Displaying items by tag: Holcim
How much could Holcim be worth?
07 February 2024We return this week to look at Holcim’s decision to separate and list its business in North America. This is big news because the region delivered nearly a third of the group's earnings in 2022 and a quarter of its net sales. The building materials market in North America has shown considerable potential for Holcim and other companies in recent years. The question then is why would Holcim want to divest this wealth generating potential from the rest of the business? The answer lies in how much Holcim US could be worth in the future.
The group announced at the end of January 2024 that it is working towards a full capital market separation and US listing of its North American business. The transaction will be run as a spin-off with the intention of benefiting all of the company’s present shareholders. The intention is to create the “leading pure-play North American building solutions company,” with the US listing expected to complete in the first half of 2025. The new company will be run separately and independently to the rump of ‘non-US Holcim’ with its own management structure and directors. Crucially, non-US Holcim itself does not intend to have any cross-shareholding in the new company. Holcim’s current chief executive officer Jan Jenisch will focus on his role as chair from May 2024 with the appointment of Miljan Gutovic. Jenisch will then lead the work on spinning-off the US business before later, possibly, taking a senior position at one of the resulting companies, according to his comments at an investors and analysts’ conference.
Holcim says it is doing this to maximise the return to its shareholders. This dodges the question, given that public companies partly exist to do this anyway, so the decision may be more about generating value for shareholders in the short term rather than, say, increasing value for both shareholders and stakeholders by building a bigger business empire. Jenisch explained the decision as a natural evolution of the company’s strategy and he repeatedly described himself as “the first servant of the shareholders.” The divestment should make both companies more valuable through corporate reorganisation rather than buying new companies or making new products. The other thing to consider is that Holcim's shareholders have not been shy in making their requirements known going back to the arguments over the share split when Lafarge and Holcim merged in 2015 and the subsequent battle for the direction of the group.
A spin-off is a form of corporate divestment where a parent company creates a subsidiary as a separate entity with its own management structure and it distributes the shares in the new company between its existing shareholders. Typically it is seen as a good option for the shareholders of the original company compared to other types of divestment such as a split-off, an equity carve out or a straight sale. The benefits include generating proceeds from the divestment, simplifying the corporate structure, increasing the value of both companies and there are tax advantages too. The risk of going for a spin-off though is that the new company may start with operational or financial issues as it starts going solo. It may also have difficulty dealing with market preconceptions about what the new organisation is like based on the parent.
Jenisch said that the group had considered going for an initial public offering for the North American business but had decided that this was riskier. Holcim expects and hopes that the value of the two companies will be higher separately than as they are at present as part of one company. Hence, its investor presentation describing the spin-off was full of plenty of arguments positioning how strong the US business is and could be. Chief financial officer Steffen Kindler also pointed out during the investor conference that one of the reasons the company opted for a full separation was to better secure Standard and Poor's (S&P) listing criteria, another sign that the plan is targeted towards securing as much value as possible. The company is targeting net sales of over US$20bn/yr by 2030 for its North American business.
The strength of the US market in recent years has been evident from the actions of other companies in the building materials sector. Ireland-based CRH moved its primary listing to the US in 2023 due to its high proportion of earnings from the country and the potential in the future from “continued economic expansion, a growing population and significant construction needs.” Another big recent transaction in the sector was the merger of the US operations of Summit Materials and Cementos Argos that completed in early 2024. The diverging prospects of the US economy versus Europe have been driving this trend. Listing on a US exchange can also give companies potentially higher valuations along with access to a larger market and easier connections to private equity to help fund expansion.
With this in mind Holcim’s decision to do something with its North America operations makes sense as it helps the company to increase the return to its shareholders, grow the business and remain competitive. The dominance of the US market on Holcim’s balance sheet is increasingly making the company a US one but without the advantages of being locally based. A spin-off suits the Milton Freedman dictum that companies only exist to maximise shareholder return but there is always a debate to be had about how to actually do this. Splitting Holcim’s growth-based US business from the more sustainability-minded European one ties into this for example, as differences in corporate social responsibilities grow between the regions.
Finally, on an emotional level giving up a key business area feels like a wrench to the status quo. Holcim will no longer be the largest cement producer outside of China once the separation completes. We await further details on how the two companies will be connected following the split… but change is coming.
New Zealand: Holcim New Zealand has appointed Michael Miller as its Executive General Manager. He succeeds Kevin Larcombe in the post, who moves to Holcim Australia as General Manager - NSW & ACT Concrete. Miller previously worked as the Chief Strategy Officer for AdBri in Australia and previously joined the company in 2007. He holds a degree in management and marketing from the University of South Australia.
Holcim to separate and list North American Business
29 January 2024North America: Holcim has announced plans for a full capital market separation of its North American business. Subject to shareholder approval, it will subsequently list the business in the US in the first half of 2025. The group will communicate the final structure of the separation, which it expects to execute as a spin-off, later in 2024. Reuters has reported that Holcim chair and chief executive officer Jan Jenisch said that the North American business may attract a valuation of US$30bn upon listing, with Holcim retaining no stake. The business recorded an estimated earnings before interest, taxation, depreciation and amortisation (EBITDA) margin of over 27% in 2023. Following the US listing of the business, Holcim itself expects to continue its inclusion in the Swiss Market Index in Switzerland.
Jenisch said “Holcim has reached a new level of financial performance and a superior earnings profile with industry-leading margins and a strong balance sheet. The success of our North American business makes it the leading pure-play building solutions company in the region. With a US listing, we will unleash its full potential to be the partner of choice for our customers in one of the world’s most attractive construction markets. As we fully capitalise on the region’s infrastructure and construction boom, we will accelerate growth and unlock value for our stakeholders.”
Petrofac conducting carbon capture feasibility study at Aggregate Industries’ Cauldon cement plant
25 January 2024UK: Aggregate Industries has engaged energy engineering firm Petrofac to investigate a carbon capture project at its Cauldon cement plant. Petrofac is currently conducting early engineering assessments to identify CO2 capture opportunities at the plant in Staffordshire. This includes technology selection for any future project. Upon commissioning, a carbon capture system will support the storage of up to 600,000t/yr of CO2 from the Cauldon cement plant under the Irish Sea as part of the cross-industry Peak Cluster carbon capture and storage (CCS) project.
Aggregate Industries decarbonisation manager Luke Olly said "Aggregate Industries is excited to be launching this carbon capture study, as we are aiming to fully decarbonise our cement plant by 2030. This technology is an important part of our strategy."
Petrofac head of business development energy transition projects, Alex Haynes, said "We’re looking forward to working with Aggregate Industries UK in finding a way to reduce the carbon footprint of its cement products."
Carbon capture for the US cement sector, January 2024
24 January 2024It has been a busy week for carbon capture in the cement sector with Global Cement covering five stories. However, increasingly, the topic has become a regular feature in the press as the industry bends to the demands of the carbon agenda. This week’s selection is notable because three of the stories cover North America.
Holcim US announced that it is working with Ohio State University and GTI Energy to design, build and test engineering-scale membrane carbon capture technology at the Holly Hill cement plant in South Carolina. The information builds on an earlier release from the US Department of Energy’s (DOE) Office of Fossil Energy and Carbon Management (FECM) in late December 2023 about the project. It has a total budget of US$9m, with US$7m supplied by the DOE. It plans to build a 3t/day CO2 capture unit that uses a method intended to retain 95 - 99% of CO2 from cement kiln gas with a purity exceeding 95%. The new information at this stage is that GTI Energy is involved. Specifically, it will support the development of the pilot skid for site deployment.
The other two stories from North America are worth noting because they both concern commercial equipment or technology suppliers joining up to work together. First, 10 companies - Biomason, Blue Planet Systems, Brimstone, CarbonBuilt, Chement, Fortera, Minus Materials, Queens Carbon, Sublime Systems, and Terra CO2 - announced they were launching the Decarbonized Cement and Concrete Alliance (DC2). The group’s principal aim is to lobby the US government toward using new low-carbon cement and concrete products in public infrastructure. It also intends to look at advocacy and public sector engagement including expanded tax credits, development of standards for novel cements, consistent ecolabeling and accounting, and customer demand support. DC2 was formally launched in January 2024 but it follows previous work by the companies in the area. The other related story was a memorandum of understanding that Aker Carbon Capture and MAN Energy Solutions have also signed this week to jointly pursue opportunities related to carbon capture, utilisation and storage (CCUS) and CO2 compression in the North American market. These two companies have worked on the full-scale CCUS unit at Norcem’s Brevik cement plant, which is due to be commissioned later in 2024. They are likely intending to capitalise on the publicity that is likely to be generated once it officially starts up.
Back in North America the DC2 Alliance noted in its press release the DOE’s release of its Pathways to Commercial Liftoff: Low-Carbon Cement report in September 2023. Although it is similar to many other varied sector roadmaps, including the Portland Cement Association’s Road to Net Zero that was released in 2021, this document is well worth reading due to its details and local market context. The headline figure, for example, is that following a set of pathways to fully decarbonise the US cement industry would cost US$60 - 120bn by 2050. Doing so would involve reducing the clinker factor, improving energy efficiency, increased use of alternative fuels, using CCUS, using alternative feedstocks and adopting alternatives to traditional cement production methods.
Graph 1: US active cement kilns by capacity and age. Source: PCA survey data used in Department of Energy Pathways to Commercial Liftoff: Low-Carbon Cement report.
One other interesting tidbit to consider from the report is an analysis of the age of the US cement sector’s kilns versus their production capacity as shown in Graph 1 above. The largest 10 kilns in the country account for 22% of the country’s total capacity and these were all built after 2000. Then, the next 44% of the national capacity comes from 38 kilns out of a total of 120 kilns at 98 cement plants. The report itself does not make this assertion but the implication is that retrofitting CCUS units at one third of the country’s clinker lines would capture the CO2 being emitted from two-thirds of the sector’s production capacity. This is not to say that this could actually work technically, logistically or economically. Yet seeing the scale of the challenge presented in this way is fascinating and one starts to have thoughts about how a retrofit roll-out of CCUS units might actually be approached.
Whether the cement sector adopts CCUS at scale remains to be seen but demonstration projects are definitely coming in both Europe and North America. The DOE report from September 2023 suggests that decarbonisation will cost a lot of money. No surprises there and, as ever, there is rather less detail on who will actually pay for this. One thing that might help here, that the DOE report mentions frequently, is the 45Q carbon capture tax credit scheme, which was introduced by the Trump administration in 2020. Regardless of the potential bill for consumers of cement though, the suppliers are clearly taking note of the investment potential as evidenced by all the non-cement plant CCUS news stories this week.
Afrimat acquisition of Lafarge South Africa draws closer
24 January 2024South Africa: Mining and materials company Afrimat says that further regulatory conditions as part of its ongoing acquisition of Lafarge South Africa have been met. The Minister of Mineral Resources and Energy of South Africa has consented in terms of the Mineral and Petroleum Resources Development Act, the Financial Surveillance Department of the South African Reserve Bank has approved the acquisition in terms of the Exchange Control Regulations and the respective Competition Authorities in Botswana and eSwatini have approved the implementation of the acquisition. Approval by the Competition Commission is still outstanding but it recommended the transaction to the Competition Tribunal in November 2023. However, the Competition Commission highlighted ‘horizontal overlaps’ in the aggregates and ready-mix concrete sectors and recommended that the parties be required to divest assets across the affected sectors.
Afrimat first announced in June 2023 that it had agreed a share purchase agreement with a Holcim Group subsidiary, Caricement, to acquire 100% of the issued share capital of Lafarge South Africa. The proposed acquisition will become unconditional and be implemented once approval by the Competition Tribunal has been obtained.
US: Holcim US, in partnership with The Ohio State University and GTI Energy, will install membrane carbon capture technology at its Holly Hill, South Carolina, cement plant. The project is partly funded by a US$7m the US Department of Energy. The partners aim to capture 99% of the plant’s CO₂ emissions.
GTI Energy vice president of carbon management and conversion Don Stevenson said "This project will showcase the power of collaboration and innovation in tackling the complex challenge of transitioning to cleaner energy systems. The development and implementation of cost-effective carbon capture technologies are key to meeting our decarbonisation goals."
US: Holcim US has entered a partnership with climate tech start-up incubator Greentown Labs to accelerate decarbonisation in the built environment, using the latter’s Somerville, Massachusetts, and Houston, Texas, incubators. Holcim said that the collaboration will increase its access to start-ups in the field of sustainable building solutions. The producer has additionally joined Greentown Labs’ Industry Leadership Council for strategic guidance. Greentown Labs supports over 200 start-ups and has assisted more than 525 since its inception. It offers lab space, office space, machine shops, electronics labs, tool shops, software, business resources and a network of stakeholders to climate tech start-ups.
Holcim chief sustainability officer Nollaig Forrest said “With our open innovation ecosystem, we partner with hundreds of start-ups worldwide to accelerate the shift to sustainable building. By partnering with Greentown Labs, we aim to empower the best and brightest start-ups active in the built environment to scale up their impact. The combination of Holcim MAQER Ventures, our venture capital programme, with Greentown’s stellar roster of successful climate tech start-ups will serve as a catalyst to reinvent how the world builds for a regenerative future.”
Greentown Labs CEO Kevin Knobloch said "Greentown Labs is thrilled to be partnering with Holcim, a global leader in sustainable building solutions to decarbonise the built environment to bolster cutting-edge climate tech innovations in this critical sector. We look forward to seeing Holcim engage with our building tech start-ups, sharing its unmatched expertise in low-carbon building innovations and helping advance our entrepreneurs' solutions."
Holcim announces over 15 upcoming acquisitions in 2024
18 January 2024Switzerland: Holcim says that it aims to conclude 15 - 20 new acquisitions in 2024, and potentially ‘many more.’ The value of individual deals ranges from US$5.78 – 115m, but might possibly exceed US$230m. Holcim says that it is focussing on growing its construction waste recycling business in Belgium, France, Germany and the UK, as well as its aggregates business in Eastern Europe.
Holcim’s ECOCycle construction-demolition material recycling technology named Circularity Lighthouse
17 January 2024Switzerland: McKinsey & Company and the World Economic Forum have recognised Holcim’s ECOCycle recycling technology for construction-demolition material (CDM) as a "Circularity Lighthouse in the Built Environment." ECOCycle technology can process 100% of CDM input into new building materials with 75% lower CO2 emissions than traditional alternatives.
Chief sustainability officer Nollaig Forrest said “Circularity is a game changer to decarbonise buildings at scale. At Holcim we are operating over 100 ECOCycle recycling centres globally to drive circular construction. With our advanced recycling of CDM, we can already reduce the CO2 footprint of cement by up to 40%. This is just the beginning; as we innovate and partner across the value chain to evolve building norms, we aim to accelerate the shift to circular construction in all metropolitan areas where we operate.”