Displaying items by tag: Investigation
Qizilqumsement allegedly paid above market price to gas supplier with links to Uzbek first family
26 April 2024Uzbekistan: Investigative reporting by Radio Free Europe/Radio Liberty (RFE/RL) has found evidence of a company linked to President Shavkat Mirziyoyev's son-in-law carrying out ‘secret state contracts.’ These included a US$36m ‘overpriced’ natural gas supply contract for Qizilqumsement. The company, Ultimo Group, is reportedly without website or public profile and co-owned by a retiree with no business background. RFE/RL described its network of associated international companies as ‘Byzantine.’
Enforcement Directorate searches The India Cements locations
01 February 2024India: The Indian Enforcement Directorate has conducted searches at locations associated with The India Cements. The directorate is seeking evidence of alleged violations of the Foreign Exchange Management Act (FEMA). Business Today Online News has reported that the current scope of suspected violations totals US$30 – 36m.
India Cements has yet to comment on the investigation.
Antimonopoly Committee of Ukraine investigates CRH’s acquisition of Buzzi Unicem's local business
24 January 2024Ukraine: The Antimonopoly Committee of Ukraine (AMCU) has launched an investigation into Ireland-based CRH's acquisition of certain Central-Eastern European assets of Italy-based Buzzi Unicem. The assets in question include two Ukrainian cement plants. The AMCU will assess the potential impacts of the consolidation on the cement market in Ukraine. The parties concluded the deal in June 2023, and expected to conclude it in September 2024. The AMCU first rejected CRH's application to it in September 2023, but subsequently agreed to reopen its examination of the deal in October 2023.
India: The Competition Commission of India (CCI) will carry out a pan-India market study into the cement industry. The Hitavada newspaper has reported that the study will cover supply structure, pricing dynamics and other aspects of the market. The CCI says that it is conducting the study in order to investigate potential collusion, ensure fair competition and protect consumers’ rights, as well as to obtain insights into the state of the cement market across different regions of India.
The CCI said “Cement is a critical input in crucial sectors of the economy, such as housing and infrastructure. These sectors have well-known forward and backward linkages with a range of other industries, thereby having the potential to influence the overall growth trajectory of the economy.”
India: The Supreme Court will hear the case against Adani Group over its alleged financial misrepresentation and stock manipulation on 24 November 2023, 24 days after the previous deferred date of 30 October 2023. BusinessWorld News has reported that the National Financial Reporting Authority (NFRA) is currently ‘scrutinising’ the group's auditors, S.R. Batliboi, while the Securities and Exchange Board of India (SEBI) is investigating British Virgin Islands-based investment fund Gulf Asia Trade & Investment for possible violations of share ownership regulations in connection with the Adani Group.
Adani Group says that it has committed no wrongdoing.
Tax authorities probe Wan Heng Ghana
12 July 2023Ghana: The Bureau of National Investigations (BNI) and the Ghana Revenue Authority (GRA) have arrested managers of Wan Heng Ghana. The Business and Financial Times newspaper has reported that the cement producer is suspected of neglecting to pay US$43.1m in tax. An investigation showed that the company received sufficient imported clinker to produce US$120m-worth of cement between 2018 and 2021, yet declared only US$19.6m-worth of sales. Management then reportedly refused to cooperate with further investigations, leading to the arrests. Wan Heng Ghana produces Sol brand cement.
The Chamber of Cement Manufacturers Ghana (COCMAG) affirmed its commitment to ensuring fair competition and ethical practices within the cement industry. It represents cement producers in the country, including Wan Heng Ghana.
US Attorney probes Adani Group investor statements
27 June 2023India/US: The US Attorney's Office has requested that large Adani Group shareholders submit correspondence from the group. Reuters has reported that the office is investigating representations made by India-based Adani to its US investors, following fraud allegations by US-based short-seller Hindenburg Research.
An Adani Group spokesperson said "We are not aware of any such subpoena to investors."
South Korea: The Korea Trade Commission (KTC) has launched a probe into imported white cement from Egypt. The commission will investigate the possible necessity of anti-dumping duties on imports of the product. Yonhap English News has reported that the KTC is responding to a complaint from domestic white cement producer Union Corporation. The producer accuses International Cement Trading and Egypt-based Royal El Minya Cement of damaging its business through cement dumping. The KTC will complete its preliminary investigation before 1 September 2023.
India: Investment research firm Hindenburg Research has accused Adani Group of conducting a 'stock manipulation and accounting fraud scheme' over a period of ‘decades.’ The US-based firm alleged that listed companies belonging to Adani Group are indirectly part-owned by shell entities and funds connected to the Adani family’s private offshore trusts and companies. The listed companies have purportedly paid money into the offshore trusts and companies, which in turn funded the shell entities and funds investing and trading in Adani Group stocks. Hindenburg Research said that four Adani Group listed companies are ‘near the delisting threshold’ under Indian law requiring a minimum 25% non-promoter holding in listed companies.
Bloomberg has reported that Hindenburg Research said that its two-year investigation into Adani Group uncovered a ‘vast labyrinth of offshore shells’ managed by Adani Group chair Gautam Adani’s brother Vinod Adani. It identified 38 such shell entities based in Mauritius, and other entities based in Cyprus, Singapore, the UAE and the Caribbean. It reported that ‘many’ Vinod Adani-controlled entities show ‘no obvious signs of operations.’ Nonetheless, they have collectively ‘moved billions of dollars.’ Hindenburg Research has uncovered evidence of what it called ‘efforts that seem designed to mask the shell entities, including recurrent listings of ‘nonsensical services’ on their websites. Many of these allegedly have no named employees, and were formed on the same days as others. The Securities and Exchange Board of India (SEBI) confirmed that the offshore funds in question are subject to an on-going investigation.
In a statement, Adani Group’s chief financial officer (CFO) Jugeshinder Singh said that Hindenburg Research had not made “any attempt to contact us or verify the factual matrix.” Singh described the allegations “stale, baseless and discredited.”
Hindenburg Research has taken a short position on Adani Group, meaning that it may make money should the price of shares in Adani Group drop.
Separately, Adani Group acquired a 63% stake in Ambuja Cements and a 57% stake in ACC from Switzerland-based Holcim through an offshore special purpose vehicle (SPV) in September 2022.
Hindenburg Research's report on Adani Group, entitled ‘Adani Group: How The World’s 3rd Richest Man Is Pulling The Largest Con In Corporate History’ can be found here.
Update on Türkiye, January 2023
18 January 2023The Ministry of Trade in Türkiye said this week that it was monitoring developments in the construction industry. Specifically, the ministry is reacting to complaints it has received about the high price of cement and supply issues. It has been looking at exports of clinker and cement. The statement noted that prices had risen particularly in the last one to two months and that the government was prepared to take unspecified action to alleviate the situation.
The comments hark back to the autumn of 2021 when members of the Construction Contractors Confederation (IMKON) stopped working for two weeks in response to high prices including cement. At the time the ministry tightened its rules on exporting cement and clinker. This followed the start of an investigation into alleged anti-competitive behaviour by the regulator Rekabat Kurumu into nine cement producers in the first half of that year. Around the same time Türk Çimento, the Turkish Cement Manufacturers' Association, had also been warning about growing raw material and energy costs. It noted that declining domestic sales between 2017 and 2019 had encouraged its members to focus on export markets more. All of this was overshadowed in February 2022 when Russia invaded Ukraine and global energy prices spiked. Türk Çimento then warned of the trouble that high coal prices were causing the sector.
Graph 1: Domestic and export cement sales in Türkiye, January – September, 2017 – 2022. Source: Türk Çimento.
Graph 1 above shows that the trend towards exports that Türk Çimento pointed out in mid-2021 has continued. Domestic sales fell to a low of 33.2Mt in 2019, recovered to 2021 and dropped somewhat so far in 2022. As an aside, that decline in domestic sales from 2017 to 2019 was the first the local cement industry had experienced a fall in sales since at least 2002. Exports fell year-on-year in 2018 but have increased steadily since then to 14.6Mt in the first nine months of 2022. Exports represented 10% of total sales in 2017. So far in 2022 they have accounted for 27% of total sales. Türk Çimento’s take on the picture so far in 2022 is that it expects the domestic market to decline by 10% in 2022 in all regions of the country principally due to high commodity prices. Cement exports are expected to increase but clinker exports to decrease.
Commercially, Türkiye-based cement producers have reacted to high energy prices by upping their own product prices in turn. OYAK Çimento, for example, reported significant rises year-on-year in sales revenue and earnings in the first nine months of 2022. Net sales grew by 160% year-on-year to Euro403m and earnings before interest, taxation, depreciation and amortisation (EBITDA) increased by 202% to Euro106m. Akçansa and Çimsa reported a similar situation.
Despite the high energy costs, both investment and merger and acquisition activity has continued in the cement sector in 2022. In August 2022 Fernas Group completed its purchase of two integrated cement plants, a grinding plant and associated ready-mix concrete assets from Çimsa Çimento for US$110m. Later in the year, in November 2022, Safi Çimento acquired Sancim Bilecik Çimento’s integrated plant from Aşkale Çimento. Various upgrade projects to cement plants were also reported including projects at KÇS Kipaş Çimento’s Kahramanmaraş plant, Nuh Çimento’s Hereke cement plant, MEDCEM’s Silifke plant and OYAK Çimento’s Ünye plant.
Recent reporting by the Economist newspaper suggests that the government is targeting the domestic housing sector in response to higher than inflation price rises even compared to Türkiye’s high consumer price inflation rate. The next general election in June 2023 may also be encouraging legislators to look at the accommodation needs of their constituents. Whether this is connected to the Ministry of Trade’s recent decision is unknown. Cement producers have followed the money to lucrative export markets in recent years. How far the government is willing to intervene in this strategy could mark a change in direction for the sector.