Global Cement News

The Brazilian cement industry took a knock last week when the competition watchdog Cade (Administrative Council for Economic Defence) confirmed its intention to issue the sector with fines worth a combined US$1.4bn.

Under the terms of the ruling, Votorantim will have to pay US$672m, Cimpor will pay US$133m, InterCement Brasil will pay US$108m, Itabira will pay US$184m, Holcim will pay US$227m and Itambé will have to pay US$39.4m. The companies involved will be forced on average to sell 24% of their assets. Votorantim, for example, will be compelled to divest 35% of its cement assets or 11Mt/yr of production capacity. In addition a fine of nearly US$2m is to be imposed on the cement associations ABCP and SNIC.

To give these figures some context, Votorantim reported a net profit of US$105m in 2013 across all its business lines including cement, metals, mining and pulp. The fine Cade wants to impose is over six times greater than this! A fine of this size will be a serious setback for Votorantim if it goes through. Votorantim's net revenue for its cement business in 2013 was about US$5.5bn. This places the fine at just over 10% of company annual turnover, a common upper limit for fines imposed by anti-competition authorities around the world. 10% of turnover, for example, is the maximum percentage fine that European Union competition regulators can impose.

Although hard to compare with the other Brazilian cement producers due to differences in financial reporting, the proposed fines seem equally tough on the other companies. Before the acquisition of Cimpor inflated its financial figures, InterCement reported a net revenue of US$1.2bn in 2011. This places its fine at 9% of annual turnover. Holcim's net sales in its Latin American region as a whole, including operations in Brazil, totalled US$3.73bn in 2013.

Both Holcim and Cimpor have issued corporate rebuttals to Cade insisting that they followed and still follow all the necessary competition laws. Both companies intend to fight the decision. Votorantim went further in its response saying that it considering the fine 'unjust and unprecedented' and it warned that the ruling would cripple any investments in the Brazilian cement sector. The ruling also forbids the company from opening new factories within the next five years, places limits on the company taking out new loans and prevents it from consolidating its market share.

Internationally, the Cade fine surpasses the US$1.1bn Competition Commission of India penalty imposed against 11 producers in India in 2013. Other recent anti-trust fines against the cement industry include a Euro80m fine in Poland that was upheld on appeal in 2013 and the US$19.3m Lafarge was charged in South Africa in 2012.

The prosecutors pointed out that work on public roads had been inflated by nearly US$8m. Overall they reckon that the cartel cost the Brazilian economy US$6.3bn. Examples likes this are unlikely to gain sympathy for the accused cement producers from a Brazilian public already angry about the amount of public money spent on building excessive sports stadiums and the like for the Football World Cup later in June 2014 and the Olympic Games in 2016. In the meantime though – over to the lawyers.

Oman: Raysut Cement has appointed Salem Alawi Mohammed Baabood as chief executive, the company announced in a bourse statement. The cement producer is the largest company by market value in Oman with a cement production capacity of 3Mt/yr at its Salalah plant.

Zimbabwe: Lafarge Cement Zimbabwe plans to increase its cement production capacity to 0.5Mt/yr once a current plant upgrade is complete, according to an official. At present Lafarge reports a 70% capacity utilisation rate at its Manresa cement plant, producing 0.37Mt/yr.

"Capital to the tune of US$15m has been earmarked to eradicate bottlenecks and to boost volumes," said Lafarge Zimbabwe chief executive Amal Tantawi in an interview reported by the Herald newspaper. Lafarge has spent about US$5m on plant refurbishments over the past five years and it is now focusing on improving the cement production capacity of its existing plant.

Lafarge Zimbabwe is also in the process of conducting feasibility studies to establish a new manufacturing plant to complement the existing one. Tantawi added that Lafarge Zimbabwe was still keen on exporting cement despite a decline in export volumes in 2013. The company has been focusing on the local market since 2013 due to increased demand. Despite high demand for cement Tantawi highlighted liquidity issues with the local economy as the biggest challenge facing Lafarge. To tackle this Lafarge is rolling out different incentives to encourage its customers to make cash payments.

Lafarge Zimbabwe has also launched Supaset cement in the country following its use on other African states. The product is as a fast setting solution for the block making and precast segments of the construction industry.

Nigeria/South Africa: French cement maker Lafarge intends to combine its businesses in Nigeria and South Africa. The new company Lafarge Africa, which will be 73% owned by Lafarge Group, will remain listed on the Nigerian Stock Exchange. The new company will have a cement production capacity of about 12Mt/yr in South Africa and Nigeria as well as operations in aggregates, ready-mix and fly ash. The new company will be worth more than US$3bn.

"I am proud to be part of the creation of this leading African building materials platform. It will provide access to growth in two of the largest economies on the continent. It will mean that our shareholders are invested in a larger and more geographically diverse business and it will contribute significantly to the economic growth of both our nations, " said Chairman of Lafarge WAPCO, Chief Olusegun Osunkeye.

Under the proposed terms, Lafarge Group will transfer its direct and indirect shareholdings in Lafarge South Africa Holdings (Pty) Limited (100% - representing 72.4% of underlying companies in South Africa), United Cement Company of Nigeria Limited (35%), Ashakacem plc (58.61%) and Atlas Cement Company Limited (100%) to Lafarge WAPCO. The transaction is subject to Lafarge WAPCO shareholder approvals and obtaining required regulatory and other customary authorisations. The group anticipates completion during the second half of 2014.

Spain: Cemex has opened a new distribution centre in Rubi, Catalonia. Cemex Spain CEO Jaime Ruiz de Haro and Rubi Mayor Carme Garcia cut the ribbon on the new facility. The centre will distribute cement and other construction materials.

"We are the top producer of white cement in the world and the number three producer of grey cement. Centres like this allow us to get closer (to our customers) and improve our offerings," said Ruiz de Haro.

Cemex expects sales to hit Euro250m in 2014 in Spain. It employs about 200 people in the country.