Displaying items by tag: HeidelbergCement
France: Logistics software provider Everysens says that its Transport & Visibility Management System (TVMS) product has helped Ciments Calcia to improve its use of railway transportation. Philippe Labbé, the logistics director for the subsidiary of Germany-based Heidelberg Cement, said that the company had been using the software for three years. During which time it increased its productivity and saved time on the operational management of rail logistics. Labbé added that he thought the product would help the company meet its decarbonisation commitments by switching more trucks to rail.
Ciments Calcia originally chose Everysens to digitise of use of railway transport, to bring all the relevant data on to one platform and to improve its management of it. The building materials manufacturer sells around 5.3Mt/yr of cement and it operates 10 production sites. It uses over 400 railway wagons in France and Belgium.
Sweden: HeidelbergCement says that it will establish a 1.8Mt/yr carbon capture and storage (CCS) plant at its Slite cement plant in Gotland. It aims to achieve full-scale capture of the plant’s CO2 emissions by 2030. In conjunction with the CCS plant project, Cementa will increase the share of biomass in the Slite plant’s fuel mix.
Chair Dominik von Achten said “Just a few days ago, we published new sustainability targets, underlining the importance of carbon capture, utilisation and storage (CCUS) as one key lever to almost halve our CO2 footprint by 2030 compared to 1990, and achieve Net Zero by 2050 at the latest.” He continued “Slite CCS is the largest CCUS project yet in our group and the cement industry, and a model for what will be achievable with CCUS also beyond 2030. As this initiative contributes considerably to the climate ambitions of Sweden, and is a unique project for us in terms of scale, we are keen to make it happen.”
UK: Hanson plans to install a C-Capture solvent-based carbon capture system at its Ketton cement plant in Rutland. The producer says that the technology reduces energy requirements per tonne of CO2 by 40% compared to other capture systems.
Chief executive officer Simon Wills said “Carbon capture is a critical part of our strategy to decarbonise cement production, and essential if we are to reach net zero carbon by 2050. If successful, the C-Capture process has the potential to be rolled-out across other sites across the HeidelbergCement Group.”
Germany: HeidelbergCement has replaced its existing revolving credit line with a new syndicated credit line based on the Loan Market Association’s sustainability-linked loan principles (SLLP). HeidelbergCement says that key performance indicators of its progress towards sustainability objectives will determine the credit line’s credit margin, adjusted according to its CO2 emissions per tonne of cementitious material and alternative fuel (AF) substitution rate. HeidelbergCement says that its ‘solid financial base’ enabled it to reduce the syndicated credit line to US$2bn from US$3bn, and to avoid financial covenants.
Chief financial officer René Aldach said “With the conclusion of the new syndicated credit line, we have taken the first step towards sustainable financing. In addition, we were able to improve the terms and conditions compared with the previous credit line.”
Admixture markets in the US
25 May 2022More mergers and acquisition news emerged this week in the shape of potential buyers for Sika’s US admixtures business. Reporting from Bloomberg revealed that Holcim, HeidelbergCement and Turkey-based Sabancı Holding had all made it, amongst other unnamed companies, to a second round of bidding for the assets. Sika then confirmed this to the Finanz und Wirtschaft newspaper and added that the sale would also relate to Canadian assets as well. The intention here is to bypass the risk of a lengthy competition investigation in the US.
Switzerland-based Sika announced in November 2021 that it had signed a deal to buy MBCC Group from Lone Star Funds, a global private equity firm, for Euro5.2bn. At the time of the announcement Sika said that the transaction was subject to regulatory approval but it added that it was ‘confident’ that all required clearances would be obtained with closure planned for the second half of 2022. Known competition probes are now pending in the UK, Australia and New Zealand. A previous piece from Bloomberg suggested that internal analysis by Sika found that the company might need to divest operations with annual sales of around US$160m with a value of US$400m. However, the latest update suggests a value of up to US$1bn. The US represented US$1.71bn or 18% of Sika’s total group sales in 2021. Sika’s information to shareholders to let them know about the MBCC acquisition in November 2021, showed that MBCC had sales of around US$966m in the Americas in 2021 with 36 production plants. Overall, not just in the US, the deal is expected to change Sika’s technology mix from 40% concrete and cement systems to 49%, with most of the additions coming from concrete applications.
Divestments were always likely in an acquisition this large between competitors with shared geographies. What is interesting here to the cement sector is that the three named interested parties are all cement producers. Holcim is perhaps the least surprising given its size, pivot towards light building materials and the fact that its current head, Jan Jenisch, used to run Sika. If anyone knows how much an admixture company is worth, it’s the guy who ran one five years ago! HeidelbergCement does not have such a large light building materials business footprint but it is demonstrably interested in making heavy building material production more sustainable. Also, as the world’s second largest western multinational cement producer it is likely to be interested in an input market for some of its end products. Sabancı Holding is the outlier in this grouping with a more regional grey cement business based in Turkey, an international white cement business and a diverse set of business interests including finance and energy. Although, even as the smallest of the bunch, it still reported sales revenue of over US$9bn in 2021. One notable absence from the potential contenders list for Sika USA is Cemex. Its Urbanisation Solutions division, which produces admixtures among other products, reported sales of US$1.9bn in 2021 or 13% of the group’s total revenue. US$558m of this was made in the US.
The wider context in the North American admixture market is that the announcement of Sika’s deal with MBCC in November 2021 was followed about a month later when Saint-Gobain said it had entered into a deal to buy GCP Applied Technologies. This followed Saint-Gobain’s acquisition of Chryso in October 2021. However, Saint-Gobain said that the GCP deal would strengthen its position more in North America. Readers can find out more about Saint-Gobain’s ambitions here.
The final word at this stage should go on Lone Star Funds, the current owner of MBCC. Lone Star Funds bought the construction chemicals business from BASF for Euro3.17bn in September 2020. At the time the acquisition closed Saori Dubourg, a member of the board of executive directors of BASF, said “Lone Star has been a professional partner in this transaction and is committed to the future success of the business.” If the reporting is correct, Lone Star Funds is now selling the same business for over Euro5bn. There are two takeaways to consider at this point. One is that the perceived value of products that make cement and concrete more sustainable are growing. The other is that Lone Star Funds timed its acquisition of MBCC from BASF very well.
Germany: HeidelbergCement has accelerated its specific CO2 emissions reduction target to 2030 to 400kg CO2/t CEM compared with 1990 levels. This represents a 30% cut compared to 2021 levels and a 47% cut compared to 1990 levels. The previous target was 33% compared to 1990 levels. The company said that in the next eight years to 2030 its CO2 emissions are set to decrease more strongly in percentage terms than in the last three decades.
The building materials producer made the announcement as part of a new set of medium-term sustainability and financial targets entitled ‘Concrete Promises’ that were presented at its Capital Markets Day event in late May 2022. The group plans to generate half of its revenue from sustainable products by 2030. Carbon capture, utilisation, and storage (CCUS) projects that have already been launched are expected to achieve a cumulative reduction of 10Mt CO2 by 2030. By 2025, more than 70% of its debt will be covered by sustainable financial instruments. Among other things, the group plans to use a bond programme that it says is the first in the industry to be aligned with the climate goals of the European Union taxonomy.
Dominik von Achten, chair of the managing board of HeidelbergCement, said “We have the ambition, speed, knowledge, technologies and partners to lead the necessary change process in our sector. Our focus is on expanding our portfolio of sustainable products, reducing our CO2 emissions quickly and significantly, proving that CO2-free products are possible on a large scale, and creating a circular economy by consistently applying the principles of circularity. Our new sustainability targets for 2030 illustrate this ambition.”
HeidelbergCement to acquire 50% stake in CBI
20 May 2022Ghana: Heidelberg said that it has signed an agreement with CBI for the acquisition of 50% of the latter’s shares. CBI is the parent company of CBI Ghana, which operates the 0.6Mt/yr Tema grinding plant in Accra. It is in the process of establishing a calcined clay plant at the facility. HeidelbergCement says that it and CBI will explore the possibility of further calcined clay projects in West Africa. Other investors in CBI Ghana include Denmark-based Investeringsfonden for Udviklingslande (IFU) and Norway-based Norfund.
HeidelbergCement’s existing Ghanaian susbidiary Ghacem operates 3Mt/yr-worth of grinding capacity at two plants in Accra and Takoradi.
HeidelbergCement managing board member Hakan Gurdal said “Characterised by high sustained market growth rates, Ghana is one of HeidelbergCement’s core markets in Africa. The new flash calciner in Ghana will be the largest worldwide, with a calcined clay production capacity of more than 400,000t/yr. Start of production is planned for 2024.” Gurdal concluded “We are committed to lowering our CO2 footprint also in emerging markets.”
US: Bloomberg has named Germany-based HeidelbergCement, Switzerland-based Holcim and Turkey-based Sabancı Holding as possible bidders for some of Sika’s US admixtures assets. Sika is seeking to divest the assets in order to obtain competition authorities’ approval for its US$6bn acquisition of Germany-based construction chemicals company MBCC from Lone Star Funds.
HeidelbergCement joins First Movers Coalition
19 May 2022Germany: The World Economic Forum and US State Department have welcomed HeidelbergCement as the newest member of the First Movers Coalition. Founded in 2021, the coalition brings together companies across multiple industrial sectors to coordinate the creation of demand for emerging reduced-CO2 production technologies. As part of its membership, HeidelbergCement commits to purchasing zero-emission vehicles for 30% of new heavy-duty truck purchases and 100% of medium-duty truck purchases by 2030.
US Special Presidential Envoy for Climate John Kerry said “I welcome HeidelbergCement to the First Movers Coalition, and its commitment to purchasing zero-emissions trucking solutions that the world must focus on scaling up over this critical decade. The First Movers Coalition is a critical pillar of the world's efforts to advance breakthrough zero emissions technologies to decarbonise many of the largest sectors of the global economy and to put us on a track to achieve net zero emissions by 2050.”
Holcim agreed to sell its Indian assets to Adani Group this week for US$6.37bn. These include Holcim’s stakes in its local subsidiaries Ambuja Cement and ACC. The deal, if approved by the local competition body, should complete in the second half of 2022. This is one of the larger sales of cement company assets over the last decade. Adani Group, an Indian-based conglomerate with businesses across energy, transport and more, is now poised to become the second largest cement producer in India.
Global Cement Weekly previously covered a potential sale of Ambuja Cement and ACC in April 2022 when the story that Holcim was looking for a buyer first emerged in the Indian press. At the time local press speculated that the sale could generate as much as US$15bn for Holcim. So it is interesting to see that a figure of US$6.37bn has been agreed upon instead, less than half of the speculative figure. Roughly, as ever, this places a value of a little below US$100/t of cement production capacity. This seems like a relatively low pricing for these plants by international standards over the last decade. However, this doesn’t take into account many factors such as, for example, the condition of the plants, Holcim’s desire to change its business, the ease of selling up in India all in one go, other non-cement assets and so on. For Adani Group though, buying into heavy building materials production in a large market like India clearly seemed attractive. It is also worth noting that, similar to other cement sector acquisitions recently, here again is a buyer with a background in another carbon-heavy industry buying into another heavy emitter.
Acquirer | Divestor/target | Year | Value | Cement production capacity | Price for cement capacity | Region |
HeidelbergCement | Italcementi | 2016 | US$7.0bn | 70Mt/yr | US$96/t | Europe, Africa, Middle East |
CRH | Lafarge and Holcim | 2015 | US$6.9bn | 36Mt/yr | US$192/t | Europe, Americas, Asia |
Adani Group | Holcim | 2022 | US$6.4bn | 66Mt/yr | US$97/t | India |
CRH | Ash Grove | 2018 | US$3.5bn | 10Mt/yr | US$350/t | US |
UltraTech Cement | Jaiprakash Associates | 2017 | US$2.5bn | 21Mt/yr | US$119/t | India |
Smikom | Eurocement | 2021 | US$2.2bn | 50Mt/yr | US$44/t | Russia, CIS |
Semen Indonesia | LafargeHolcim | 2019 | US$1.8bn | 12Mt/yr | US$150/t | Indonesia |
CSN | Holcim | 2021 | US$1.0bn | 9Mt/yr | US$111/t | Brazil |
Table 1: Selected large scale acquisitions of controlling shares in non-Chinese cement production assets since 2012. Source: Global Cement news and company releases. Italcementi acquisition value reported by Reuters.
Table 1 above provides some historical context to Adani Group’s agreed acquisition by comparing it to other large completed deals in the cement sector over the last decade. Don’t forget that it is only looking at this from the cement sector. This list excludes changes in ownership in the Chinese cement companies in this period because, generally, there has been a government-driven consolidation in the industry through mergers rather than large-scale acquisitions. So, for example, the world’s current biggest cement producer CNBM had a reported production capacity of 350Mt/yr in 2012 and this rose to 514Mt/yr in 2020 as it absorbed other state-owned companies. The big merger it underwent during this time was with China National Materials (Sinoma) in 2018, primarily an engineering company that also produced cement.
The most obvious trend in Table 1 is the journey of Lafarge and Holcim from their merger in 2015 and the gradual realignment of the business subsequently. During this time the company has sold up in large markets outside of its core regions in Europe and North America. Latterly, it has also started to diversify away from heavy into lightweight building materials. One notable ‘nearly happened’ was LafargeHolcim’s attempt to sell its business in the Philippines to San Miguel Corporation for US$2.15bn in 2019. That deal collapsed when the Philippines Competition Authority failed to approve it within a year of its proposal. CRH enlarged itself from assets sold during the creation of LafargeHolcim and then picked up Ash Grove in the US in 2018. CRH’s head Albert Manifold memorably said in 2018 that his company was focusing on markets in developed countries and CRH’s large-scale acquisitions have largely followed this.
As for the others, HeidelbergCement’s purchase of Italcementi in 2016 almost appeared as a riposte to the formation of LafargeHolcim, albeit on a slightly smaller scale. It confirmed HeidelbergCement’s place as the world’s second largest non-Chinese cement producer. It is also one of the minority of truly multinational acquisitions on this list. Unlike LafargeHolcim and now Holcim though, HeidelbergCement hasn’t exhibited a desire to downsize or diversify at quite the same speed. UltraTech Cement’s acquisition of Jaiprakash Associates in 2017 confirmed its place as the largest Indian producer. That deal was publicly one of the longer lasting one as it originally started out in at least 2014 on a smaller scale and was later slowed down by the Mines and Minerals (Development and Regulation) (MMDR) Amendment Act. Smikon’s purchase of Eurocement in 2021 almost looks like part of the isolation of the Russian economy, especially with the benefit of hindsight given by the invasion of the Ukraine in early 2022.
Mega-deals have lots of moving parts but two of the most tangible to broader audiences are the price and the timing. Cemex infamously got both of these wrong with its acquisition of Rinker in 2007 as it paid high just as the US subprime mortgage crisis started a wider global financial one. This was despite Cemex’s emergence over the previous 15 years as a multinational force to be reckoned with due in part to the so-called ‘Cemex Way’ approach to management, acquisitions and integration. Clear winners from the big acquisitions over the last decade are harder to spot but CRH and UltraTech Cement look strong so far. Adani Group has certainly picked a lively time to make a purchase on this scale following a global pandemic with ongoing global supply chain issues and disruptions to energy and food markets.