Global Cement Weekly
Issue: gcw73 / 31 October 2012
Headlines
However bad the multinational cement financial reports get as they tighten their operations remember that it could be worse. For example, they could face the challenges the East African Portland Cement Company (EAPCC) has confronted over the last year. Reuters broke the news this week that EAPCC had widened its loss to US$9.96m due to poor sales, a major plant breakdown and labour unrest. All of this occurred in a construction economy demanding ever more cement.
EAPCC has seemed surrounded by controversy over the last year starting with a conflict of interest issue raised over a change in clinker supply in December 2011. This then led to the removal of the company's directors by the Kenyan government, which in turn led to a strike. In the chaos a worker was shot and wounded. On top of that the report reveals that there was a 'major' breakdown in one of the plant's kilns. It's a wonder that EAPCC didn't make a greater loss in the 2011-2012 year.
Demand for cement in Kenya and in the other countries in the east African region is growing. Data from the Kenya National Bureau of Statistics in December 2011 showed that cement consumption in Kenya rose by 12% in the nine months to September 2011. As reported last week in GCW72, ARM Cement (formerly known as Athi River Mining Ltd) reported a net profit of US$9.71m for the first nine months of 2012. This marks a 328% growth in profit compared to the same period in 2011 when it made US$2.26m. Meanwhile this week it was announced that Ethiopia is about to open its second cement plant in the town of Dire Dawa. More plants are on the way. Over in Tanzania, the Tanzania Investment Centre (TIC) announced that the country's cement deficit surpassed 1Mt since 2011.
As has happened elsewhere in Africa, notably in Nigeria and South Africa, local producers are pushing hard to restrict foreign imports as they grow their own capacity. In September 2012 the East Africa Cement Producers Association (EACPA) made warnings on the issue. The chairman of EACPA at the time was none other than the managing director of the EAPCC. In addition potential investors should take note that Kenya will hold its next general election in March 2013. Over 1000 people died in the protests following the 2007 election as well as the displacement of over 500,000 people.
Given this growth in protectionism, international producers who want to expand are being forced to seek riskier territories. Pakistan's Lucky Cement, a major importer of cement to Africa, is doing exactly this. It announced this week that it is entering into joint ventures in plants in DR Congo and Iraq. However these projects perform, Lucky Cement must be praying that they don't end up looking like the last year that EAPCC has endured.
Trinidad: Trinidad Cement, a subsidiary of TCL Group, has appointed Alejando Alberto Ramirez as a director. The appointment was effective from 12 October 2012. Ramirez succeeds Luis Miguel Cantu Pinto who retired from the board of directors on 5 October 2012. Ramirez was elected on 12 October 2012 at TCL's annual meeting to fill the vacancy.
Philippines: Holcim Philippines has plans to invest US$350m to US$450m on building a new 2Mt/yr cement plant due to increased demand and sales in the third quarter. This quarter is normally a weak season for the construction industry because of monsoon rains.
Holcim Philippines' chief operating officer Roland van Wijnen said that cement demand remained robust on account of sustained government infrastructure spending and steady rollout of residential and commercial projects. The Cement Manufacturers Association of the Philippines (CEMAP) has reported a growth rate of 20% since October 2011.
Holcim Philippines reported a 22.5% growth in its net income to US$61.5m in the first nine months of 2012 from US$50.3m in the same period of 2011. Revenues for the past nine months reached US$491m, an increase of 22.5% year on year. However, third quarter earnings in 2012 declined to US$12.5m from US$15.2m in 2011. The company attributed this to having to import clinker to augment production given that several of its facilities were under preventive maintenance.
"The challenge for us is to meet increasing demand over the longer term. We have begun reactivating our idle facilities, beginning with our terminal in Calaca, Batangas in 2011. Our grinding plant in Mabini will be operational by the third quarter of 2011," said van Wijnen. Holcim Philippines is now preparing a proposal for a new cement plant to be submitted for board approval in the first half of 2013. If built this will boost the firm's cement capacity to about 9.5Mt/yr with a completion date of 2016.
Kenya: East African Portland Cement (EAPCC) has reported a loss of US$9.96m for the year ending 30 June 2012, compared to a loss of US$1.40m in 2011. EAPCC saw its revenue drop by 15% to US$101m in the same period. The company's takings were affected by slow sales, a major plant breakdown and labour unrest.
The company said that production was hurt by labour unrest that caused operations to be suspended in January 2012 and a major breakdown of one of its kilns that hit production. Other factors included a weakening Kenyan Shilling, and rising costs for power and raw materials. In addition slow sales affected revenue.
Spain: Spanish cement company Cementos Molins has reported a net profit of Euro31m for the nine months to September 2012, an increase of 85% compared to the same period in 2011. In a regulatory filing the company attributed the increase to its international operations.
The foreign units of the company recorded a net profit of a total Euro55m while the domestic subsidiaries registered a combined loss of Euro24m. Cementos Molins' turnover was Euro688m from January to September 2012, a rise of 12.6% year-on-year.
Sales abroad grew by 23% to Euro550.4m while domestic sales fell by 15.7% to Euro138m due to a significant reduction in demand. Earnings before interest, tax, depreciation and amortisation (EBITDA) rose by 43% in Euro159m. The company's net debt was Euro349m at the end of September 2012, a reduction of Euro49m from December 2011.
India: India Cements has started gathering documentation for a 3Mt/yr expansion at two of its plants in Tamil Nadu. The company's next step is to secure clearance for these projects.
Brownfield expansions are being planned for Dalavoi, in Ariyalur district of Tamil Nadu, where the company plans to add a new line that will add over 2.55Mt/yr to the existing 2.16Mt/yr cement capacity. This will increase the total capacity at the plant to 4.71Mt/yr. A 40MW captive power plant will also be set up to supply electricity for the upgrade. At Sankaridurg the company plans to double the capacity of its 0.7Mt/yr plant.
If approved, the upgrades will increase India Cements' capacity to 15.5Mt/yr in its eight plants in Tamil Nadu, Andhra Pradesh and Rajasthan.
Mexico: Cement producer Grupo Cementos de Chihuahua has reported sales of US$197m for the third quarter of 2012, a rise of 13.3% year-on-year. Increased sales were driven by a growth in sales volumes in the US, higher aggregates and concrete block sales in Mexico and the effect of the Peso depreciation against the US dollar, according to the company's results report.
In Mexico sales were US$51m, a decrease year-on-year due to a reduction of consumption in the public infrastructure sector and the mining industry. Earnings before interest, taxation, depreciation and amortisation (EBITDA) were US$38.4m, an increase of 0.5% year-on-year. Net consolidated income for the third quarter of 2012 was US$11.7m, compared with a loss of US$3.36m in the same period in 2011.
Tajikistan: New cement producer Suhgd Cement has opened a 100,000t/yr cement plant in northern Tajikistan. Tajik Energy and Industry Minister Gul Sherali attended the official opening ceremony on 20 October 2012.
The company intends its capacity to grow to 1Mt/yr, making it the biggest cement producer in the country. Equipment for the plant was sourced from Chinese suppliers at a cost of US$1.8m. More than 140 people work at the plant, which will rise to 300 when the capacity increases.
Tajikcement is currently the biggest cement producer in Tajikistan with a capacity of 1.1Mt/yr. However the country continues to import building materials to satisfy demand. In September 2011 the joint company Juaxin Gayur Cement JV, between Tajik Gayur and Chinese Juaxin Central Asia Investment, started construction of a 1Mt/yr plant in the Javan region costing US$100m. This plant is expected to be launched in autumn 2013.
Israel: The Israeli Interior Ministry has approved the construction of a waste recycling plant with a capacity of 1500t/day next to the former Hiriya rubbish dump, southeast of Tel Aviv.
The project is a joint venture between the regional Dan Municipal Sanitation Association and Nesher Cement. Nesher Cement plans to use refuse derived fuels at its Ramle plant, all other materials will be recycled. The Environment and Finance ministries have also announced tenders to build another similar facility in the area.
Australia: Holcim Australia, a subsidiary of Switzerland-based building materials company Holcim, plans to lay off 150 staff and mothball up to 30 facilities as part of a review of its Australian operations. The majority of the closures and lay offs will affect Holcim's Australia's concrete business.
The company expects to mothball or close about 10% of its sites when it completes an organisational review in the next week. Holcim Australia, previously know as Readymix, employs about 3200 staff and another 1800 contractors and casual workers.
"With softer activity and outlook in some of our key markets, we must also adjust our business to suit," said Holcim Australia chief executive Mark Campbell. He added that since the company had been exposed to both mining and non-mining sectors across Australia its had been able to ride the two-speed economy better than some of its competitors.
Holcim Australia's parent company launched a cost-cutting drive in May 2012 called the 'Holcim Leadership Journey' programme designed to save Euro1.25bn by 2014.
Pakistan: Lucky Cement Limited has declared a profit after tax of US$21.0m for the quarter ending 30 September 2012, 33.8% higher than the same quarter of 2011 when it made a net profit of US$15.7m.
Gross profit for Lucky Cement, which is Pakistan's largest cement manufacturer, increased by a similar margin. This rose by 32.9% year-on-year as its net sales revenue improved by 18.1% to US$92.4m. Higher sales volume in the domestic markets, in line with the company's strategy gave rise to the increased profit.
Lucky's local sales volume during the quarter grew by 5%, rising to 0.86Mt compared to 0.82Mt sold during the 2011 quarter. However, its export sales volume declined by 9% from 0.62Mt to 0.56Mt. This was mainly due to intentional focus on the domestic markets, which increased the overall profitability of the company. The company also managed to decrease its financing cost by 76% compared to 2011.
Lucky has also reported that it had successfully sourced uninterrupted electricity from Hesco since 1 July 2012, averaging a supply of over 20MW/hr during the quarter. It said that this new source of electricity had helped to reduce Pakistan's power generation problems.
The company also reported progress with respect to its joint venture investment in a new cement plant in the Democratic Republic of Congo, where plant and machinery has been negotiated and finalised with a renowned European supplier, and on its joint venture investment for a grinding facility in Iraq, where the teams for the project have been mobilised at the site.
Oman: Oman Cement is in the process of increasing its cement grinding capacity by installing an additional 15t/hr cement mill. The tender process has been initiated for building the plant, according to the company's chairman Dr Abdullah Abbas Ahmed.
Oman Cement is also planning to improve the pollution control equipment on its line 2 to control dust emission levels. It is in the process of identifying a consultant for this project.
Meanwhile, the company said that its net profit increased by 32.5% to US$30.4m for the first nine months of 2012, from US$25.2m for the same period of 2011. Its sales revenue also increased, to US$108.5m, compared to US$94.2m during the period.
The company has achieved sales of 1.69Mt for the first nine months of 2012 compared to 1.40Mt for the same period of 2011.
Italy: Italcementi has announced that it will invest Euro150m in order to revamp its cement plant in Rezzato, which was built in 1964. Italcementi has stated that it wants to turn the plant into the most modern and ecological cement plant in Europe, with work set to start in November 2012. It said that the opening of the adapted plant would be scheduled for some time towards the end of 2014.
Italcementi's CEO Carlo Pesenti said that the restructuring would lead to an improvement in the environmental and economic sustainability of the plant, as well as cutting production costs by 23% and reducing specific consumption of raw materials by 8%.
About Global Cement Weekly
Global Cement Weekly is the weekly cement industry email newsletter from Global Cement.
To sign up for Global Cement Weekly follow this registration link to PRoIDS Online.
If readers have any news or personnel changes they would like to report in Global Cement Weekly email us at editorial@propubs.com.