Displaying items by tag: Divestments
Australia: Boral’s earnings in the first half of its financial year have fallen as it has completed the sales of its North American fly ash business. Its revenue from continuing operations fell slightly to US$1.08bn in the six months to 31 December 2021. However, its earnings before interest, taxation, depreciation and amortisation (EBITDA) for continuing operations dropped by 16% to US$138m from US$164m in the same period in 2020. Cement and concrete sales volumes remained stable and rose slightly respectively.
“With the completion of the divestment of our North American Fly Ash business on 11 February 2022, we have now finalised the strategic realignment of our portfolio to focus on our Australian construction materials business,” said Boral’s chief executive officer Zlatko Todorcevski. “We are focused on building a more competitive and profitable business that is positioned for success and delivers increased returns to shareholders.” He blamed falling earnings on construction shutdowns and growing energy prices despite changes to the business.
Holcim sells cement business in Northern Ireland for Euro67m
25 January 2022UK: Holcim has sold its cement business in Northern Ireland to Cookstown Cement for Euro67m. The latter is a newly formed local construction company established by a longstanding business partner of Holcim. It will take control of Holcim’s integrated 0.45Mt/yr Cookstown cement plant.
Miljan Gutovic, Region Head EMEA at Holcim, said, “This divestment advances our ‘Strategy 2025 – Accelerating Green Growth’ with a focus on consolidating our leadership in core markets to become the global leader in innovative and sustainable building solutions. With Cookstown Cement, we are pleased to have found a strategic and trusted owner for the business, better positioned to continue investing in its long term growth. We are delighted about Cookstown Cement’s vision, offering a solid platform for the team to continue to thrive.”
Cementos Progreso grows in Central America
05 January 2022We start 2022 with the news that Cemex is selling up to Cementos Progreso in Costa Rica and El Salvador. On 20 December 2021 Cemex announced that it was selling one integrated cement plant, one grinding plant, seven ready-mix concrete plants, one aggregate quarry and one terminal in Costa Rica and one terminal in El Salvador. The sale is valued at around US$335m with an expected completion date in the first half of 2022 subject to regulatory approval.
This sale is noteworthy because it concerns Mexico-based Cemex selling off assets in its ‘back yard’ of Central America. Once the sale completes it will retain operations in Panama, Nicaragua, Guatemala and Colombia under its Cemex LatAm subsidiary. It will also continue to operate in the Caribbean in the Dominican Republic, Jamaica and Puerto Rico. Previous divestments by Cemex over the last five years or so have tended to focus on piecemeal (or bolt-off) divestments in the US and Europe. This latest sale could be viewed in a similar way if Central America and the Caribbean are seen as a region rather than individual countries. For its part Cemex describes the divestment as part of its ‘Operation Resilience’ plan to optimise its global portfolio.
Why it chose to sell up in Costa Rica is curious given that Cemex LatAm’s cement sales volumes for the region were reported as ‘flat’ in 2019 with the exception of Colombia and El Salvador. 2020 was then a shock, like almost everywhere else, as coronavirus caused disruption reducing sales volumes. 2021 saw recovery in all of Cemex LatAm’s national markets over the first nine months. Notably, both Cemex’s revenue and operational earnings in Costa Rica grew when comparing the first nine months of 2019, before the pandemic, to the same period in 2021, unlike Colombia and Panama. For the third quarter of 2021 Cemex said that growing cement sales volumes in Costa Rica had been driven by infrastructure and housing sectors. It also added that “Our cement footprint in the country is also a very relevant component of our regional trading network. We continued exporting during the quarter, mainly to our operations in Nicaragua.” In may be coincidence but it was interesting timing to add a comment like that.
From Cementos Progreso’s perspective the new assets in Costa Rica and El Salvador are part of an ongoing expansion phase outside of its home base. At home in Guatemala the company operates three integrated plants. The third, the San Gabriel plant, started up in 2019. In the same year the company purchased Cemento Interoceanico and its grinding plant in Panama. Then in July 2021 the group commissioned its new Belmopan grinding plant in Belize as part of its Cementos Rocafuerte subsidiary. The new proposed acquisitions in Costa Rica and El Salvador start to fill in the gaps in Cementos Progreso’s network between Guatemala and Panama. The price seems on the high side for a 0.9Mt/yr integrated plant and a 0.9Mt/yr grinding unit. Yet the associated quarry, concrete plants, terminals and, crucially, the location may have made it one well worth paying. For comparison Peru-based Unacem agreed to purchase a grinding plant from CBB in Chile this week for around US$30m. Back in 2013 Lafarge sold assets in Honduras, including an integrated plant and a grinding unit, to Cementos Argos for Euro232m.
Both parties may do well out of this transaction. Cemex continues to show that it is fully prepared to sell assets anywhere as it sharpens up its operations. Cementos Progreso meanwhile is turning itself into a regional player to watch.
Costa Rica/El Salvador: Cementos Progreso has agreed to acquire Cemex’s Costa Rican and El Salvadorian assets for US$335m. The divested assets consist of an integrated cement plant, a cement grinding plant, seven ready-mix concrete plants, an aggregate quarry and one terminal in Costa Rica. An additional terminal is also being sold in El Salvador. The transaction is expected to be completed in the first half of 2022 subject to approval by the relevant competition authorities.
Cemex’s chief executive officer (CEO) Fernando Gonzalez said “This transaction allows us to progress in our portfolio rebalancing objectives, while redeploying resources to fund our growth investments and further deleveraging.”
US: Australia-based Boral has agreed to sell its US fly ash business to Eco Material Technologies for US$755m. The parties expect to conclude the transaction by the start of 2023. The proceeds of the sale will add to Boral’s surplus capital.
Boral’s chief executive officer Zlatko Todorcevski said “Together with the sale of our North American building products business and our stake in Meridian Brick, we will have divested the North American businesses for more than US$3bn.” He added “This is a significant milestone that supports our strategy to refocus on our construction materials business in Australia.”
Update on Holcim, November 2021
24 November 2021Holcim’s investors’ event last week confirmed the changes the company has been making to its sales mix. At its Capital Markets Day it revealed its commitment to expand the net sales of its Solutions & Products division to 30% of the group total by 2025. This division covers products such as roofing, mortar, precast concrete and asphalt. At the same time it is reducing the proportion of sales from its cement division. Graph 1, below, from a presentation given by chief executive officer Jans Jenisch, hints at what group may be aiming for: roughly a third of its sales from cement; a third from aggregates and ready mixed concrete; and a third from the Solutions & Products division in 2025.
Graph 1: Forecast growth of sales by Holcim’s Solutions & Products division to 2025. Source: Holcim Capital Markets Day 2021 presentations on website.
To give readers an idea of the scale of change in Holcim’s cement business since the merger with Lafarge in 2015, just look at the figures. In 2015 LafargeHolcim sold 256Mt of cement and it had a cement production capacity of 374Mt/yr. In 2020 it sold 190Mt of cement and it had a cement production capacity of 288Mt/yr. However, the ratio of sales from cement has remained consistent at just below 60%.
This all changed in January 2021 when Holcim announced it was buying roofing and building envelope producer Firestone Building Products for US$3.4bn. Instead of trimming down the business to make synergistic changes as it had been for the previous five years the group significantly changed its sales mix. As noted in ‘2021 in Cement’ in the December 2021 issue of Global Cement Magazine, Holcim remains the world’s largest non-Chinese cement producer. Yet its acquisitions in 2021 have consisted of ready-mixed concrete and aggregate companies in mature markets, and Firestone. Its divestments have been cement subsidiaries. Since 2019, and including the agreed Brazilian sale, planned to complete in 2022, the group has generated US$4.1bn in these divestments. Almost as if to reinforce this change of direction the group also switched its name to Holcim in May 2021.
Aside from the focus on expanding the scope of the Solutions & Products division over the next few years, the group said at its recent investors’ event that it wants to lead in sustainability and innovation. It also reminded investors that growth remains in building materials markets. Once Jenisch had established the potential the construction market has in the coming years it was all about so-called ‘green’ growth. On the sustainability side this includes promoting the group’s Science Based Targets initiative net-zero targets by 2050, pushing sales of its low-carbon concrete products and working on increasing the uptake of construction and demolition waste in Europe. The group has a target of reaching 25% or higher for sales of its ECOPact ready-mixed concrete product by 2025. Holcim reported Scope 1 CEM specific CO2 net emissions of 555kgCO2/t in 2020 and it has target of 475kgCO2/t by 2030. This is broadly in line with its peers. Cemex has also committed to 475kgCO2/t or lower and HeidelbergCement is currently aiming for 500kgCO2/t or lower by 2030.
Simultaneously promoting sustainability and growth in products that release CO2 during their manufacture is quite the balancing act for all cement producers. The way Holcim appears to be squaring this particular circle is by heading elsewhere. Back in January 2021 we asked whether Holcim would leave it with the Firestone acquisition or go further. This question has now been answered with Holcim’s intent to increase the share of its Solutions & Products to 30% by 2025. Other large cement producers don’t seem to be diversifying their sales mix at the same speed but similar strategic thinking along supply chains can be seen from the proposed buyer of LafargeHolcim Brazil, Companhia Siderúrgica Nacional (CSN) Cimentos. CSN is a steel manufacturer and buying cement assets gives it somewhere to use its slag. Fittingly, Holcim’s investors’ day ended with a night out at a museum holding an exhibition on the history of concrete. For now at least concrete looks set to remain a key part of the business.
Votorantim Cimentos to acquire FYM’s Southern Spain business
11 November 2021Spain: FYM has agreed to sell its Southern Spain business to Brazil-based Votorantim Cimentos. The assets consist of the 1.6Mt/yr Málaga cement plant and 11 ready-mixed concrete plants and aggregates assets in Andalusia. Parent company HeidelbergCement said that the divestments accord with it Beyond 2020 strategic vision. FYM retains its Northern Spain cluster in the Basque Country, Cantabria, La Rioja and Navarra, which it operates under the Cementos Rezola brand.
Cemex UK to sell four Scottish ready-mix concrete plants
05 November 2021UK: Cemex has agreed to sell its Cardenden, Dundee, Greenock and Perth ready-mix concrete plants to Tillicoultry Quarries. The company thanked its employees at the sites for their commitment. It said that the asset sale is part of a portfolio rebalancing strategy aimed at high growth metropolitan markets.
Germany: HeidelbergCement recorded consolidated sales of Euro14bn in the first nine months of 2021, up by 7% year-on-year from Euro13.1bn in the corresponding period of 2020. Revenues rose in all regions, except for North America, where they fell by 0.1% to Euro3.51bn. The company’s cement sales were 95.7Mt, up by 6% from 90.1Mt, while its ready-mixed concrete sales were 35.7Mm3, up by 4% from 34.4Mm3. Cement sales grew across every region, and recorded the sharpest increase in Western and Southern Europe, of 11% to 23Mt from 20.7Mt.
The group said that ‘significant’ energy cost inflation impacted upon results in the period. It launched a Euro500m cost mitigation programme and initiated the divestment of some Spanish assets and the acquisition of Tanga Cement in Tanzania.
Holcim increases nine-month sales, earnings and profit in 2021
29 October 2021Switzerland: Holcim’s consolidated sales rose by 16% year-on-year to Euro18.7bn in the first nine months of 2021 from Euro16.1bn in the first nine months of 2020. The company’s recurring earnings before interest and taxation (EBIT) rose by 33% to Euro3.3bn from Euro2.48bn. Its operating profit rose by 38% to Euro3.11bn from Euro2.26bn.
The group increased its cement sales by 7.8% to 150Mt from 139Mt. Volumes in Asia Pacific were 51.7Mt, up by 17% from 44.2Mt; volumes in Europe were 35Mt, up by 4.1% from 33.7Mt; volumes in Middle East Africa were 27.2Mt, up by 11% from 24.5Mt; volumes in Latin America were 20.5Mt, up by 18% from 17.3Mt and volumes in North America were 15.1Mt, up by 1.5% from 14.9Mt.
CEO Jan Jenisch said “I’m pleased that we have achieved a record quarter of profitable growth once again. I congratulate my teams for their exceptional resilience as they continue to successfully navigate the challenges posed by the pandemic in a dynamic business environment. On the back of their performance we have revised our recurring EBIT growth guidance from 18% to at least 22% on a like-for-like basis.” He continued “Most importantly, our colleagues have kept their focus on our key long-term value creation drivers to become the global leader in innovative and sustainable building solutions. We are picking up momentum in our strategic portfolio transformation, with the divestment of our business in Brazil, the announcement of nine bolt-on acquisitions so far this year and the expansion of our Firestone GacoFlex range from Mexico to Colombia and Ecuador.”