Displaying items by tag: VICAT
Update on France, April 2024
10 April 2024Heidelberg Materials announced this week that it is preparing to close its integrated cement plants at Beffes and Villiers-au-Bouin in France by October 2025. It framed the restructuring as a response to ‘a significant decline in cement sales in France’ and a plan to focus on low-carbon products. Unfortunately, local media reported that around 170 jobs will be lost at the two sites. The company says it is looking at ‘socially acceptable solutions’ including redeployment to other locations in the country.
Investment has been forthcoming from Heidelberg Materials France in recent years. It reminded everyone that it initiated a Euro400m scheme at its France-based subsidiary Ciments Calcia in late 2020. Most of this was earmarked towards a new production line at the Airvault plant, which is currently being built. Other schemes at the Beaucaire, Bussac-Forêt and Couvrot integrated plants followed. More recently, Heidelberg Materials launched a carbon capture, utilisation and storage (CCUS) project at Airvault, part of the GOCO2 initiative, with the aim of starting initial capture in 2030 with full 1Mt/yr capture planned later. What the company didn’t mention though was at the time of that 2020 investment it was also preparing to convert the integrated Gargenville plant into a grinding unit, stop white cement production at its Cruas plant with the intention of turning the site into a terminal and it wanted to reduce its workforce by around 140. To be fair to Heidelberg Materials though, it did have the same goal of reducing its specific net CO2 emissions. The added detail this week was that the group aims to generate half of its revenue from sustainable products that are either low-carbon or circular by 2030.
Heidelberg Materials France is not alone with its ambitions for low-carbon products. Holcim notably opened in early 2023 what it said was the first calcined clay unit in Europe at its Saint-Pierre-la-Cour cement plant. Heidelberg Materials then followed in May 2023 with the announcement of a calcined clay project at its Bussac-Forêt cement plant. Other clay projects from Vicat, NeoCem and Neo-Eco have been reported since then. The other prominent France-based blended cement producer that has steadily been building its business in recent years is Hoffmann Green Cement. More general plant upgrade projects that are also worth mentioning include Eqiom’s (CRH) upgrade to its Lumbres plant in February 2024 and the ignition of a new kiln at Lafarge France’s Martres-Tolosane plant in October 2023. Both of these projects have been framed as driving sustainability.
Graph 1: Cement production in France, 2014 - 2022. Source: France Ciment.
Heidelberg Materials’ assessment about the poor state of the cement market has been confirmed by local media. Sales reportedly started falling in 2022, were down by 6% year-on-year in 2023 and further downward pressure is expected in 2024. Production data shown in Graph 1 above released by France Ciment, the national cement association, doesn’t really show what has been happening with sales. Over the last 20 years production hit a high of around 22Mt in the mid-2000s before settling around 16 - 17Mt/yr from 2015 onwards. The more telling trend, perhaps, has been the increase in CEM II blended cements from 50% in 2012 to 64% in 2022. Cement production may have stayed roughly the same over the last decade but it is using less clinker than it used to. Hence the pressure on companies like Ciments Calcia to reduce clinker capacity.
A further cost pressure facing cement producers in France is the impending end to the price cap on electricity scheduled by the end of 2025. The government enacted the scheme in late 2021 at the end of the Covid-19 pandemic, but then carried on as energy prices spiked following the Russian invasion of Ukraine. France Ciment lobbied in August 2023 for further protection for the sector using the argument that decarbonisation was not possible without electricity available for a reasonable price. It added that decarbonising the cement sector in France with carbon capture would cost around Euro3.5bn. Electricity prices started rising in February 2024 as part of the government’s phase out of the scheme.
Finally, 17 people were arrested on 5 April 2024 in connection with a demonstration at Lafarge France’s Val-de-Reuil ready-mixed concrete plant in Eure. Environmental activists reportedly trespassed on the site, according to local press, causing an estimated Euro450,000 in damages with acts such as spraying foam into machinery, ripping up bags of cement, breaking windows and more. The activists presented their actions as a response to both the environmental impact of cement and concrete production and the ongoing legal allegations about Lafarge’s actions in Syria in the early 2010s. Lafarge France’s La Malle integrated plant was also similarly targeted in December 2022 when around 200 activists stormed the site and caused damage to machinery and property. Lafarge’s response at the time was to remark that there was a feeling of misunderstanding given that the La Malle plant was piloting various decarbonisation methods.
All of this presents a febrile picture of the cement sector in France. Sales are down, electricity costs are set to go up and producers are switching to low-carbon cement products. Alongside this they are also closing clinker production plants but are also investing in new decarbonisation projects. At the same time environmental protestors have also been targeting cement and concrete plants and Lafarge’s association with its former actions in Syria appear to have made it more of a target than the other manufacturers. It is unsurprising then that Holcim, the parent company of Lafarge France, has raised the risk of damage to the group’s reputation, with both the general public and investors, should it fail to meet its targets. Reaching net zero was never going to be easy but setting unrealistic targets is increasingly not an option.
Decarbonising the cement sector in the US, March 2024
27 March 2024The US Department of Energy (DOE) announced a US$1.6bn investment in the cement sector this week. The funding was part of a total of US$6bn for 33 projects in over 20 states to decarbonise energy-intensive industries also including chemicals and refining, iron and steel, aluminium and metals, food and beverages, glass, process heat applications and pulp and paper. The DOE was keen to link the money to “the President’s Bipartisan Infrastructure Law and Inflation Reduction Act.” Politics is never far away it seems! The projects are part of the Industrial Demonstrations Program, managed by DOE’s Office of Clean Energy Demonstrations (OCED).
Company | State | Funding | Scale | Method |
Heidelberg Materials US | Indiana | US$500m | Full | CCS |
National Cement | California | US$500m | Full | Alternative fuels, calcined clay, CCS |
Summit Materials | Georgia, Maryland, Texas | US$216m | Demonstration | Calcined clay |
Brimstone Energy | TBD | US$189m | Commercial | Raw material substitution |
Sublime Systems | Massachusetts | US$87m | Commercial | Raw material substitution |
Roanoke Cement | Virginia | US$62m | Demonstration | Calcined clay |
Table 1: Summary of US Department of Energy funding announced on March 2024 to decarbonise cement and concrete production
Table 1 above shows the main approaches each of the projects aim to use. The two most expensive ones involve carbon capture and sequestration (CCS) at Heidelberg Materials US’ Mitchell cement plant in Indiana and National Cement’s Lebec plant in California respectively. In a complimentary press release Chris Ward, the CEO of Heidelberg Materials North America, said “This substantial federal funding investment will help create the first full-scale deployment of carbon capture and storage on a cement plant in the US.” The proposed CCS unit at the plant will capture around 2Mt/yr of CO2 from 2030. If Ward’s forecast is accurate (and no one beats them to it), then Heidelberg Materials will likely have set up the first full-scale CCS units at cement plants in both North America and Europe. This will be a significant achievement. The National Cement project, by contrast, is a mixed bag of approaches to decarbonising cement production that follows the multi-lever approach advocated for in many of the industry net-zero roadmaps. It intends to use agricultural by-products such as pistachio shells, as alternatives fuels to lower the fuel-based emissions, calcined clay to lower the clinker factor and CCS to capture the remaining 950,000t/yr of CO2 emissions.
The other projects either involve using calcined clay or substituting limestone with calcium silicate. The Summit Materials proposal is noteworthy because it aims to build four clay calcination units in locations in Maryland, Georgia and Texas. None of these appear to be near Summit’s (or Cementos Argos’) cement plants. This suggests that the company may be intending to use calcined clay in ready-mixed concrete production. The Roanoke Cement Company calcined clay project will be baseEuropead at its cement plant in Troutville, Virginia.
The remaining two grant recipients, Brimstone and Sublime Systems, will both test the companies’ different methods of manufacturing cement by using calcium silicate instead of limestone. Brimstone’s method produces ordinary Portland cement (OPC) and supplementary cementitious materials (SCM). The company said in July 2023 that its OPC met the ASTM C150 standards. However, the company has released less information about its actual process. Sublime Systems’ uses an electrolysis approach to create its ASTM C1157-compliant cement. It calls this ‘ambient temperature electrochemical calcination.’
Investment on the same scale of the DOE has also been happening in Europe. In July 2023, for example, the European Commission announced an investment of Euro3.6bn in clean tech projects to be funded from the proceeds of the European Union emissions trading scheme (ETS). This was the third call for large-scale projects following previous announcements of recipients in 2021 and 2022. Euro1.6bn of the third call funding went towards cement and refining projects including five cement and lime projects in Belgium, Croatia, Germany and Greece. The money granted for each of these schemes was in the region of Euro115 - 235m.
Both the US and Europe are throwing serious finance at the cement industry to try and kickstart the various pathways towards net zero. They are also doing it in different ways, with the US aiming to boost its economy by onshoring sustainable industry, and Europe hoping to fund its approach via carbon taxation. Government-driven decarbonisation investment for cement in other large countries and regions around the world appears to be lagging behind the US and Europe but these may spring up as net zero targets are set, roadmaps drawn up and government policy formulated. These places could also benefit from watching what works and does not work elsewhere first. Back in the US and Europe the next tricky part of this process will be bridging the gap between government subsidy and commercial viability.
Vicat reports full-year sales growth in 2023
14 February 2024France: Vicat recorded consolidated sales of Euro3.94bn in 2023, up by 8% year-on-year from Euro3.64bn in 2022. Its earnings before interest, taxation, depreciation and amortisation (EBITDA) were Euro740m, up by 30% from Euro570m. The producer's energy costs declined by 10% to Euro596m. Vicat noted ‘strong’ growth in sales across all regions except Kazakhstan and India, and in earnings in the US. Its cement volumes rose by 6.3% overall, but contracted in Egypt, France, Senegal and Switzerland.
The release of the half-year financial results from many of the larger multinational cement producers in Europe and North America gives us the usual opportunity to examine how well the year has gone so far. In summary, each of the companies highlighted here increased its sales and earnings on a like-for-like basis. However, in many cases, but not all, sales volumes of cement fell. Notably, both Holcim and Heidelberg Materials did not appear to release these figures. Heidelberg Materials did say though that its sales volumes declined in all business lines as “a result of the global economic down-turn.” In Holcim’s case, on top of whatever else has been going on over the last six months, the group has continued to divest cement assets as it realigns its portfolio. One more interesting point to note is that, instead, Holcim and Heidelberg Materials highlighted their reductions in CO2 emissions at the start of their half-year reports.
Graph 1: Sales revenue for selected multinational cement producers in the first half of 2023. Source: Company financial reports.
Holcim continued to expand its light building materials business segment in North America as well as picking up some aggregate and ready-mix concrete assets in North America and Europe. Its sales grew fastest in North America, although Europe generated more sales overall. Elsewhere the other geographic business areas all held up. The group’s Solutions & Products division, the one responsible for the light building materials, lost sales and earnings year-on-year. This was blamed on the “normalisation of buying patterns” in the roofing market in North America in late 2022 and carrying into 2023, leading to destocking in various distribution channels. How this might effect the group’s ongoing diversification strategy remains to be seen.
Heidelberg Materials was more upfront about the specifics of its cement business in the first half of 2023. Sales volumes fell in all business lines. For cement, the largest falls were reported in the Western and Southern Europe Group area due to a ‘significant’ decline in residential construction followed by the Africa-Eastern Mediterranean Basin area although a slight increase was recorded in deliveries in Asia-Pacific. That last region benefited from the local subsidiary increasing its cement and clinker deliveries in Indonesia. This was reportedly due to the company leasing the Maros cement plant in September 2022. The plant serves markets in the east of the country. Overall, despite the falls in revenue in many regions, the group pushed up its prices sufficiently to keep net sales revenue and earnings growing well.
Cemex, meanwhile, was keen to shout about its improved earnings in all of its regions. It attributed this to its price strategy, lowering input cost inflation and the growing effects of its investments portfolio and its Urbanisation Solutions business. Each of the group’s main regions – Mexico, the US and Europe – performed well, with Mexico growing sales the fastest, the US driving up earnings the most and Europe, Middle East, Africa and Asia holding growth steady despite demand issues. Pricing was cited as a main issue for the success of each region.
Vicat’s sales and earnings rose due to increased sales volumes of cement and higher prices. At home in France, the company successfully fought off falling cement sales volumes with price rises, particularly due to energy price inflation. North America, the group’s other big market, grew strongly, boosted by the ramp-up of production and sales from the new kiln at the Ragland plant in Alabama. Finally, Titan experienced a similar situation to the other companies featured here, with increasing demand driving sales and further helped by prices. Earnings then grew in turn. Unlike the other companies, the US contributed a much larger share of sales for Titan than Europe or elsewhere. Back home in Greece the company’s sales and earnings benefited from increased sales volumes across all business lines. Both Vicat and Titan had mixed experiences in Egypt and Türkiye, with negative currency exchange effects causing problems in both countries, despite demand mounting in the latter.
On the basis of these financial results, it has been a positive first half for the larger cement companies based in Europe and North America. Cement sales volume growth has been mixed, where known, but price rises have compensated for this, leading to higher earnings. Whether these companies can continue to pull off this trick as or if global inflation starts to slow down is very much an ongoing question. As mentioned at the start, some of the companies also led their half-year reports with emission figures and many of them prominently highlighted forthcoming sustainability projects. These companies may be making most of their money in Europe and North America but there is clearly an awareness that these regions are also leading globally in implementing CO2 emission legislation.
France: Vicat's consolidated sales were Euro1.91bn in the first half of 2023, up by 9% year-on-year from Euro1.76bn in the first half of 2022. The group's earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 17% to Euro314m from Euro269m. Vicat said that it recorded generally 'resilient' sales volumes and price rises across most of its markets. Volumes dropped in France and Switzerland. During the half, Vicat's specific CO2 emissions per tonne of cement fell by 3.6% year-on-year to 571kg/t from 591kg/t.
Chair and chief executive officer Guy Sidos said "The group has not yet returned to its pre-crisis margins rates. I’d like to thank all our teams for their unwavering commitment enabling us to reach our industrial, financial and climate targets." He added that Vicat is on track to achieve its CO2 emission target of 497kg/t of cement by 2030.
Regarding its outlook for the current 2023 full year, Vicat said "The group is targeting further significant sales growth, with its markets overall expected to display resilience and reflect the full benefit of the price hikes in selling prices implemented in 2022 and the fresh increases introduced in 2023." It added "The performance in 2023 will reap the benefit of the full impact of the new kiln at the Ragland plant in the US, the elimination of the non-recurring costs incurred in 2022 and the stabilisation in energy costs."
France: Vicat and Materrup plan to build their first reduced-CO2 MCC1 raw clay cement plant at Carbonne in Occitanie. The plant will have a capacity of 60,000t/yr. Vicat and Materrup plan for their joint venture to subsequently build three further units across France.
Vicat's chair and chief executive officer Guy Sidos said "This new structure will enable Vicat to provide complementary very low-carbon solutions and meet the different needs of players in the construction sector. Development prospects are promising."
France: Vicat says that it will commission its planned 100% carbon capture system at its Montalieu-Vercieu cement plant ‘before 2030,’ and possibly as soon as 2027. The Les Echos newspaper has reported that the system will have a capture capacity of 1Mt/yr of CO2, although the plant’s emissions are currently 800,000t/yr. Captured CO2 may then be transported by barge, train or pipeline to the port of Fos-sur-Mer.
When commissioned, the upcoming carbon capture system will reduce the CO2 emissions of cement produced at the Montalieu-Vercieu plant by 94% to 40kg/t.
UK: Carbon8 has appointed Paul Drennan-Durose as its chief executive officer (CEO). He succeeds John Pilkington, who becomes the non-executive chair.
Drennan-Durose holds experience in the sustainable energy sector with both public and private companies, including private equity and venture capital. He previously worked as the CEO of Ineo Partners, Powerhouse Energy Group and Heliex Power. Before this he was the managing director of Poole Process Equipment for seven years in the 2010s. Other roles of note include that of Group Commercial Director - Europe, Africa, Middle East and Asia Pacific for SMP Europe and the managing director of PLW and Fiamm Energy Technology.
Carbon8 is a UK-based company that supplies carbon capture, utilisation and storage (CCUS) equipment. Its main investors include EDF Pulse Ventures and Vicat. Notable corporate achievements include deploying its technology at Vicat’s Montalieu-Vercieu cement plant in France, at an EFW plant in the Netherlands and establishing business partnerships with FLSmidth and Return Carbon.
Update on California, May 2023
10 May 2023Eagle Materials announced this week that it had completed the acquisition of Martin Marietta’s cement import business in the north of California. A key part of the deal includes the sale of a cement terminal at Stockton. No value for the transaction has been disclosed.
The agreement prompts discussion for two immediate reasons. Firstly, it continues the enlargement of Eagle Materials’ cement business with its second terminal in California. The company operates its cement business in a band running almost right across the US. It runs seven cement plants in seven different states and jointly operates, with Heidelberg Materials, a plant in Texas too. It also runs a network of 25 cement terminals, including the new acquisition, stretching from California in the west to Pennsylvania in the east.
Eagle Materials’ focus on the cement sector also harks back to its previous plans to separate its various businesses. In 2019 it approved a plan to split its heavy materials and light materials businesses into two publicly-traded entities. The decision was made in response to pressure by shareholder Sachem Head Capital Management to make the company, in its view, more valuable. A strategic portfolio review followed but the planned separation was subsequently delayed due to the Covid-19 pandemic and poor market conditions, amongst other reasons. The board of the company then cancelled the proposed separation in 2021 citing the financial benefits of a diversified business, opportunities for strategic growth and the divestment of its oil and gas proppants business.
The other talking point is that the Eagle Materials transaction follows a positive response by the Federal Trade Commission (FTC) in response to the abandonment of CalPortland’s attempt to buy the Tehachapi cement plant in southern California and two related terminals from Martin Marietta. CalPortland’s parent company Taiheiyo Cement said in late April 2023 that it had terminated the acquisition agreement originally announced in mid-2022 due to its inability to obtain approval from the FTC in a timely manner. Whilst the FTC did not say if it had directly tried to block the proposed deal it did say, “The abandonment is a victory for consumers and preserves competition for a key component of Southern California’s construction and infrastructure industries.”
The FTC argued that the transaction would have reduced the number of cement suppliers in Southern California from five to four, further concentrating an already concentrated market, and was “presumptively illegal.” It noted that the Tehachapi plant was only about 20km away from CalPortland’s Mojave cement plant. It went on to say that, if the deal had gone ahead, CalPortland was poised to own half of the cement plants serving the Southern California market. It added that it would have been well-placed to raise its prices and that, “the transaction would have also increased the likelihood for coordinated action between the remaining competitors in this concentrated market.”
The de-facto block by the FTC of the Tehachapi sale now opens up the question of who Martin Marietta might try to sell it to next. Cemex, Mitsubishi Cement and National Cement (Vicat) are the obvious contenders given that they each also run integrated plants in the state. Of course another company, especially one with some form of existing distribution network, may express interest. Given its enlarged presence in Northern California, Eagle Materials springs to mind. Other potential buyers are, of course, available.
Vicat boosts sales in first quarter of 2023
04 May 2023France: Vicat's first-quarter sales were Euro899m in 2023, up by 14% year-on-year from US$789m during the first quarter of 2022. In France sales rose by 9.6% to Euro297m. In the Americas sales rose by 9% to Euro198m. In the Mediterranean region sales rose by 94% to Euro104m and in Africa sales rose by 21% to Euro108m. Meanwhile, sales remained roughly level year-on-year in Asia and Europe (excluding France), at Euro112m and Euro81m respectively.
Chair and CEO Guy Sidos said “Vicat’s first-quarter performance demonstrates the strong resilience of demand in its main markets, which translated into a sharp increase in its consolidated sales when compared to very good first-quarter 2022 figures. Amid changeable winter weather conditions, especially in California, the group has pushed ahead with the ramp-up in its new installation in Alabama and accelerated its strategy of improving its manufacturing performance and shifting away from fossil fuels to achieve its operational, environmental and social objectives.”