Global Cement Weekly
Issue: gcw92 / 20 March 2013
Headlines
Somebody at HeidelbergCement is brave. Making an investment in a cement market characterised in 2012 by job losses and carbon taxation takes some nerve. Yet this is exactly what HeidelbergCement has done with the announcement that it plans to take joint control of Cement Australia with Holcim.
So what's in it for Holcim and HeidelbergCement?
Opportunity and foreign supply chains to minimise the carbon tax seem to be the main reasons. With Holcim's 2012 financial performance dragged down by Europe and Africa, its cost reduction programme, the 'Holcim Leadership Journey,' continues into 2013. Australia, as one of the few disappointing spots in the producer's Asia-Pacific region, is an obvious asset to sell. By contrast, HeidelbergCement reported growth in its operating income in 2012.
With regards to supply chains, both Boral and Adelaide Brighton – Cement Australia's competitors in Australia – acted to seize foreign clinker supplies in 2012. As they are multinationals, Holcim and HeidelbergCement have ready-built supply chains. Figures from the Global Cement Directory 2013 show that Holcim holds a cement production capacity of 9.7Mt in Indonesia, 5.75Mt in the Philippines and 0.55Mt in New Zealand. HeidelbergCement hold 16.5Mt in Indonesia. Despite regular annual high performance and regular capacity growth in the cement industry in Indonesia and the Philippines, having the option to export excess clinker to nearby Australia must be enticing.
For Holcim, minimising risk may be a key factor in their decision to reduce their share in Cement Australia. Holcim dodged mentioning the country's cement performance in its 2013 outlook although it did report an overall volume decrease across all its business lines in 2012. Boral expects its sales volumes to remain flat in the first six months of 2013, with pricing challenged by the high Australian Dollar and low sea freight prices. Adelaide Brighton expects its demand for cement to continue coming from South Australia, Western Australia and the Northern Territory. Adelaide Brighton also took pains to point out the carbon tax will hit its 2013 profits by US$6m, nearly 4% of its 2012 profit. Going 50-50 with HeidelbergCement shares the risks for Holcim as well as the profits.
Holcim faces the same dilemma that Lafarge faced in mid-2012 when it sold two cement plants in the US. It needs to sell assets to cut costs and raise capital but it also needs to pick assets to sell that won't boost its competitors too much. The on-going recovery in the US building industry suggests at present that Lafarge may have made a poor choice in North America. Holcim's decision suggests that they aren't expecting a recovery in Australia anytime soon.
Switzerland: Swiss-based multinational building materials producer Holcim has announced that Wolfgang Reitzle will take over as chairman in 2014. To ensure continuity, current chairman Rolf Soiron has been proposed for re-election at the annual general meeting of 17 April 2013. Also at the meeting the board of directors will propose the election of Hanne Birgitte Breinbjerg Sørensen and Anne Wade to the board of directors of Holcim.
Sørensen is currently the CEO of Maersk Tankers based in Copenhagen, one of the world's largest tanker operators. She holds an MSc in Business Economy from the University of Aarhus.
Wade, an investor with extensive experience in capital markets, was the Senior Vice President and Director of an investment management company, Capital International, based in London from 1995 to 2012. She graduated with a BA from Harvard University and holds a Master of Science from the London School of Economics.
In addition the board of directors is proposing the re-election of Beat Hess for a three year term. He is currently deputy chairman of the board of directors. Markus Akermann and Peter Küpfer are no longer available for re-election. Christine Binswanger has resigned from the board effective from the date of the meeting.
Australia: Swiss cement maker Holcim has announced plans to operate Cement Australia as a joint venture (JV), in which both Holcim and Germany's HeidelbergCement AG will hold equal 50% stakes. Holcim will therefore sell 25% of its stake in Cement Australia to HeidelbergCement for an undisclosed amount. The move has already been approved by the Austrian authorities, according to Holcim.
Cement Australia operates two cement plants and a grinding station in the east and southeast of Australia and in Tasmania with a total cement capacity of 4.2Mt/yr. In addition, a new grinding station in Port Kembla with an annual capacity of 1.1Mt/yr is expected to go online in 2013.
Bangladesh: Lafarge Surma Cement Ltd signed an agreement with Madina Cement Industries Ltd at a ceremony organised at the company's headquarters. Under the terms of the deal, Lafarge Surma will supply its high quality clinker to Madina Cement from its integrated plant at Chhatak to produce 'Powercrete.' This will be subject to strict quality controls by employees of Lafarge Surma to ensure world-class quality that Lafarge Surma promises to deliver to its customers.
Furthermore the production process will follow the highest safety standards. Lafarge will shortly launch Powercrete, with the aim of strengthening its market position in Bangladesh.
Lebanon: Holcim has been named by the Environment Ministry as the country's sole disposer of pharmaceutical waste, according to a press release. The ministry issued a permit to the company to burn the drugs in its cement kiln. Holcim is in the process of destroying hundreds of tons of expired pharmaceuticals in the kiln at its factory in Shekka, in the north of Lebanon.
The drugs that are to be burnt were discovered during investigations that uncovered hundreds of tonnes of expired medicinal goods around the country. Officials sought a responsible way to dispose of the material and discovered that they could be used as an alternative fuel for a cement kiln. The high temperatures (~1500°C) in the kiln ensure that organic materials are completely destroyed during combustion.
UK: Building materials producer Hanson, a UK-based part of Germany's HeidelbergCement, has launched a new range of quality concretes designed to reduce the CO2 emissions associated with construction projects. The EcoPlus range contains Hanson Regen, a sustainable substitute for Ordinary Portland Cement (OPC) in concrete. Hanson Regen is a ground granulated blastfurnace slag (GGBS) and can replace up to 70% of the OPC content. Replacing 1t of OPC with 1t of Regen in EcoPlus concrete reduces the embodied CO2 by around 850kg.
Paul Lacey, Hanson's head of sustainability and marketing, said, "EcoPlus is designed to help engineers, specifiers and contractors meet current and future environmental legislation. Our online carbon calculator shows the CO2 savings that can be made by specifying one of our eight standard EcoPlus mixes, which are suitable for foundations, pavements and structural projects. We can also design and supply bespoke mixes."
Using Regen in EcoPlus also improves the durability of structures, particularly where sulphates and chlorides are an issue, and gives a lighter, more aesthetically pleasing colour to the concrete.
Spain: Cementos Molins cut 310 jobs in Spain in 2012. The Spanish cement producer launched a downsizing plan for 165 people and shut down plants in Leon and Malaga. At present Molins needs to refinance a gross debt of Euro167m in 2013. On 15 March 2013 Molins launched a project to cut 56 jobs at its plant in Sant Vicenc dels Horts, a 29.3% reduction in staff numbers at the plant.
India: Production at the South India Cement plant in Malkhed, Sedam Taluk, has recently restarted after a mothball and upgrade period that had lasted several years. N M Hemnur, regional manager of South India Cements, said that the factory's production capacity had been increased to 30,000t/yr but that it would dramatically increase to 1Mt/yr in the future.
India/Germany: ACC has ordered two vertical roller mills from Loesche, in a consortium with KHD, for its Jamul cement plant.
The Holcim subsidiary has ordered a Loesche Mill Type LM 56.3+3 CS equipped with a classifier type LDC to grind clinker. The vertical roller mill will be operated with the power of a 5600kW motor and will have a capacity of 195t/hr. In addition a Loesche vertical roller mill Type LM 43.4 D will be part of the project and is designed to have a capacity of 90t/hr. The gearbox has a capacity of 1300kW.
Loesche's scope of supply for the Jamul project of Holcim will include additional equipment which is delivered in a joint venture by Loesche GmbH, Duesseldorf, as well as by Loesche India Pvt. Ltd.
Nigeria: Minister of Trade and Investment, Olusegun Aganga, has announced plans to create a new tariff on imported bulk cement. The move follows the alleged cement 'glut' surrounding a dispute between importer Ibeto Cement and leading producer Dangote Cement in late 2012. The current duty on imported bulk cement is 10% but no levy is imposed on the commodity.
At a meeting on Nigerian business competitiveness organised by the Nigerian Economic Summit Group (NESG), Aganga said that there was no basis for importing cement clinker since Nigeria has a cement production capacity of 28.6Mt/yr. He also stated that at no time did he issue any import permit for bulk cement in 2012.
Indonesia: PT Indocement Tunggal Prakarsa reportedly reduced its exports by 84.5% in 2012 in order to meet rising domestic demand for cement in Indonesia, according to a company spokesman.
The state-run company cut its exports to 0.1Mt in 2012 from 0.6Mt in 2011, and witnessed a rise of 12.3% in its domestic sales, which reached 17.9Mt in 2012. In 2011 the company sold 15.4Mt of cement at home.
In 2012 the company's cement brand, Tiga Roda, accounted for a major part of its market share with sales of the branded cement rising by 32%. In 2011 the company's brand covered 31.5% of Indocement's entire market share.
The positive performance in the company's cement sales in 2012 was due to Indocement's strategic expansion plans that involved building new cement plants in the country. In addition, the cement producer has signed an initial agreement on equipment provision services, construction and implementation with the Chinese Sinoma Group.
Burundi: Burundi Cement Company (BUCECO) doubled its production and profits in its first two years of operations and is expected to reach capacity later in 2013, according to its founder and owner Tribert Rujugiro Ayabatwa.
Burundi's first and only cement producer, which employs 80 people, began production in January 2011. It produced 70,500t of cement in 2012 compared to 34,500t in 2011. It made a profit of US$22m in 2012 compared to US$10m in 2011.
"Clearly, this country has great demand for high-quality, affordable cement and we are delighted that BUCECO can help meet the need," said Ayabatwa.
BUCECO's cement plant has a production capacity of 100,000t/yr and the producer has plans to double its capacity. Before BUCECO was operational, Burundi imported all of its cement from other East African countries including Uganda, Kenya and Tanzania.
Tanzania: The Tanzania Portland Cement Company (TPCC) has reported a 22% increase in net profit to US$37.9m in 2012 from US$31.2m in 2011.
The company's turnover increased by 15% to US$153m from US$134m. Cost of sales rose due to double-digit inflation rates and energy tariffs rising to US$80m in 2012 compared to tariffs of US$72.5m in 2011. The Tanzanian Shilling remained relatively stable compared with major trading world currencies in 2012, depreciating by less than 1% against the US Dollar.
According to the TPCC statement of audited results, local cement producers were exposed to foreign imports in 2012 as East African Community (EAC) governments decided not to reinstate suspended duties on cement in the common external tariff. The TPCC board has also approved further expansion with a new cement mill in 2013.
Production: China saw cement output increase by 10.8% year-on-year to 237Mt in the first two months of 2013, according to recent data released by the National Bureau of Statistics.
45 companies in Xinjiang Uyghur Autonomous Region produced a total 466,000t of cement and 2.67Mt of clinker in the first two months of 2013, a year- on-year decrease of 9.28% and 37.27% respectively, according to sources quoted by China Business Newswire.
Guangdong Province produced 118Mt of cement in 2012.
Company news: China Shanshui Cement has reported that its net profit fell by 31.8% to US$245m in 2012. Its revenue fell by 4.2% to US$2.6bn in 2012. Total sales volume of cement and clinker rose by 3.5% to 56.9Mt. It attributed the decrease in net profit to the fall of selling prices as a result of decline in demand.
West China Cement has reported that its net profit rose by 44.9% to US$57.9m in 2012. Operating revenue grow by 10.5% to US$566m. The company saw cement sales rise by 22.2% to 14.3Mt.
Fujian Cement has reported a slump in net profit of 76.9% to US$4.63bn in 2012. Operating revenue fell by 13.7% to US$261m. The company expects to earn US$359m in operating revenue in 2013.
Gansu Qilianshan Cement Group sold 15.3Mt of cement and cement clinker in 2012, a year-on-year increase of 29.2%. Currently the company has a cement production capacity of 21.3Mt/yr and it aims to reach a capacity of 45Mt/yr by the end of 2015. Gansu Qilianshan Cement Group Co has announced in its annual report for 2012 that the company saw its net profit drop by 47.8% year-on-year to US$28m in 2012. The company's operating revenue rose by 17.28% year-on-year to US$684m in 2012.
Xinjiang Tianshan Cement Co Ltd has reported that it saw net profit drop by 71.8% year-on-year to US$51.3m in 2012. The company attributed the net profit drop to overcapacity in the cement industry in 2012. Tianshan Cement's operating revenue for 2012 fell by 6.99% year-on-year to US$1.24bn.
Shenzhen-listed cement producer, Sichuan Shuangma Cement Co has announced that it earned a net profit of US$1.37m in 2012, a year-on-year decline of 90%. The company's operating revenue for 2012 decreased by 8.3% on-year to US$301m.
China: China is expected to introduce rules to boost the use of waste treatment as an alternative fuel in cement kilns, a China Securities Journal report has said.
Xu Yongmo, vice chairman of the China Building Materials Federation, said at a forum that the National Development and Reform Commission (NDRC), together with other six ministries, were mulling over policies to boost co-processing in cement industry. The waste used in the cement kilns covers municipal sludge, household garbage and industrial solid waste.
India: A 4% rise in the entry tax on clinker in the Indian state of Assam has riled local cement producers. In the state budget, chief minister Tarun Gogoi had proposed to raise the entry tax on clinker from 2% to 6%, applicable only to small and medium units.
Industry sources quoted by the Telegraph of India said the proposal to raise the entry tax would adversely affect small grinding units in the state. "Given the budget proposal, there is an apprehension that the small units might not be able to bear the additional cost burden and become unviable," said a source.
The total procurement of clinker from outside Assam is estimated at 1.8Mt/yr, of which 24 small units procure 475,000/t. The source added that these units had invested US$74m in the state, employing over 3000 people directly or indirectly.
However, two large cement manufacturers - Cement Manufacturing Company Ltd (Star Cement, CMAL) and Meghalaya Cement Ltd (Topcem, MCL) - have been exempted from the tax. CMCL and MCL have units at Sonapur and Amingaon in Assam respectively. The source added that these large units had invested up to US$92m in the state, creating jobs for about 600 people.
"The government has accorded mega project status to large cement manufacturers, exempting them from entry tax, but imposed the same on small units. This is contrary to its vision of development," said Dilip Goenka, director of KD Cement.
Germany: Dyckerhoff Group has reported that its net profit in 2012 has decreased as expected. Net profit fell by 59% to Euro26.9m in 2012 from Euro65.9m in 2011. The German cement producer explained in a press release that cement volumes fell by 2.5% in Europe and that this couldn't be counterbalanced by volume increases in Russia and the US.
Sales remained stable overall at Euro1.6bn in 2012. Earnings before interest, taxes, depreciation and amortisation fell by 3.1% to Euro284m from Euro293m. Average cement prices decreased in Luxembourg and in Poland. In the Czech Republic cement prices remained almost stable, while they increased in Germany, Ukraine, Russia and the US. About 48% of total Group sales can be ascribed to the division Germany/Western Europe, 39% to Eastern Europe and 13% to the USA.
The group's complete consolidated financial statements will be published on 26 March 2013.
Egypt: The Shura Council's housing committee, in Egypt's upper house of parliament, has suggested imposing mandatory pricing for the country's cement firms. The move follows recent rises in cement price of up to 25%.
"The Egyptian Competition Authority will be tasked with setting the price if the government approves the Shura Council's recommendation," said Atef Yacub, the head of Egypt's Consumer Protection Agency, to Al Ahramonline. He explained that the 'unjustified increase in cement prices' is the main reason behind the suggestion of the mandatory pricing. Yacub dismissed suggestions that energy price rises were solely responsible for the rises in overall cement prices.
In February 2013 the Egyptian government said that the price of fuel oil, which is widely used in energy-intensive local industries such as cement, would be increased by 50% to US$220/t.
Brazil: Haver & Boecker has celebrated the expansion of its headquarters in Brazil with over 200 guests from North and South America, Europe and Asia in attendance. Haver & Boecker Latinoamericana (HBL), the Brazilian subsidiary of the German engineering specialists for the raw material processing industry, is based in Monte Mor near Sao Paulo.
The expansion of HBL's building represents part of the investments made by the company to meet the growing demand registered in the Brazilian and Latin American market. Sales in Latin America have more than doubled since 2008. The growing share of engineering services required an expansion of office space to more than 1500m2.
Haver & Boecker also announced at the event held on 1 March 2013 that they have created Haver & Boecker Holding Americas to support technical, financial and communications for all branches in Latin America and North America. Adrián Gamburgo, who was previously the director of HBL, will lead the holding company. Rodrigo Campos becomes the managing director for the branch in Brazil.
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