Global Cement News

This week has seen the start of what is likely to become a string of positive financial results from the Indian cement industry. UltraTech Cement, Shree Cement and Hyderabad Industries have already seen massive improvements in their profits for the final quarter of 2011, up in one case by over 100% compared to 2010.

On the face of it such results do not chime with a recent report by Fitch Ratings, which predicts a 'negative outlook' for the Indian cement industry in 2012. Fitch's report says that based on expected growth of 2-5%, overcapacity and an increase in interest rates will prey on margins in 2012, making any mini-boom short-lived. The impressive profits may well evaporate come the end of March.

India's capacity utilisation rate dropped to just 65% in the last quarter of 2011. This is not a statistic indicative of a booming cement industry and, coupled to reports of increased profits from the sector, indicates that higher prices are being used to maintain margins.

With even more capacity being added every week and the prospect of increased input costs as the year develops, how long will this strategy work? Will the topic of cartelisation be raised again in India? The new head of the Cement Manufacturers' Association has a lot to consider as he takes up his role.

Elsewhere in this issue of Global Cement Weekly, we have the news that the German BDZ and VDZ are to fully merge, plant projects in Russia and Saudi Arabia and the latest on the developing situation in Kenya, where East Africa Portland Cement Company (EAPCC) is still in dispute with its workers. EAPCC and the government's expectation that work can resume on 26 January 2012 appears to be ill-founded considering continued resentment shown by the workforce.

Mr M A M R Muthiah, the current managing director of the Chettinad Cement Corporation has taken over as president of the Cement Manufacturers' Association (CMA). Muthiah said that the association acts as a bridge between the industry and the Government with an objective to promote the cement sector's growth, protect consumer interests and collaborate with international counterparts outside of India.

Mr O P Puranmalka, a whole-time Director of Ultratech Cement, has taken over as the CMA's new vice-president.

Pascal Casanova has become the general director of Lafarge France, a unit of the French cement giant Lafarge. Casanova was born in 1968 and joined Lafarge in 1999 after having been employed by a number of different construction firms. He served as Lafarge's research and development director since 2008.

Holcim announced yesterday a shock profits warning after it included Euro641m in one-off charges in its 2011 accounts. Over half of this amount, a massive Euro343m, came from writedowns at its former South African subsidiary AfriSam, which has been unable to deal with poor trading conditions there. Writedowns in the US and parts of Europe made up the rest of the one-off costs. The move has prompted fears from analysts that other cement manufacturers may follow suit, taking the sector into unknown territory. What other skeletons are hiding in the cupboards of the big multinationals?

Meanwhile, an old cement industry problem that is not unfamiliar to AfriSam, cartelisation, has reared its ugly head again. After five Spanish producers were ordered to pay a combined Euro11.1m over an alleged cartel in northern Spain, authorities in Pakistan searched the offices of its national cement association, the APCMA, on Monday. They were following a tip-off that cement companies have been monitoring each others' dispatches, a practice deemed illegal in previous investigations. A previous cartel case from 2009-2010 is still pending in Pakistan so any action against producers will likely to take years to be brought.

Elsewhere, the situation has gone from bad to worse at the East Africa Portland Cement Company in Kenya, with protests over the re-instatement of previously-fired board members turning violent on Monday. With one worker hospitalised after being shot by an over-zealous security guard, it is hard to see how the current situation can be resolved without the removal of the current management. The government has assured the workers that it is working on the problem.

At the same time in Kenya, National Cement Company's (NCC) plans to build a quarry and clinker plant south of Nairobi have been slammed by local Massai groups, environmental NGOs and even the state-owned Kenya Wildlife Service. NCC plans to 'buy-off' the Massai with a jobs scheme, but this doesn't address the conservation issues. Global Cement urges NCC to re-examine its plans and the location of its proposed plant, and to work closely with the Kenya Wildlife Service.

The Spanish cement producer Cementos Portland Valderrivas has approved the nominations of Juan Bejar and Jose Manuel Burgos as board members. Bejar currently occupies the post of executive chairman at domestic motorway operator Globalvia and Burgos is a vice-chairman at the real estate firm GMP. They will replace Rafael Martinez-Ynzenga Canovas del Castillo and Feliciano Fuster.