Displaying items by tag: Cemex
Update on Cemex, June 2021
30 June 2021Fernando A González and Cemex took to the virtual airways this week with Cemex Day 2021. The investors’ update comprised the usual greatest hits package explaining how well everything is going: earnings growth and leverage levels about to hit desired targets, selective investments and divestments on the way, new production capacity round the corner and punchy sustainability goals turning up earlier than expected. Or at least that’s the way that chief executive officer González and the team told it.
To be fair to Cemex, it seems to be in a good place right now. It weathered 2020 well and now its first quarter results in 2021 compared to the same period in 2019, before coronavirus hit, are looking rosy with cement sales volumes growth of 9%. How much of that is attributable to pent up demand from 2020 remains to be seen though. Its strategy of focusing on markets in North America and Europe appears to have paid off in recent years with its competitors copying it as they have retreated from riskier climes and concentrated on core territories. Its obsession with righting the ratio between its debts and earnings is closer than ever to being realised, with a 4.07x net leverage ratio in 2020 and a target of 3x or lower planned for 2023. That last target is crucial both materially and psychologically for the company as it starts to put it back in the same financial field as its Western multinational competitors and opens up new investment opportunities.
From a production angle, the big news from the event was a 10Mt/yr cement production expansion project between now and 2023. This wasn’t quite as promising as it sounded, as just under half of this was attributed to legacy projects in Mexico, Colombia and the Philippines and some of the new projects had already been announced, but it does bookmark a move from divesting plants to upgrading and building new ones.
The new projects comprise an additional 5.7Mt/yr capacity from on-going debottlenecking, new integrated plants, new grinding plants and reopening idle or mothballed plants. During the event José Antonio González, the Executive Vice President of Strategic Planning & Business Development broke it down into 3.5Mt in Mexico, consisting of 1.5Mt additional grinding capacity at the integrated Tepeaca plant, a 0.5Mt/yr expansion at the integrated Huichapan plant and 1.5Mt/yr from bringing both idled lines back into production at the CPN Hermosilla plant in Senora to support the US market. That last one notably was partly announced in February 2021. In Europe and the US the group plans to add 1.2Mt/yr including expanding grinding capacity at two plants in Europe with details to be announced later. Finally, the company plans to add 1Mt/yr of additional capacity in South American including restarting an idled 0.5Mt/yr kiln at a plant in the Dominican Republic and building a new 0.5Mt/yr grinding mill in Guatemala.
Cemex has also stepped up its target reduction in CO2 emissions to below 475kg CO2/t of cementitious material, an approximately 40% reduction in CO2 emissions compared to 1990 levels, by 2030. The previous target for 2030 of 520 kg CO2 has been brought forward to 2025. This compares to LafargeHolcim’s similar target of 475kg CO2/t by 2030, HeidelbergCement’s target of 500kg CO2/t by 2030 and CRH’s target of 530kg CO2/t by 2030. The group is planning to spend US$60m/yr on its decarbonisation projects. This compares to a spend of around US$140m/yr on its 10Mt/yr cement production capacity expansion drive over the next three years. Or to put it another way, the group is spending more on growing than sustainability.
Unfortunately, it wasn’t all good public relations for Cemex this week with the news in the Colombian press that one of its former executives is set to be investigated by the authorities over his alleged involvement in the ongoing Maceo cement plant corruption case. The background to this one is that in 2016 Cemex fired several senior staff members, and the local subsidiary’s chief executive resigned, in relation to the building of a new integrated plant at Maceo. This followed an internal audit and investigation into payments worth around US$20m made to a non-governmental third party in connection with the acquisition of the land, mining rights and benefits of the tax free zone for the project. Legal proceedings followed in Colombia and the US. Many large companies have legacy problems to deal with. Just take LafargeHolcim’s continued connection to Lafarge Syria’s conduct in the early 2010s. At the time of writing the Maceo plant is still yet to start operation and is likely to be one of the ongoing projects mentioned above.
Cemex’s second quarter results are due to arrive towards the end of July 2021 but the group is presenting an upbeat image. Sales are up, debts are down, divestments are out and expansions are in. Confidence is important for a multinational trying to convince the rating agencies to give it back its investment grade, so whether this is strictly true or not it certainly knows how to talk the talk. One question going forward at least is how strictly Cemex will want to stick to its core markets if the good times really have returned?
Cemex raises 2021 full-year earnings guidance
29 June 2021Mexico: Cemex has forecast full-year earnings before interest, taxation, depreciation and amortisation (EBITDA) of US$3.10bn in 2021, up by 26% year-on-year from US$2.46bn in 2020. The forecast figure is 7% higher than its previous prediction of US$2.90bn in its first quarter 2021 earnings call. The company said that it expects the double-digit growth to continue into 2022. It said that in 2023 and estimated US$400m of additional EBITDA will come from bolt-on investments and its on-going 10Mt/yr cement capacity expansion.
Colombia: The Colombian prosecution service intends to summon former Cemex Colombia chief executive officer (CEO) Carlos Jacks to face charges in relation to the Maceo cement plant corruption case. Jacks was CEO of the company for 24 years and previously headed Cemex operations in Costa Rica, the Dominican Republic and Puerto Rico, according to the Noticias Caracol television channel. A statement made by Camilo González Téllez, the former Legal Vice President, has been used by the prosecutor’s office to press charges against Jacks. So far González is the only senior Cemex executive to have received a custodial sentence in relation to the affair.
In 2016 Cemex fired several senior staff members in relation to the Maceo project and its subsidiary’s chief executive resigned. This followed an internal audit and investigation into payments worth around US$20m made to a non-governmental third party in connection with the acquisition of the land, mining rights and benefits of the tax free zone for the project. Legal proceedings followed in Colombia and the US.
Cemex plans US$925m in investments in 2021 - 2023
25 June 2021Mexico: Cemex says that it will invest US$925m in 2021 – 2023 in production capacity expansions and upgrades, as well as in other projects to improve financial margins. Chief executive officer Fernando González said at its Cemex Day 2021 business update that the group is planning a 10Mt/yr cement capacity expansion consisting of an extra 7.5Mt/yr in the Americas, 1.5Mt/yr in the Philippines and 1.0Mt/yr in Europe. It expects a total increase in 2023 full-year profit of US$520m as result of the investments. Around US$425m will be spent on the cement capacity additions and the remainder will go towards projects on urbanisation and its other business lines.
Strategic planning and business development executive vice president José González said “We focus on high-growth metropolitan areas, where our products and solutions nurture the urbanisation needs of these markets. These areas represent around 70% of the population and around 80% of the gross domestic product (GDP) of construction.”
Cemex realigns climate goals to Science-Based Targets Initiative’s Well Below 2° scenario
25 June 2021Mexico: Cemex has launched a new brace of CO2 emissions reduction targets. The group is now targeting CO2 emissions below 475kg/t of cement and 165kg/m3 of concrete by 2030. These represent decreases of 40% and 35% respectively compared to 1990 levels. The group plans to invest US$60m/yr in efforts to meet its 2030 targets. It had previously targeted CO2 emissions below 520kg/t of cement by 2030. It now aims to achieve the previous target by 2025. The group says it intends to reach the new targets through the use of alternative fuels with high biomass content, hydrogen injection, low temperature and low CO2 clinker, decarbonated raw materials, optimisation of the kilns’ heat consumption and the reduction of clinker factor through the higher utilisation of blended cements in the market.
Chief executive officer Fernando Gonzalez said, “Climate action is the biggest challenge of our times, and Cemex is taking decisive action to address it. We commit to continue leading the industry in climate action.”
Balearic Environmental Commission tightens requirements on Cemex’s Lloseta cement plant’s licence
18 June 2021Spain: The Balearic Environmental Commission has set more stringent environmental requirements than previously in its authorisation of Cemex’s Lloseta plant’s licence to operate. The Diario de Mallorca newspaper has reported that the authority has followed standards set out by European Commission decisions. The requirements cover emissions, dust and hazardous waste volumes.
Cemex promotes Vertua admixtures range in the UK
15 June 2021Mexico/UK: Cemex has promoted its Vertua admixtures in the UK, with the launch of next generation products in the range. The producer says that Vertua admixtures used in conjunction with its grinding aids, cement enhancers, super plasticisers and accelerators further reduce the carbon footprints of these products. It called green admixtures a ‘fundamental enabler of key innovations’ which will accelerate sustainable urbanisation.
Europe, Middle East and Africa regional urbanisation solutions vice president Marcelo Catalá said, “Cemex’s Vertua range of next generation admixtures, together with our broader array of low carbon, resource-efficient urbanisation solutions, will contribute considerably to building alongside our customers a better and more sustainable future for the cities in which we live.”
Atotonilco de Tula municipal government supports Cemex’s Ecomunidad recycling initiative
11 June 2021Mexico: The municipal administration of Atotonilco de Tula, Hidalgo province, has given US$3050 to Cemex to help with the running of its Ecomunidad recycling initiative. In June 2021, the initiative involves recycling collection at 11 Cemex sites and has educated 11,000 people. Since its foundation at 20 local schools in 2019, the initiative has recycled 37t of plastic waste.
Cemex concludes sale of subordinated notes
10 June 2021Mexico: Cemex has concluded the sale of subordinated notes with a value of US$1.0bn. The company says that it will use the proceeds from the bonds sale for various purposes, including debt repayment.
Chief financial officer Maher Al-Haffar said, “The purpose of this transaction is to further Cemex in its pursuit of an investment grade capital structure and a commensurate leverage ratio.”
Cemex to install supercritical CO2 waste heat recovery plant at Prachovice cement plant in the Czech Republic
09 June 2021Czech Republic: Mexico-based Cemex plans to install a 2MW waste heat recovery (WHR) plant using supercritical CO2 (sCO2) at its Prachovice cement plant. The unit is intended to provide up to 8% of the plant’s electricity requirements.
The producer is part of a consortium studying new sCO2 WHR systems. The EU Horizon 2020 Industrial Heat to Power fund awarded Euro14m in financial backing to the consortium. The project is intended to demonstrate a cheaper and more flexible method of waste heat valorisation compared to the steam or organic rankine cycle approaches conventionally used in WHR.
Plant director Karol Czubara said, “The new sCO2 technology has a smaller footprint and higher operational flexibility than conventional power plant cycles, which produce power from turbines using water or steam.”