Global Cement News

South Africa: Lafarge is considering approaching the International Trade Administration Commission of South Africa to protect the local market from what it calls 'low-quality cheap cement' imported from Pakistan. The multinational is concerned that substandard products are being used for large infrastructure projects in the country, including the construction of hospitals, government housing and schools. Some importers are labelling cement as flour to dodge quality tests. Yet when the regulators do test imported product, they refuse to disclose the outcome, citing confidentiality.

"Imports are a concern for several reasons; sometimes the prices are very low, which affects us financially. We are looking at approaching the International Trade Administration Commission of SA to intervene in the market, but no decision has been made," said Lafarge South Africa CEO Thierry Legrand. He added that some cement sellers did not comply with the National Regulator for Compulsory Specifications, yet had import licences. Other domestic producers including AfriSam and Pretoria Portland Cement have also expressed concern at the situation.

In 2011 three companies importing from Lucky Cement, Pakistan's biggest cement exporter, were shut down. Cement and Concrete Institute (CCI) managing director Bryan Perrie said that 140,000t of cement were imported into South Africa in the first quarter of 2012 and that a substantial portion of it probably came from Lucky Cement. "People have struggled to keep accurate import statistics of cement but we know that Lucky is a major importer. People bring cement in as flour, so the statistics of how much comes in is often incorrect," he said.

Importers in South Africa are supposed to test samples for every 500t of imported cement. Yet when the CCI asked third-party regulators about the results of these checks, they were told this was confidential. The CCI had asked the regulator to publish a list of cement importers online, recording which products had letters of authority, but this has not happened.

India: After setting a precedent by fining 11 cement companies a combined US$1.13bn in June 2012, the Competition Commission of India (CCI) has now imposed a penalty of US$71.5m on Shree Cement for indulging in restrictive trade practices.

The CCI has imposed the penalty on Shree Cement while issuing final order in the case against cement manufacturers and their trade body, the Cement Manufacturers Association (CMA). "The commission has also imposed a penalty on Shree Cement at the rate of 0.5 times its profits for the years 2009-2010 and 2010-2011 aggregating to US$71.5m," said the CCI in a statement.

"We have not seen the CCI order. Let us first go through the order and then we will decide on the future course of action in consultation with our lawyers, " commented H M Bangur, the managing director of Shree Cement.

The CCI found 11 cement manufacturers, including Shree Cement Limited and CMA, in contravention of the provisions of the Competition Act, 2002 which deal with anti-competitive agreements including cartels. As the cement companies (except Shree Cement) were already found to be in cartel in Case No. 29 of 2010 and penalised by the CCI via its order dated on 20 June 2012, the CCI decided not to order remedies including imposition of penalty on such companies again for the same period of contravention.

It has been reported by local media that since the fine in June 2011 Indian cement prices have continued to rise, with Rayalaseema Rashtra Samiti president Kuncham Venkatasubba Reddy threatening an indefinite hunger-strike over high prices.

India: Birla Corporation has earned a profit after tax of US$15.3m in the first quarter of the current financial year (ending 30 June 2012) against US$20.2m in the same quarter of the previous year. This represents a more than 24% drop year-on-year. Birla's net sales from operations for the quarter were US$118.5m. 

Commenting on the results, Harsh V Lodha, chairman of the company, said that the profitability of the company continued to be affected due to the closure of limestone mining operations at its Chanderia units on account of an order from the high court of Jodhpur. It was also observed that higher coal and freight prices had caused reduced margins.

France: Lafarge has reported that its net profit fell in the first half of 2012 due to troubles in its European markets, mainly in central and eastern Europe, where the construction industry slumped Lafarge recorded an impairment of Euro200m on its Greek assets alone. The French cement group's net income fell from Euro260m in the first half of 2011 to Euro13m in 2012, a drop of 95%.

Sales rose by 5% to Euro7.61bn and earnings before interest, taxes, depreciation and amortisation (EBITDA) rose by 8% to Euro1.52bn, boosted by increases in emerging markets. In addition to the impairment on Greek assets, Lafarge also recorded a Euro148m charge related to the company restructuring in the first half of 2012.

"Economic conditions remain challenging in many parts of the world and we remain prudent on our outlook," said Lafarge's chief executive Bruno Lafont. "Even in a lower growth volume environment, our actions to generate sales growth and cash, and to improve returns, led to a third consecutive quarter of positive trends." He confirmed that he expects the cement industry to grow between 1% and 4% in 2012, mainly driven by emerging markets. Lafarge expects higher pricing for the year and cost increases to be slower than in 2011.

By region on a like-for-like basis, cement volumes increased in North America by 14% to 5.7Mt and sales increased by 16% to Euro1.4bn. In Western Europe volumes decreased by 11% to 8.3Mt and sales decreased by 10% to Euro1.62bn. Here sales decreased by 6% to 7% in France and the UK, where it was blamed on adverse weather and a slowdown in advance of the London 2012 Olympic Games, and by 28% to 30% in Spain and Greece.

In Central and Eastern Europe volumes decreased by 7% to 5.9Mt, yet sales remained stable increasing by 1% to Euro561m. In both Russia and Poland higher pricing counteracted a drop in volume. In Middle East and Africa volumes decreased by 2% to 23.4Mt and sales increased by 4% to Euro2.2bn. Notably, Nigeria saw a 49% increase in sales due to a new line started in 2011 and Egypt saw volumes fall by 11% due to limited gas supply. In Latin America volumes increased by 5% to 4.5Mt and sales increased by 12% to Euro474m. In Asia volumes increased by 5% to 21.9Mt and sales increased by 11% to Euro1.36bn. Notably, activity slowed in India yet sales still rose by 25%. In China sales were impacted by slower construction growth, with volumes remaining stable but prices decreased.

Lafarge said that its debt stood at Euro12.55bn at the end of June 2012, down from Euro14.26bn a year earlier. The company's debts peaked at Euro17bn in 2008 and they stem from a series of acquisitions culminating in the Euro8.8bn takeover of Egyptian rival Orascom Cement. Lafarge plans to raise as much as Euro1bn in asset sales in 2012, though it hasn't said which units it may sell.

Lafarge made Euro72m from divestments in the first half of 2012. The company has also cut investment and reduced the number of executives. In June 2012, the company announced it would cut its costs by Euro1.3bn by 2015.

India: Two of Holcim's Indian subsidiaries have reported rises in their second quarter 2012 profits. Ambuja Cement has reported a 35% growth in net profit for the quarter ending 30 June 2012 due to increased sales, to US$84.6m from US$62.8m in the same period of 2011. Net sales by the company rose by 17.9% to US$463m during the quarter from US$392m in 2011. Ambuja Cement attributed this to a 7.3% rise in sales volume, to 5.54Mt from 5.16Mt.

During the quarter, absolute Earnings before interest, taxes, depreciation and amortisation (EBITDA) for the company rose by 22.8% to US$133m. However Ambuja Cement declared that higher operational expenses impacted upon this rise. Total expenses for the company, including raw material and power costs, rose by 15.7% to US$354m from US$306m. The company expects that profit margins are likely to remain under pressure due to steep rise in cost driven by higher raw material prices and rise in distribution and freight costs.

Meanwhile, ACC has reported a 26% rise in consolidated net profit for the second quarter of 2012 due to strong revenue growth, to US$74.8m from US$59.2m in the same period in 2011. Total consolidated turnover for ACC in the quarter rose by 15% to US$526m from US$458m in 2011. The company sold 6.05Mt of cement during the quarter compared to 5.93Mt in the same period in 2011.

Like Ambuja Cement, ACC mentioned 'steep' escalations in most of its key input costs including slag, fly ash, gypsum and power. The company also commented that the increase in railway freight rates with effect from March 2012 substantially impacted both inward and outward costs.

Both Ambuja Cement and ACC were fined in June 2012 by the Competition Commission of India for their alleged involvement in a price-fixing cartel. Ambuja Cement was fined US$210m and ACC was fined US$207m. ACC is currently taking steps to appeal against the fine.