78bn from Euro7.21bn. Its operating earnings before interest, taxation, depreciation and amortisation (EBITDA) fell by 33% to Euro900m from Euro1.34bn. The group recorded a net loss of Euro2.61bn in the fourth quarter of 2015 including a Euro2.73bn charge due to asset impairment and other costs.
By region for the 2015 financial year, the group reported static sales volumes of cement of 123Mt in its Asia Pacific region driven by growth in the Philippines, Vietnam and Indonesia. Cement sales declined in Indian and China. Sales volumes fell by 4.7% to 42.1Mt in Europe led by a poor construction market in France despite growth in the UK and Romania. Sales volumes fell by 1.2% to 27.9Mt in Latin America mainly due to the economic situation in Brazil. Sales volumes grew by 1% to 43.4Mt in the Middle East Africa region as some countries in the region failed to cope with low oil and commodity prices. Sales volumes grew by 4.2% to 21.8Mt in North America propelled by the continued economic recovery in the US.
Cemex takes charge of its debts
Written by David Perilli, Global Cement
16 March 2016
Cemex has taken action towards its debts over the course of the last week. First, it announced that it had amended its credit agreements in order to delay the looming effects of consolidated financial leverage and coverage ratio limits by one year to March 2017 with other similar deadlines also delayed. Then it announced the pricing of US$1bn of Senior Secured Notes due in 2026, a form of secured borrowing. This was followed by confirmation of asset sales in Bangladesh and Thailand. Finally, it announced that it was seeking regulatory permission to sell a minority stake in its subsidiary in the Philippines.
This column has discussed the on-going financial travails at Cemex a few times, notably recently when the group released its fourth quarter results for 2015 and in the wake of HeidelbergCement’s announcement to buy Italcementi. Basically, it all comes down to debt, as the following graph shows.
Figure 1 - Cemex assets, debt and equity, 2006 - 2015
Cemex took on large amounts of debt following its acquisition of Rinker in 2007. Since then the value of its assets have been falling faster than it has been able to reduce its debts. However, its equity (assets minus debts) is looking like it might dip below its debts in 2016. Hence, action needs to be taken. Cemex appears to have attempted to do this over the last week. Will it be enough?
The credit amendment was probably the most pressing issue for the Cemex management given that the terms have been reliant on maintaining a leverage ratio (debt divided by assets) below a set limit. Cemex has extended the terms of the borrowing in its favour so it can keep the leverage ratio higher for longer without penalty from its creditors. Note that the leverage ratio here means the ratio between debt and operating earnings before interest, taxation, depreciation and amortisation (EBIDTA).
Selling assets and shares in Asia is the next step in cutting debt in the window the group has negotiated for itself. It holds minor cement production assets in Thailand and Bangladesh that it is selling to Siam City Cement for US$53m. These include a 0.8Mt/yr integrated cement plant in Saraburi, Thailand and a 0.52Mt/yr cement grinding plant in Madangonj, Bangladesh. Unfortunately for Cemex it purchased the Saraburi plant for US$77m in 2001 from Saraburi Cement making it a loss of at least US$24m.
A minority sale of shares in its Philippines assets is more promising. The group runs two integrated cement plants in the country, the Solid Cement Plant in Rizal and the APO Cement Plant in Cebu with a combined cement production capacity of 6.23Mt/yr and a new 1.5Mt/yr production line on the way at Solid Cement also. Local media estimate that the sale could earn Cemex as much as US$850m from the booming market. The Cement Manufacturer's Association of the Philippines reported that cement sales volumes grew by 14.3% to 24.4Mt in 2015 with more growth predicted for 2016.
The credit amendment and asset sales of US$0.9bn may give Cemex the breathing room it requires to keep the creditors at bay for a while longer. It originally refinanced its debts in 2009 at the height of the financial crisis to keep the business running until the markets picked up again. They haven’t. A question that might be legitimately asked at Cemex’s analyst day later this week, on 17 March 2016, is this: when is Cemex going to seriously tackle its debts? As the situation continues the group may end up devoting more time to managing its debts than it will to actually making cement and other building products.
Uzbekistan puts Kyzilkumcement on sale 16 March 2016
Uzbeksitan: Uzbekistan has put on sale state shares in Kyzylkumcement. According to the State Committee of the Republic of Uzbekistan for Privatization, Demonopolization and Development of Competition, the government wants to sell a 35.9% state shares or 160,658,567 shares in Kyzylkumcement for a total of over US$160m. Sales of the state-owned cement producer will be handled by the block-trading section of Uzbekistan Stock Exchange.
Kyzylkumcement was launched in 1977. It is the largest cement plant in Uzbekistan with a production capacity of 3.1Mt/yr.