Displaying items by tag: Lafarge
Pending LafargeHolcim and Sika deals forge ahead despite SNB’s abandonment of Swiss Franc cap
16 January 2015Switzerland: On 15 January 2015, the Swiss National Bank (SNB) abandoned the Euro1.20 cap on the Swiss Franc, causing market turmoil. However, deals involving domestic companies Holcim and Sika are expected to survive the impact of the shock decision.
Bigger deals are insulated against the effects of the sudden surge in the value of the Swiss currency because the companies involved are able to to buy insurance to protect them against such moves. However, some bankers said that the volatility introduced by the SNB decision to scrap the cap after three years could dampen deal-making in the longer term.
Holcim also said that it remained committed to a planned merger with France's Lafarge despite the move by the SNB that knocked almost Euro2.95bn (3bn Swiss Francs) off Holcim's market value.
"Regarding a possible impact on the combination with Lafarge, what we can say is that we remain committed to the merger," said Holcim spokesman Eike-Christian Meuter. According to Reuters, a spokesman for Lafarge said that it also remains committed to the merger.
Holcim was one of the companies caught up in a 10% all-in Swiss blue chip stocks on fears over the impact on their exporting power. Holcim slumped 20% at one point.
US: Continental Building Products (CBP) has appointed James 'Jay' Bachmann to the position of president and CEO, effective immediately. Bachmann has served as interim CEO since November 2014 and CFO since January 2014. He will continue to serve as CFO in an interim role, pending the appointment of a permanent CFO.
CBP has also announced the appointment of Dennis Romps to the position of chief accounting officer (CAO). Romps will also continue to serve as senior vice president and corporate controller, positions he has held since January 2014.
Bachmann formerly served as CFO at Lafarge USA and co-chief financial officer of Lafarge North America from November 2012 through December 2013. He also held multiple executive responsibilities at Lafarge since 2002, including senior vice president of finance (Investor Relations) of Lafarge SA from January 2008 through October 2012 and senior vice president and controller of Lafarge North America from November 2005 to June 2006. Prior to Lafarge, he worked at Arthur Anderson from September 1990 to April 2002.
Romps previously served as CBP's CFO from August 2013 to December 2013. He formerly served as co-chief financial officer of Lafarge North America from December 2006 until August 2013, while also holding a variety of vice president positions in finance, IT and supply chain of the gypsum division of Lafarge North America from 2005 until August 2013.
Lafarge Tarmac sells land for new Euro2.56bn theme park
13 January 2015UK: Lafarge Tarmac has agreed to sell land that once housed the UK's largest cement plant to allow the construction of a Euro2.56bn theme park.
The 1.37km2 Swanscombe Peninsula site in Kent has been earmarked as the home for the proposed London Paramount Entertainment Resort after developer London Resort Holding Company agreed a deal to buy the land. The sale follows an announcement in May 2014 that the resort would be designated a 'nationally significant' project.
"We take a long-term view of our landholdings from mineral extraction to development and restoration; creating jobs, supporting communities and continuing responsible environmental stewardship," said Lafarge Tarmac chief executive Cyrille Ragoucy. "We are proud to be part of this exciting project. This is a fitting legacy for land which has been owned by Lafarge Tarmac for over 140 years."
The sale is expected to go through once planning permission for the scheme is granted. London Resort Holding has already held two stages of public consultation, involving more than 4000 local people. Two more stages are planned ahead of a submission to the Planning Inspectorate in Autumn 2015.
"With this agreement in place, the vision for Kent as the home of a nationally-significant, multi-billion pound entertainment resort employing thousands of people is moving closer to becoming a reality," said David Testa, executive director of London Resort Holding. "It further underlies our commitment to delivering the project and is welcome news as we continue to consultant and engagement with the local Dartford and Gravesham communities living near the site and more widely with our interested parties."
Back to business in 2015
07 January 2015The end of 2014 proved a good time to tidy up outstanding business for various organisations with links to the cement industry. Lafarge and Holcim received clearance from the European Commission for their proposed merger and they announced their executive committee, Holcim and Cemex concluded their transactions in Europe, the US Environmental Protection Agency (EPA) announced regulations for coal ash, HeidelbergCement found a buyer for its Hanson Building Products business and even PPC managed to appoint a new CEO.
The HeidelbergCement sale is of interest because the company has said it is using the proceeds to pay off debt rather than to make purchases. CEO Bernd Scheifele said in the press release that the intention was to improve the company's 'credit-worthiness.' This isn't directly related to the cement industry because Hanson Building Products produces concrete gravity pipe, concrete and steel pressure pipe and clay bricks in the US, UK and eastern Canada. Yet the potential cash bonanza is relevant. Remember, this is happening at the same time that Lafarge and Holcim have been offloading lots of their own assets to meet competition regulations in various territories.
When the initial public offering was made for Hanson Building Products in September 2014, analysts assumed that HeidelbergCement was positioning itself for a spending spree. The purchase price for Hanson Building Products agreed with a private equity firm was US$1.4bn. This could be used to buy five 1 Mt/yr cement plants at an average price of US$250/t for cement production capacity!
Unfortunately for HeidelbergCement its net debt rose from Euro7bn in 2012 to Euro7.5bn in 2013. This was the first time it had risen since 2007 when it hit a peak of Euro14.6bn. That year was when it agreed to purchase Hanson. It also marked the start of the 2007 – 2008 financial crisis. Similarly, ratios such as net debt to operating income before depreciation (OIBD) also rose in 2013. Although it looks from interim financial reports that HeidelbergCement's debt may have decreased again in 2014, it is probably not doing so at any great speed. Hence the Hanson Building Products sale.
For comparison with debt held by the other European-based cement producers, Lafarge's net debt stood at Euro10.3bn at the end of 2013, Holcim's net debt was Euro7.9bn, Italcementi's net debt was Euro1.9bn and Mexico-based Cemex's net debt was Euro14.8bn. Compared to most of these their operating incomes these company's have net debt to earnings before interest, taxes, depreciation, and amortisation (EBITDA) ratios (net debt/EBITDA) of between two and three-and-a half suggesting that they can pay back their debts within a few years if absolutely necessary. The outlier here is Cemex with a ratio of over six following previous acquisition bursts.
The implication here is that Lafarge and Holcim have chosen to sell their wares at a time when their European competitors are weakened. Meanwhile their Chinese competitors have only just started to directly expand outside of mainland China. Smart move.
France/Switzerland: Holcim and Lafarge have announced the executive committee for the proposed merged company, LafargeHolcim, due to be formed in the first half of 2015. As previously announced, Lafarge's current CEO Bruno Lafont will become LafargeHolcim's first CEO and the chairman of the new board will be Wolfgang Reitzle, currently chairman of Holcim.
Lafont will lead a project team of 10 managers from both Holcim and Lafarge to handle the transition. Once the merger is finalised, the members of this project team will be officially appointed members of the Executive Committee.
The future executive committee is composed of:
- Finance: Thomas Aebischer, currently in charge of Finance at Holcim;
- Integration, Organisation and Human Resources: Jean-Jacques Gauthier, currently in charge of Finance at Lafarge;
- Europe: Roland Köhler, currently in charge of Europe at Holcim;
- Asia Pacific: Ian Thackwray, currently in charge of East Asia Pacific and Trading at Holcim;
- Middle-East Africa: Eric Olsen, currently in charge of Operations at Lafarge;
- North America: Alain Bourguignon, previously in charge of North America and UK at Holcim;
- Latin America: Saâd Sebbar, currently in charge of Morocco at Lafarge;
- Performance and Cost: Urs Bleisch, currently in charge of Corporate Functions at Holcim;
- Growth and Innovation: Gérard Kuperfarb, currently in charge of Innovation at Lafarge;
In India both companies are well on track in preparing the merger of Holcim and Lafarge, with the future structure for the subcontinent to be announced in due course upon clearance by the Competition Commission of India.
The current executive committees of Holcim and Lafarge remain in charge and accountable for the activity and operations of their respective groups until completion of the merger. Both groups continue to operate entirely separately as competitors until the merger is completed.
The selection and nomination process for the rest of the leadership team is also well underway. Apart from the future executive committee, the following direct reports of the future CEO have been selected under project mode:
- Strategy and M&A, Christof Haessig, currently in charge of Corporate Finance and Treasury at Holcim;
- Communication, Public Affairs and Sustainable Development, Alexandra Rocca, currently in charge of Communication, Public Affairs and Sustainable Development at Lafarge;
- Legal, Xavier Dedullen, currently in charge of Legal & Compliance at Holcim;
- Health and Safety, Sapna Sood, currently in charge of Health and Safety at Lafarge.
Kenya: Lafarge has appointed two directors to the board of East African Portland Cement Company (EAPCC) following the exit of Titus Naikuni after eight years with the company. EAPCC said that the terms for ex-Capital Markets Authority chairman Kung'u Gatabaki and Sarone Sena, chairman of Eldoret University council, are effective immediately. Bill Lay was reappointed as EAPCC chairman for a three year period, effective from 7 November 2014, by president Uhuru Kenyatta.
Greek Supreme Court orders Heracles General Cement to pay village Euro78,000 for pollution
07 January 2015Greece: The Supreme Court of Greece has ordered the Heracles' General Cement Company, a subsidiary of Lafarge, to pay the residents of Agia Marina, Halkida Euro78,000 as compensation for pollution from its cement plant.
The court upheld the settlement's arguments that the cement plant had failed
to adhere to the environmental terms in its operating licence in order to avoid the relevant costs and refused to take measures for the proper maintenance and modernisation of its facilities. They said this resulted in all outdoor areas in the village being covered in a layer of cement dust up to 1.2cm thick, including the nearby coastline.
The village residents had originally sued for a total of Euro1.14m but the court awarded the residents a much lower sum, even though it found that the company's omissions fully justified their claim to moral damages resulting from their deprivation of environmental benefits and the threat to their health from exposure to environmental pollution.
Hungary: Lafarge Cement Magyarország has opened a storage facility for waste that will be used to help fuel its plant in Királyegyháza, southwestern Hungary. The project, involving an investment of EUro2.2m, will be used to store plastic, rubber and industrial and farm by-products.
EU approves LafargeHolcim merger
16 December 2014Europe: The European Commission (EC), the European Union's antitrust authority, has approved the proposed merger of Lafarge and Holcim, subject to asset sales by both companies in regions where their activities overlap. The EC's approval is conditional upon the divestment of Lafarge's businesses in Germany, Romania and the UK. Holcim is required to divest its operations in France, Hungary, Slovakia, Spain and the Czech Republic. The proposed transaction concerns assets worth several billion Euros and will create the world's largest cement producer with operations in 90 countries.
"The Commission had concerns that the transaction, as originally notified, would have had a detrimental effect on competition in a significant number of markets in the European Economic Area (EEA)," said the EC. "The commitments offered by the two companies address these concerns."
According to the EC, its assessment found that the merged entity would have faced insufficient competitive pressure from remaining players in many markets. This would have brought a risk of price rises. In order to prevent a negative impact on competition, the companies have committed to divesting most of the operations where their activities overlap. Further, the EC said that Holcim and Lafarge will not be allowed to close the deal until it has approved the buyers of the assets put up for sale.
In April 2014, Holcim and Lafarge announced their plan to combine through an all share merger of equals to create LafargeHolcim, with nearly Euro32bn in sales. The proposed combination would be structured as a public exchange offer initiated by Holcim for all outstanding shares of Lafarge on the basis of a 1 for 1 exchange ratio. The companies also agreed to have equal dividends on a per share basis between announcement and completion. The offer would be subject to Holcim holding at least 2/3rd of the share capital and voting rights of Lafarge.
American focus shifts back north
10 December 2014This week we heard news of two potential bidders for Lafarge and Holcim divestments. However, for a change it was where they will not be bidding that was of interest: Brazil. India's UltraTech Cement and Colombia's Cementos Argos now seem to have no interest in developing their positions in South America's largest cement market, having both previously stated their interest.
The Brazilian assets to be sold are three integrated cement plants and two grinding plants that share a capacity of 3.6Mt/yr (as well as a one ready-mix plant). Cementos Argos came out and said that it would not be bidding. UltraTech's position is more of a rumour, given by 'a source close to the company' that was not revealed by local media. However, both stories suggest that Brazil is currently not a good place for cement producers to buy up assets.
The reasons for these decisions are related to the state of the Brazilian economy, which has seen sub 2% growth in the last 11 quarters. The economy actually contracted by 0.9% in the second quarter of 2014 and by 0.25% in the third quarter of 2014. A 0.2% rise in the fourth quarter will be negated by a fall of 0.28% in the first quarter of 2015. Over the course of 2015 the IMF forecasts growth of 1.4%.
Although Brazilian cement production has risen from around 40Mt/yr in 2006 to around 70Mt/yr in 2013, it has been growing by lower and lower amounts each year. In 2013, it rose by 1.5% year-on-year, down from a 6.7% rise in 2012, an 8.3% rise in 2011 and a near 16% rise in 2010. Taken along with the IMF's GDP growth forecast, there is a genuine chance that Brazilian cement sales could plateau in 2014 or 2015. There will certainly be better places to try to sell cement over the next couple of years, hence the eagerness with which Cementos Argos declared its position.
One country that Cementos Argos has said it's looking at Lafarge and Holcim assets in is Mexico. Its economy is anticipated to grow by 3.5% in 2015, more than twice as quickly as Brazil and far more than the Americas as a whole (2.2%). Another anticipated strong performer in 2015 will be the US (3.1%), where Cementos Argos acquired assets in 2013. This week also saw the news that the Portland Cement Association's 8.1% cement consumption forecast for 2014 will be met.
Taking this all together, it appears that economic growth, and hence cement demand growth, will return to North America in earnest in 2015. Meanwhile South America's largest market is starting to lag behind. How will the rest of the two continents fare in 2015 and beyond?