12 April 2016
Ratings agency says LafargeHolcim to benefit from Indian infrastructure spending growth 12 April 2016
India: Government plans to increase spending on infrastructure projects will benefit LafargeHolcim according to Moody's Investor Service. The second largest cement producer in India will gain from uneven regional demand, with a much larger scale and more prominent operations in northern India, where it sells almost 42% of its local cement volume.
LafargeHolcim and other European cement manufacturers with a presence in India are likely to benefit if the Indian government's plans to ramp up infrastructure spending happen in the next 12 to 18 months. The 2016 Union Budget contained plans to hike public infrastructure spending, especially on roads, which could revive stagnant cement demand in the country.
According to the government's 12th Five Year Plan (2012 - 17) investment in infrastructure should increase from 7.6% of gross domestic product (GDP) in 2014 to 9% in 2017. However, cement demand for government-funded projects has been weak in the last four years with many construction schemes delayed or put on hold. As a result, while infrastructure investment will be a key growth driver, the timing of such investment remains uncertain.
However, Moody’s also noted that European multinational cement producers based in the south of the country with limited geographical spread would be more exposed to local overcapacity in this region. This included HeidelbergCement, Italcementi and CRH.
Vietnam: Prime Minister Nguyen Xuan Phuc has agreed to add the Thaicement Ha Tien plant in Kien Giang to a portfolio of projects to be invested in the 2011-2020 period with a vision to 2030. The cement plant will have a production capacity of 4.5Mt/yr.
Nguyen has assigned the Ministry of Construction and People’s Committee of Kien Giang province to conduct a survey and exploration of limestone and clay deposits and present it to the National Mineral Reserves Councils for approval before granting an investment license. He also requested the relevant agencies to assess the financial capacity of the investor, which must be able to provide at least 20% of the project’s total investment under current regulations.
The Ministry of Construction has forecast that Vietnam's sales of cement and clinker will rise by 4 - 7% year-on-year to up to 77Mt in 2016 despite economic problems.
Indonesia: State-owned cement producer Semen Baturaja has received a US$115m bank loan to build a new cement plant in Sumatra. The plant will have a cement production capacity of 1.85Mt/yr and it will be operational by June 2017. The project is expected to cost US$252m, according to Investor Daily. The plant was originally announced in 2014.
India: Two cement plants in Himachal Pradesh have been accused of evading goods tax worth US$9m, the Comptroller and Auditor General of India (CAG) has said. The Ambuja integrated cement plant at Darlaghat and the JP Cement Himachal grinding plant at Bagha allegedly avoided the tax.
The companies transported 1.7Mt of limestone and 0.21Mt of shale from their quarries between April 2012 and March 2014. Ambuja Cement and JP Cement were liable to pay US$5.1m and US$3.9m respectively. The CAG only became aware of the shortfall in December 2015.
Competition and Markets Authority refers Breedon Aggregates purchase of Hope Construction Materials for further investigation 12 April 2016
UK: The Competition and Markets Authority (CMA) has referred the proposed acquisition of Hope Construction Materials by Breedon Aggregates for further investigation unless Breedon can take action to address competition concerns. An initial study by the CMA found that competition issues might arise in 27 ready-mixed concrete sites, causing potential price rises for end consumers. The study ruled out any competition issues with regards to the companies’ aggregates and cement markets.
“The vast majority of the merger raises no concerns but there are a number of areas where the companies compete strongly with each other for customers and the concern is that the loss of such rivalry could lead to price rises for customers. The businesses may now resolve these concerns or face a detailed investigation,” said Sheldon Mills, CMA Senior Director of Mergers. Unless Breedon takes action an in-depth phase two investigation will be conducted by the CMA.
Breedon responded that the CMA’s response was expected. Subject to agreement with the CMA on appropriate remedies, Breedon expects to complete the acquisition later in 2016. Breedon announced in November 2015 that is was planning to buy Hope Construction Materials for Euro480m.