Displaying items by tag: LafargeHolcim
Mario Gross appointed head of Lafarge Malaysia
14 March 2018Malaysia: Lafarge Malaysia has appointed Mario Gross as its president and chief executive officer (CEO) from 1 April 2018. He succeeds Thierry Legrand, according to the Business Times newspaper. Gross, aged 39 years, holds 15 years of experience in the building materials industry, with roles in Germany, China, Thailand and Switzerland. He joins Lafarge Malaysia from Switzerland’s Sika.
ACC and Ambuja enter Master Supply Agreement
13 March 2018India: With a merger of LafargeHolcim subsidiaries ACC and Ambuja Cement on hold, the two companies have proposed entering into a Master Supply Agreement (MSA) with each other with the aims of increasing synergies, reducing operational costs and increasing the companies’ joint sustainability.
This agreement is for supply of cement, clinker, raw materials (including fuel, fly ash, slag, gypsum etc), spare parts and for providing toll grinding services at certain plants. This will be executed through purchase orders, subject to a pricing formula. This will enable each company to optimise the cost of servicing markets by using each other’s plant’s capabilities, maximise the utilisation of assets to generate additional sales for each company and make best use of their joint spare inventory.
2017 for the cement multinationals
07 March 2018HeidelbergCement’s acquisition of Italcementi really sticks out in a comparison of the major multinational cement producers in 2017. Both its sales revenue and cement sales volumes jumped up by more than 10% year-on-year from 2016 to 2017. It still puts HeidelbergCement behind LafargeHolcim and CRH in revenue terms but the gap is shortening. Although, as we reported at the time of its preliminary results in late February 2018, on a like-for-like basis its sales and volumes only rose by 2.1% and 1.1% respectively.
Graph 1: Sales revenue from multinational cement producers in 2016 and 2017 (Euro billions). Source: Company financial reports.
The European markets may be back on their feet but serious growth came from mergers and acquisitions. Along the same lines, India’s UltraTech Cement is set to reap the reward of its US$2.5bn acquisition of six integrated cement plants and five grinding plants from Jaiprakash Associates in mid-2017. Although as can be seen in graphs 1 and 2 it had been doing fairly well even before this.
Graph 2: Cement sales volumes from multinational cement producers in 2016 and 2017 (Mt). Source: Company financial reports.
We’ve included Ireland’s CRH this year to present the scale of the company. When it says that it is the world’s biggest building materials company, it means it! CRH doesn’t publish its cement sales volumes, which makes it hard to compare it to other cement producers. In part this may be due to the company’s regional-focused structure and its approach to the construction industry. In Global Cement Magazine’s Top 100 Report 2017 – 2018 feature, CRH was placed as the seventh largest cement producer by installed capacity with 50.5Mt/yr. The major story with CRH in recent years has been its steady stream of acquisitions, notably Ash Grove Cement in the US in 2017.
LafargeHolcim may remain the biggest cement producer in the world outside of China but it made an income loss of Euro1.46bn in 2017. At face value its cement sales volumes fell by 10.2% to 210Mt in 2017 from 233Mt in 2016 but this was mainly due to divestments in China, Vietnam and Chile. On a like-for-for-like basis its volumes rose by 3.3%. To this kind of mood music the emphasis on the release of its 2017 results this week was the announcement of a five-year plan to refocus the company. However, reports of overcapacity in Algeria that also emerged this week suggest the group may have its work cut out.
Cemex described 2017 as a ‘challenging year’ as its operating earnings fell due to a lower contribution from the US and South America despite growth in Mexico and Europe. Hurricanes in Florida had a negative impact in the US and the Colombian market suffered from falling production in 2017. UltraTech Cement uses a different financial year to the other companies detailed here, which makes comparisons a little harder. However, its profit after tax fell in the third quarter that ended on 31 December 2017 due to rising costs of petcoke and coal. Undeterred though, its expansion drive continues this week with its continued efforts to try and win the bid for Binani Cement. Vicat, meanwhile, reported falling earnings in part due to the poor market in Egypt. Yet overall its sales and volumes rose in 2017 aided by recovery in France. Finally, Buzzi Unicem rode out the Italian market with its acquisition of Zillo Group delivering a rise in sales and cement volumes.
Wider trends are hard to call given the differing geographical spreads of these cement producers. Europe has been recovering from a decade of stagnation and Asian markets are no longer reliable. South America is mixed with places like Brazil, and now Colombia, underperforming. Yet Argentina is proving one of the fastest growing construction markets at the moment with local plants unable to meet demand. Africa remains profitable and promising as ever but divided between the north and the Sub-Saharan region.
Once the effects from mergers and acquisition activity by the larger cement producers start to fade then the actual situation may become clearer. In the meantime, the effects of the recent cold snap in Europe on the first quarter results for 2018 could be pretty varied. The Financial Times newspaper, for example, quoted one pundit from the Construction Products Association who estimated the industry lost 1% of its annual output to the bad weather in the UK. This may not be great news for any company relying on the European market.
Algeria: Production overcapacity has reduced the profits of LafargeHolcim’s subsidiary in Algeria. A source at the cement producer told the El Watan newspaper that the cement market had been hit by overcapacity since July 2017. New capacity is expected to increase local production to a surplus of 20Mt/yr in 2020. LafargeHolcim Algeria aims to export 5Mt/yr but this will still leave an additional production capacity of 15Mt/yr that is expected to lead to a price war and the potential shutdown of plants. In its 2017 annual report the cement producer said that, “…profitability in Algeria diminished in the second half of the year, on the back of weaker cement demand and a shift from a sold-out to an over-supplied environment.”
Switzerland: LafargeHolcim has launched a new five year plan, ‘Strategy 2022 – ‘Building for Growth,’ as it has reported an income loss of Euro1.46bn. It blamed the loss on a, ‘…detailed review of the asset portfolio, and specifically the country risk.’ Its net sales rose by 4.7% year-on-year on a like-for-like basis to Euro22.7bn from Euro23.4bn. Its sales of cement rose by 3.3% on a like-for-like basis to 210Mt from 233Mt.
“In 2017 we made good progress across all key metrics. The growth in sales and the over-proportional increase in earnings before interest, taxation, depreciation and amortisation (EBITDA) represent a good performance and give us a very good basis to build on. The fact that four of our five regions reported growing EBITDA is testimony to our global strength,” said group chief executive officer Jan Jenisch. He added that the new strategy is based by a new set of targets that centre on growth, improving profitability, increasing cash generation and better returns for shareholders.
Holcim Argentina imports 0.42Mt of clinker in 2018
02 March 2018Argentina: Holcim Argentina plans to import 0.42Mt of clinker between May and December 2018 for US$27.5m. In a measure, agreed by the board of the subsidiary of LafargeHolcim, the cement producer will import the raw material via 10 ships, according to the El Cronista newspaper. The measure is intended to make up for a shortfall between production and local demand.
Cement and taxes
28 February 2018The old saying goes that nothing is certain except for death and taxes. But maybe that should be cement and taxes. Paying your taxes is something most people and companies just get on with, perhaps with some grumbling or perhaps not, but certainly with little press. So two news stories popping up in the same week about cement plants with tax issues is out of the ordinary.
The first concerned Lucky Cement’s battle in Pakistan to keep one of its plants open following accusations of underpaying its taxes. The local tax office tried to shut the Pezu plant down for not paying its property tax. The cement producer hit back with a restraining order from the provincial high court. The second detailed efforts by the Ethiopian authorities efforts to claw back US$10m from a local cement producer accused of deliberately understating its profits. In both cases it’s hard to tell if there is an obvious right or wrong party. Yet if these kinds of stories are hitting the local press headlines then either something has gone wrong or both parties are digging in for a fight.
Looking over a longer time frame two major stories about tax have been doing the rounds over the last year in the industry news. India’s Goods and Services Tax (GST) is a classic example of how cement producers sometimes have to deal with changes to existing regulations. It received another outing this week in the form of the credit agency ICRA’s latest forecast. It explained how the introduction of the new tax, a consolidation of other existing indirect taxes, had slowed production in the second quarter of the Indian financial year in 2017 - 2018.
The other example from a large cement producing country was US President Donald Trump’s cut to federal corporate tax in December 2017. The tax cut was expected to particularly benefit companies that produce materials, like building materials manufacturers. It prompted HeidelbergCement to say in early January 2018 that it expected to see a boost to its profits in 2019. Warren Buffet, the chairman of Berkshire Hathaway and owner of insulation producer Johns Manville amongst other companies, put it bluntly when he said in his 2017 annual report that nearly half the gain of his company’s net worth came from the changes to the US tax system.
Multinational companies, including some cement producers, face issues when dealing with different rules and regulations between the various countries that they operate in. However, sometimes unfairly, sometimes not, large companies also hold a reputation for trying to avoid paying tax.
In this context it’s interesting to look at how LafargeHolcim says it approaches the issue. The company published its tax principles in 2016 where it talks about being responsible and that it, “…accepts tax as a necessary and required contribution to society.” It then talks about the necessity of transparency and good relationships with tax authorities. The same year it declared a total tax bill of Euro726m versus total sales revenue of Euro23bn. By contrast Cemex UK in its tax strategy talks about how it follows the US Sarbanes Oxley Act 2002, which applies a more stringent international accounting and auditing standard. It feels far more honest when it says that it aims to minimise the tax burden upon its shareholders by using methods outlined by the UK government. Taxes may be a certainty but nobody wants to pay a penny more in taxes than they have to.
France: Worker’s at LafargeHolcim’s Martres-Tolosane cement plant have gone on strike over salary negotiations. A coalition of unions says that the company has refused to increase salaries despite a recovery in the cement market, according to France Info radio. The plant employs 110 workers. In mid-2017 LafargeHolcim announced that it was spending Euro100m on building a new clinker production line at the site.
ACC and Ambuja Cements put merger plans on hold
27 February 2018India: ACC and Ambuja Cements, the two Indian subsidiaries of LafargeHolcim, have put their merger plans on hold. ACC said that its board was of the opinion that there were ‘certain constraints’ blocking its merger plans, according to the Press Trust of India. However, it added that a merger was its ‘ultimate’ objective. Ambuja Cements made a similar statement. Both companies joined Holcim in 2005, before becoming part of LafargeHolcim in 2015.
Ashaka Cement to complete captive power plant in early 2019
26 February 2018Nigeria: Ashaka Cement plans to complete its 16MW captive power plant in early 2019. The subsidiary of Lafarge Africa and LafargeHolcim started the US$30.5m project in 2017, according to the Nigerian Guardian newspaper. Once operational the power plant will supply additional electricity to the national grid as well as supplying the neighbouring cement plant.