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2021 roundup for the cement multinationals
02 March 2022Cement markets have mostly recovered following the shock emergence of coronavirus in 2020. Most of the producers that have released their results so far for 2021 have reported strong boosts to sales revenue and racing earnings as something more like normality resumed. The following roundup covers a selective group of cement companies around the world.
The recovery in 2021 has made the outliers in the companies covered here noteworthy. UltraTech Cement, Semen Indonesia and Dangote Cement are all large regional companies with dominant positions domestically and varying degrees of international spread. As can be seen in Graph 1, UltraTech Cement and Dangote Cement both reported very large increases in sales, over 20% year-on-year. By contrast, Semen Indonesia sales fell very slightly.
Graph 1: Sales revenue from selected cement producers in 2020 and 2021. Source: Company reports. Note: Figures calculated for UltraTech Cement.
One reason for UltraTech Cement and Dangote Cement’s success can be seen in Graph 2 (below). Both companies managed to sell more cement in 2021. Semen Indonesia did not due to Indonesia’s production overcapacity and new competitors. It also blamed a significant rises in coal prices for a 9% drop in its earnings before interest, taxation, depreciation and amortisation (EBITDA).
UltraTech Cement has been wary of successive waves of coronavirus throughout its 2022 financial year, but generally the Indian regional markets have recovered and government-backed rural housing and infrastructure spending have supported growth. It did note rising coal prices earlier in the year, but these were reported to have somewhat softened during the quarter to 31 December 2021. It is worth noting that the ongoing war in Ukraine is affecting energy markets but more on this at the end of this article. Dangote Cement’s performance was slowed somewhat by the start of coronavirus but it has since resumed its turbo-charged trajectory with volumes, revenue and earnings growth all above 10% in 2021. Mostly this performance is supported by the Nigerian market but the company is doing well internationally too.
Graph 2: Cement sales volumes from selected cement producers in 2019 and 2020. Source: Company reports. Note: Figures calculated for UltraTech Cement.
Holcim and HeidelbergCement’s increase in sales revenue in 2021 are actually fairly similar on a like-for-like basis, both with around 10%. The former’s sales volumes were up across cement, ready-mixed concrete and aggregates in each of its regions around the world, as were sales revenue. Holcim’s big move in 2021 has been the expansion of its Solutions & Products segment with the acquisition of Firestone in April 2021. Now this has continued with the completion of the Malarkey Roofing Products purchase on 1 March 2022, a few days after it released its 2021 results. Chief executive officer Jan Jenisch described the move towards lightweight building materials as generating, “further double-digit growth engines for the company.” As an aside, it was fascinating to see CRH leave the building envelope business this week, mostly based in the US, with an agreement to sell up its division for US$3.8bn to private equity. The business CRH is divesting sells architectural glass, storefront systems, architectural glazing systems and related hardware to customers primarily in North America. CRH is clearly pursuing a different business strategy to Holcim.
HeidelbergCement has also reported a strong year in 2021 albeit without the Holcim razzle-dazzle of barging into new market areas. It noted significant increases in energy prices and pandemic‐related lockdowns in some key markets in Asia. It described a very slight cement sales volume decline in Africa and the Middle East and a drop in earnings in Asia. Its trump cards are its carbon capture projects coming down the pipeline. It’s keen to remind investors about this with the unspoken implication that it might save the company money in the future when carbon taxes bite further.
Both Cemex and Buzzi Unicem followed the growth pattern seen in sales and earnings by the other larger multinational producers covered above. Central and South American markets really took off for Cemex in 2021, starting with its home market in Mexico. However, growth was present, although slower, in both its largest markets in the US and its Europe, Middle East, Africa and Asia region. Notably cement volumes in the Philippines grew by 7% and that’s even with the devastation caused by typhoons at the end of the year taken into account. Similarly, Buzzi Unicem performed well in 2021 due to growth in Italy, the US and Eastern Europe compensating for a small sales decline in Germany. As mentioned in Update on Ukraine, February 2022 Buzzi Unicem has particular exposure to the war in Ukraine as it operates two cement plants in Ukraine and two units in Russia but this is a problem for the 2022 financial year.
To finish on Ukraine, first and foremost, a human tragedy is unfolding. Yet the war also presents many economic challenges to financial markets through sanctions and counter-actions. A recession in Russia looks likely as do energy price surges in the US and Europe leading to further inflation and, perhaps, recessions too. All this potentially lies ahead. For now, the dilemma for US and European-based cement companies and suppliers with operations in Russia is reputational. Should they continue to do business in Russia as public opinion hardens and companies like BP, Shell, Equinor, HSBC and AerCap head for the exit? The Russian government has blocked foreign companies and individuals from selling shares locally but pressure looks set to intensify for such companies to do something.
Update on Ukraine, February 2022
23 February 2022International tensions reached a new high this week with Russia’s formal recognition of the breakaway Donetsk and Lugansk regions in eastern Ukraine and its decision to deploy troops accordingly. However, what of the local cement industry in Ukraine going into the current crisis?
Ukrcement, the Ukrainian Cement Association, says that its members reported a record 11Mt of cement production in 2021. Clinker production totalled 8.11Mt during the same period. The cement figure is close to Ukrcement’s forecast in the autumn of 2021 of 11.5Mt, a rise of 17% year-on-year from 9Mt in 2020. At that time association head Pavlo Kachur added that the local cement industry operated at 66% capacity utilisation in the first nine months of 2021.
The big industry story locally was the start of tariffs on cement imports from Turkey that was announced in September 2021. After much complaining by local producers and an investigation the year before in 2020 the Interdepartmental Commission on International Trade (ICIT) introduced anti-dumping duties of 33 - 51% on cement imports from Turkey for five years. Other than this the usual energy preoccupations have been present in Ukraine. In an interview with Interfax in November 2021, Pavlo Kachur expressed alarm that the price of coal had tripled from the start of 2021 to August 2021. At the same time he explained that the biggest driver of cement consumption was infrastructure projects.
CRH, the largest producer locally, rebranded its subsidiary as Cemark in November 2021 with the intention to start shipping cement bags with the new marking from January 2022. It operates three integrated plants at Mykolaiv, Podilsky and Odessa. It reported that its local operating profit grew year-on-year in 2020, despite a “challenging pricing environment” as cost savings initiatives and lower fuel and logistics costs resulted in improved performance. In September 2021 CRH said that sales were up due to growing cement sales volumes resulting from market demand. Although once again it complained about competitive pricing forcing it to lower its prices. Despite this though lower maintenance costs and cost controls had boosted its operating profit.
Buzzi Unicem runs two integrated cement plants in Ukraine, Volyn and Yugcement, as well as terminals at Kiev and Odessa through its Dyckerhoff Ukraine subsidiary. In 2021 it noted recovery in the construction sector, helped by government stimulus and the introduction of tariffs on imports from Turkey. It said that prices fell in the first half of the year before recovering in the second half. Ready-mixed concrete output showed more growth. Dyckerhoff Ukraine’s net sales rose by 9.4% year-on-year to Euro127m in 2021 even despite negative currency exchange effects.
As for the other producers, NEQSOL Holding Ukraine filed an application to the Antimonopoly Committee of Ukraine (AMCU) in October 2021 to acquire a stake in Ivano-Frankivskcement. Azerbaijan-based NEQSOL Holding also operates the Norm Cement plant near Baku in Azerbaijan. HeidelbergCement used to operate in Ukraine, including the Amvrosiyivka Plant in the contested part of Donetsk region, but it sold up in 2019 to local investors. Its two former integrated plants now operate under the Kryvyi Rig Cement brand. Finally, Russia-based Eurocement runs two plants in Ukraine, at Balakleya in Kharkiv region and Kramatorsk in Donetsk region, under its Balcem subsidiary, which formed in 2019. However the status of the second plant is currently uncertain. Balcem said that the Balakleya plant resumed full cycle production in March 2021 when it restarted kiln two. Kiln one was restarted in June 2021 after a down period since 2008. The plant currently has a production capacity of around 1Mt/yr.
Ukrcement’s Pavlo Kachur said that the cement market in Ukraine was experiencing a positive period in November 2021. Whether this continues is very much in the balance given events in the east of the country. The wider implications for cement producers in the rest of Europe and Russia are the fallout from the economic warfare between both sides. A number of countries have started to react to Russia’s actions with the US, European Union, UK, Japan and Australia announcing economic sanctions and Germany halting approval of the Nord Stream 2 gas pipeline. However, Russia supplies a significant share of Europe’s gas supply. All of this could disrupt energy supplies and force input costs up. This has already been reflected in higher oil prices.
Meanwhile, one aspect of the current situation to watch is how multinational cement producers with a presence in Russia will cope. Moving money in or out of the country is likely to become harder. HeidelbergCement told Reuters this week that it did not expect any major impact on its Russian operations, even if the conflict escalated. Its three cement plants supply local markets and do not export outside of Russia, it added. Other companies straddling the potential sanctions divide include Holcim, Buzzi Unicem and Eurocement.
The crisis continues.
Buzzi Unicem increases sales in 2021
10 February 2022Italy: Buzzi Unicem’s full-year consolidated sales rose by 8.9% in 2021 to Euro3.45bn. The group also increased its cement sales, by 6.7% to 31.2Mt.
Buzzi Unicem’s net financial position for the year was Euro231m, compared to a loss of Euro242m in 2020.
Buzzi Unicem and Italgas to develop power to gas plants
19 January 2022Italy: Buzzi Unicem has signed an agreement with Italgas to collaborate on the development of power to gas plants for implementation in combination with carbon capture systems. Their research will assess the possibility of producing and using synthetic methane obtained from the combination of green hydrogen from power to gas plants with captured CO2.
Buzzi Unicem’s group technical director at Luigi Buzzi said "We are very interested in the opportunity to collaborate with Italgas as an experienced partner to develop a project that is fully integrated into our industrial investment plan aimed at identifying technologies for capturing and reusing the CO2 released by our plants, in line with the roadmaps defined by industry associations.” He added “Our aim is to responsibly contribute to containing climate change by developing CO2 capture technologies and identifying the best solutions for its reuse. We are currently experimenting with calcium looping technology for capturing the carbon dioxide released by the production process at our plant in Vernasca, Piacenza. Thanks to the EU Horizon 2020 Cleanker project, it will be possible to assess the technical and economic sustainability of this technology and estimate the changes to the plant and the investments required to adopt this process in existing cement plants.”
Buzzi Unicem increases nine-month sales and cement volumes in 2021
08 November 2021Italy: Buzzi Unicem’s consolidated sales rose by 5.6% year-on-year to US$2.54bn in the first nine months of 2021 from US$2.41bn in the first nine months of 2020. It recorded consolidated cement sales of 23.4Mt, up by 7.5% from 21.7Mt in the corresponding period of 2020. Sales growth in Eastern Europe - especially the Czech Republic and Poland - and the US offset a partial slowdown in Italy, particularly in the third quarter of the year.
The group expects global construction activity to generally remain level into the fourth quarter of 2021. It forecast “favourable” volume and price effects in its full-year results for 2021. It nonetheless noted “growing concern” at rising energy, fuels, logistics, raw materials and services costs in various regions. It forecast group recurring earnings before interest, taxation, depreciation and amortisation (EBITDA) not in excess of 2020 levels.
SLK orders 100 railway wagons
18 August 2021Russia: SLK Cement has ordered 100 gondola railway wagons to improve its logistics operations over the busy summer sales period. It increases the company’s fleet of railway wagons - including hoppers, gondolas and dump cars – to 570 units. Yevgeny Grishchenko, the Logistics Director of SLK Cement, said that the expanded railway fleet would reduce delays in deliveries and reduce transport costs.
Half-year cement producers update
04 August 2021The story so far for the first half of 2021 has been one of recovery following the coronavirus-related lockdowns in the same period in 2020. Market restrictions ended, production curbs were rescinded and revenue and sales volumes grew.
Many of the larger multinational cement producers have released their financial results and sales revenues show a gap-tooth pattern for the first halves of 2019, 2020 and 2021. Sales for LafargeHolcim, HeidelbergCement and Cemex all took a knock of around 10% from 2019 to 2020. Generally, sales have increased from 2019 to 2021 for the more regional-based companies such as Cemex or Buzzi Unicem. The larger multinational producers like Holcim and HeidelbergCement bounced back from the dip in 2020 but comparisons with the first half of 2019 are less favourable. Like-for-like comparisons between 2019 and 2021 are not available but both companies have been refocusing their portfolios in recent years making it hard to gain a sense of exactly what’s going on. These trends are still ongoing with more speculation in the press this week about which companies are bidding for LafargeHolcim Brasil for example. However, both Holcim and HeidelbergCement did report record earnings or operating incomes in the first half of 2021 suggesting that all the cost cutting in 2020 has paid off. The general market picture was continuing demand in North America, recovery in Europe and Latin America, growth in Africa and the Middle East and growth in Asia despite renewed coronavirus-related uncertainty.
Figure 1: Sales of selected major multinational cement producers in first half of 2021. Source: Company financial reports.
Figure 2: Cement sales volumes of selected major multinational cement producers in first half of 2021. Source: Company financial reports.
Cemex and Buzzi Unicem benefitted from their strong market presences in the Americas and Europe. Cemex was also helped by a particular recovery in Mexico and Latin America. The latter region benefited from the relaxation of strong lockdown measures in many countries implemented in the first half of 2020. Cemex’s investors update event at the end of June 2021 summed up its situation with earnings growth and leverage levels about to hit desired targets, selective investments and divestments on the way, new production capacity round the corner and sustainability goals turning up earlier than expected.
In Africa, Dangote Cement witnessed a switch from growth outside of Nigeria to a spurt of domestic demand for cement from mid-2020 onwards. This temporarily caused the company problems earlier in 2021 when it was forced to suspend its newly started export operations to Cameroon from its Onne and Apapa terminals. The reactivation of its previously mothballed 4.5Mt/yr Gboko plant in Benue State and an upcoming 3Mt/yr plant at Okpella in Edo state seem to have soothed the demand rush for now. Clinker exports have been resumed.
India meanwhile faced a second wave of its coronavirus epidemic in the spring of 2021. UltraTech Cement acknowledged this in its latest financial results, for the quarter to 30 June 2021. It reported that this had ‘marginally’ impacted cement demand but that the company was still monitoring the impact of the health situation upon its operations. Despite this, revenue and sales volumes of cement still grew significantly year-on-year in both the quarter and the first half of 2021. UltraTech Cement’s wariness about the health situation chimed with recent comments by Roongrote Rangsiyopash, the head of Siam Cement Group (SCG), who told local press in Thailand that current coronavirus restrictions in the country had reduced cement demand by 20%.
Finally, Semen Indonesia reported growing revenue, sales volumes of cement and earnings in the first half of 2021. Its financial results had little to say about the local coronavirus situation other than that it had reduced domestic demand growth and worsened production overcapacity. National cement production reached 115Mt in 2020 but local demand was only 62.7Mt. Unsurprisingly, exports reached their highest level ever, at 9.3Mt, in 2020.
As ever this is a very selective view of cement producer financial results. Larger multinationals like CRH or Votorantim are yet to release their results and likewise for the big Chinese producers. Recovery and growth seems to be the likely outcome for most of them though. However, the effects of recent coronavirus outbreaks in Asia have shown up in some of the results covered above. This suggests that the second half of 2021 for building materials manufacturers may be characterised by which countries are better able to suppress coronavirus either through mass vaccination or other public health measures. Buzzi Unicem summed it up it in its half year results: “The rapid progress of vaccination campaigns was matched by a clear recovery in economic activity.”
Buzzi Unicem reports sales growth as Italian market recovers
04 August 2021Italy: Buzzi Unicem’s net sales grew by 5.8% year-on-year to Euro1.61bn in the first half of 2021 from Euro1.52bn in the same period of 2020. Its sales volumes of cement and clinker rose by 10.9% to 14.8Mt from 13.4Mt. Earnings before interest, taxation, depreciation and amortisation (EBITDA) increased by 12.3% to Euro352m from Euro314m. The group reported cement sales volumes growth in all territories with the exception of Poland, and Germany to a lesser extent. It also noted growth in ready-mixed concrete sales volumes of 7% to 5.8Mm3 with development in Italy, Poland and Ukraine more than compensating for ‘unfavourable’ changes in the US, Germany and the Czech Republic.
US: The death of a maintenance worker has been reported at Buzzi Unicem USA’s Hercules Cement at Stockertown in Pennsylvania. The cause of the fatality has not been released pending an investigation by state authorities and the Mine Safety and Health Administration, according to the Express Times newspaper. The incident occurred on 26 July 2021.
SLK Cement to open new terminal at Korkino plant
21 July 2021Russia: SLK Cement is preparing to open a new terminal at its integrated plant in Korkino plant in Chelyabinsk Oblast. The unit will have a cement capacity of 250t/hr for despatch by railway and road. The subsidiary of Italy-based Buzzi Unicem has invested around US$3.4m in the project.