Displaying items by tag: Cemex
US: Kosmos Cement, a subsidiary of Cemex, has pleaded guilty to violating workplace safety standards. It is liable to be fined to up to US$400,000 towards the death of a worker at its Louisville cement plant in Kentucky in 2014. Michael Egan, Cemex's executive vice president and general counsel, entered the guilty plea for the company. Contract employee Felipe Mata Vizcaya fell to his death after opening an elevator door when the elevator car wasn't there, according to the Courier-Journal.
Cemex is required to pay US$200,000 immediately and the balance if it doesn't make required repairs within three years. It has also pledged to design, operate and test all elevators at the site to meet national safety standards and to install additional safety features.
In a statement, US Attorney John Kuhn called the matter "one of the worst cases of negligence on the part of a company." The company was accused of violating the Mine Safety and Health Act, and the case was investigated by the US Labor Department's Mine Safety & Health Administration.
Mexico: Cemex’s net sales have risen by 3% year-on-year to US$3.2bn in the first quarter of 2016 when adjusted for ongoing operations and for currency fluctuations. Its adjusted gross profit rose by 10% to US$1bn and its operating earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 3% to US$583m before adjustment. The Mexico-based cement producer attributed the rising sales to higher prices and sales volumes increases in selected territories.
“We continue to see favourable results from the implementation of our value-before-volume strategy, with increases in sequential pricing in our three core products,” said Cemex chief executive Fernando A Gonzalez.
The company’s overall cement sales volumes rose slightly to 15.6Mt from 15.5Mt. By region, cement volumes rose by 8% in the US, by 3% in South American, Central America and the Caribbean and by 10% in Asia, Middle East and Africa. Volumes remained static in Europe and fell by 13% in Mexico.
Europe: The Low Emissions Intensity Lime And Cement (LEILAC) consortium has secured Euro12m in funding over five years from the European Commission Horizon 2020 Grant programme to test Calix’s direct separation process to capture CO2 emissions from cement and lime production. The consortium comprises HeidelbergCement, Cemex, Tarmac, Lhoist, Amec Foster Wheeler, ECN, Imperial College, PSE, Quantis and the Carbon Trust. The consortium will also contribute a further Euro9m towards the project.
During the first three years, the project will focus on finalising the design of the demonstration plant, to be constructed at the HeidelbergCement plant in Lixhe, Belgium once the necessary permits have been secured. The high temperature Direct Separation Calciner pilot unit will then undergo two years of testing in a standard operational environment, at a feed rate capacity of 240t/day of cement raw meal and 200t/day ground limestone respectively, on a continuous basis for several weeks.
Fundamental research on the process demands and performance will be carried out to demonstrate that the technology works sufficiently and robustly enough to be scaled up to full operational use. The project results will be shared widely with industry at key intervals during the testing.
Calix’s direct separation technology is achieved by re-engineering the process flows used in the best available technology for lime and cement calcination. Carbonate calcination occurs by indirect counterflow heating, and consequentially the flue gases are not mixed with the CO2 emitted from the carbonate minerals. This technology is already operating at a commercial scale for magnesite calcination. It does not require any separation technologies, new materials or processes. The technology is complementary with other carbon capture methods already developed in the power and cement sector, such as oxyfuel, and can make use of alternative fuels.
LafargeHolcim was the last of the major non-Chinese cement producers to report its annual financial results when it did so on 17 March 2016. With the full set in, as it were, Global Cement will compare the progress of the world’s largest multinational cement companies in 2015.
The first thing to note is that whilst cement production growth rates have hardly been inspiring in 2015, growth or holding the status quo is occurring. The emerging markets have faced challenges in 2015 following the prolonged depression in the construction sector in Europe since 2008. As Wolfgang Reitzle and Eric Olsen put it in the forward of the 2015 LafargeHolcim annual report, “…our share price has been significantly affected, mainly by the volatility associated with emerging markets.”
Figure 1: Cement & clinker sales volumes from five major cement producers, 2011 – 2015. Source: Annual reports. Note: Sales volumes are calculated for LafargeHolcim for 2011 – 2013.
Figure 1 shows cement and clinker sales volumes for the major cement producers from 2011 to 2015. This graph isn’t quite as depressing as it looks because it shows a drop in cement production for the major producers and it has started to show remedial action being taken. Where growth isn’t happening in a market, pressure builds to find it through mergers and acquisitions.
So, Lafarge and Holcim merged and the decision may be now starting to show promise with its sales volumes remaining static year-on-year in 2015 rather than falling. It should be noted here that the drop from 2013 to 2014 is due to the divestments Lafarge and Holcim both made before the merger to satisfy competition bodies and because the sales volumes were calculated here from the separate Lafarge and Holcim annual reports.
Even more so, HeidelbergCement’s plan to buy Italcementi may be a good idea here. Already it has been growing its cement production each year since 2013. The acquisition could potentially speed up the growth considerably. Elsewhere, both Cemex and Buzzi Unicem are showing signs of picking up cement production since 2013.
Figure 2: Earnings before interest and taxation (EBIT) for five major cement producers, 2011 – 2015. Source: Annual reports. Note: Cemex and LafargeHolcim figures have been converted from US Dollars and Swiss Francs respectively at current exchange rates.
Figure 2 shows one indicator of profitability for the major cement producers by comparing their earnings before interest and taxation (EBIT). This is less useful than cement sales volumes because it covers the producers’ entire businesses including aggregate and concrete sectors. However, it does show the problems Italcementi has faced and it offers one reason why the company might have allowed itself to be taken over. Note also how Cemex has continued to increase its EBIT despite its high levels of debts.
Returning to the LafargeHolcim comments about volatile emerging markets, most of the producers reported tough trading in their Asian territories in 2015. The exceptions were Cemex with its reliance on the Philippines booming market and Buzzi with its limited assets in the region. However, Cemex suffered in its own major emerging market in South and Central America. Despite these setbacks though all of the producers featured here benefitted from growing sales volumes in North America, particularly in the US.
Both LafargeHolcim and Cemex announced divestments promptly following their results announcements suggesting that they feel they need to do more to regain the profitability they once had. LafargeHolcim plans to sell assets in South Korea and Saudi Arabia. Cemex has agreed to sell cement plants in Bangladesh and Thailand and a minority stake in its business in the Philippines. This last decision may suggest how serious Cemex is about tackling its debts considering the strong market in that country at present. HeidelbergCement is due to complete its acquisition of Italcementi in the second half of 2016.
Finally, the major changes to the multinational cement producers will continue in 2016 as CRH asserts itself following its major acquisitions from Lafarge and Holcim in 2015. Already its Europe Heavyside Divison reported sales revenue of Euro3.61bn in 2015 surpassing that of Buzzi Unicem. Other international producers such as Eurocement, InterCement and Votorantim were also poised for continuing growing but poor domestic markets (Russia and Brazil) may cripple their ambitions in the short term.
Cemex has taken action towards its debts over the course of the last week. First, it announced that it had amended its credit agreements in order to delay the looming effects of consolidated financial leverage and coverage ratio limits by one year to March 2017 with other similar deadlines also delayed. Then it announced the pricing of US$1bn of Senior Secured Notes due in 2026, a form of secured borrowing. This was followed by confirmation of asset sales in Bangladesh and Thailand. Finally, it announced that it was seeking regulatory permission to sell a minority stake in its subsidiary in the Philippines.
This column has discussed the on-going financial travails at Cemex a few times, notably recently when the group released its fourth quarter results for 2015 and in the wake of HeidelbergCement’s announcement to buy Italcementi. Basically, it all comes down to debt, as the following graph shows.
Figure 1 - Cemex assets, debt and equity, 2006 - 2015
Cemex took on large amounts of debt following its acquisition of Rinker in 2007. Since then the value of its assets have been falling faster than it has been able to reduce its debts. However, its equity (assets minus debts) is looking like it might dip below its debts in 2016. Hence, action needs to be taken. Cemex appears to have attempted to do this over the last week. Will it be enough?
The credit amendment was probably the most pressing issue for the Cemex management given that the terms have been reliant on maintaining a leverage ratio (debt divided by assets) below a set limit. Cemex has extended the terms of the borrowing in its favour so it can keep the leverage ratio higher for longer without penalty from its creditors. Note that the leverage ratio here means the ratio between debt and operating earnings before interest, taxation, depreciation and amortisation (EBIDTA).
Selling assets and shares in Asia is the next step in cutting debt in the window the group has negotiated for itself. It holds minor cement production assets in Thailand and Bangladesh that it is selling to Siam City Cement for US$53m. These include a 0.8Mt/yr integrated cement plant in Saraburi, Thailand and a 0.52Mt/yr cement grinding plant in Madangonj, Bangladesh. Unfortunately for Cemex it purchased the Saraburi plant for US$77m in 2001 from Saraburi Cement making it a loss of at least US$24m.
A minority sale of shares in its Philippines assets is more promising. The group runs two integrated cement plants in the country, the Solid Cement Plant in Rizal and the APO Cement Plant in Cebu with a combined cement production capacity of 6.23Mt/yr and a new 1.5Mt/yr production line on the way at Solid Cement also. Local media estimate that the sale could earn Cemex as much as US$850m from the booming market. The Cement Manufacturer's Association of the Philippines reported that cement sales volumes grew by 14.3% to 24.4Mt in 2015 with more growth predicted for 2016.
The credit amendment and asset sales of US$0.9bn may give Cemex the breathing room it requires to keep the creditors at bay for a while longer. It originally refinanced its debts in 2009 at the height of the financial crisis to keep the business running until the markets picked up again. They haven’t. A question that might be legitimately asked at Cemex’s analyst day later this week, on 17 March 2016, is this: when is Cemex going to seriously tackle its debts? As the situation continues the group may end up devoting more time to managing its debts than it will to actually making cement and other building products.
Philippines: Cemex Philippines has started proceedings to sell a minority stake in its assets. The subsidiary of Cemex has filed a registration statement with the Securities and Exchange Commission (SEC) of the Philippines and the Philippine Stock Exchange. Subject to obtaining approvals from both bodies it will then sell a minority interest in the company’s cement manufacturing assets in the Philippines, the company said in a statement.
Cemex runs two integrated cement plants in the country, the Solid Cement Plant in Rizal and the APO Cement Plant in Cebu. The decision to sell shares of assets in the Philippines is part of Cemex’s wider asset divesture plant.
Europe: The European Court of Justice has annulled a request for information by the European Commission into several cement producers in a cartel probe. The judgement could restrict the competition watchdog's investigative powers, according to reporting by the Wall Street Journal.
The commission opened an antitrust investigation in late 2010 looking at the activities of Cemex, Holcim, Lafarge, HeidelbergCement and others. Originally the cement companies were suspected by the commission of colluding with rivals to fix prices and share markets in Austria, Belgium, the Czech Republic, France, Germany, Italy, Luxembourg, the Netherlands, Spain and the UK. However, the investigation was closed in mid-2015 due to insufficient evidence. Since then the cement producers have challenged the commission’s right to ask for the level of detail they requested. The ruling overturns a 2014 decision by the EU's General Court, which said the commission questionnaires were justified.
Mexico/Thailand/Bangladesh: Cemex has signed an agreement for the sale of its operations in Bangladesh and Thailand to Siam City Cement for US$53m. The proceeds obtained from this transaction will be used mainly for debt reduction and for general corporate purposes. The deal is expected to be finalised in the second quarter of 2016 subject to regulatory approval.
Cemex runs a 0.8Mt/yr integrated cement plant in Saraburi, Thailand. The plant was originally purchased from Saraburi Cement for US$77m in 2001. Cemex operates a 0.52Mt/yr cement grinding plant in Madangonj, Bangladesh.
Mexico: Cemex has obtained consent to amend its credit agreement dated 29 September 2014 in order to delay the scheduled tightening in its consolidated financial leverage and coverage ratio limits by one year. The formalisation of the amendment is subject to customary conditions and is expected to be finalised in the following days.
The amendment to the credit agreement will allow the leverage ratio covenant to remain at 6.0 times until and including 31 March 2017. It will then gradually decline to 4.0 times by 30 June 2020. The margin grid in the credit agreement will be modified such that if the consolidated leverage ratio is greater than 5.50 times in the reference periods ending on 31 December 2016, 31 March 2017, 30 June 2017 and 30 September 2017. The applicable margin will be 425 bps instead of 400 bps. All other levels in the margin grid remain unchanged.
In addition, the credit agreement will be amended to allow Cemex the right, subject to meeting local requirements in the Philippines, to sell a minority stake in a subsidiary that directly and indirectly mainly owns Cemex’s cement manufacturing assets in the Philippines.
Czech Republic: The Global CemFuels Awards 2016 has announced winners in six categories. The Suez Environnement solid recovered fuel facility at Malpas Farm, Rugby, which supplies the Cemex Rugby cement plant, won Outstanding Alternative Fuels (AF) project. LafargeHolcim won AF-user company of the year. N+P, Netherlands received the award for AF-supplier company of the year for the second consecutive year. Linder-Recyclingtech won the award for innovative technology for AF use. Frederico Contente, Masias Recycling was awarded project manager of the year. Jan Theulen, HeidelbergCement was awarded CemFuels Personality of the Year.
The Global CemFuels Awards 2016 took place as part of the Global CemFuels Conference and Exhibition. The awards are nominated and voted for across the alternative fuels industry. The specialised annual alternative fuels conference for the cement and lime industries took place on 22 – 23 February 2016 in Prague.
Featured image: Jan Theulen, HeidelbergCement (right) and Robert McCaffrey, Global Cement (left)