Displaying items by tag: Holcim

Adani Group’s latest target for acquisition in the cement sector was revealed this week to be Heidelberg Materials’ India-based business. The Economic Times newspaper reported that talks have started between the companies with a tentative value of US$1.2bn. As might be expected, Adani Group is said to be keen to close the deal down quickly. It wants to avoid an auction situation where it might face competitors. However, there may be some disagreement about the actual production capacity of Heidelberg Materials’ companies in India. If a deal were finalised, it might be completed by early 2027.

Heidelberg Materials’ capacity in India was listed as 14Mt/yr by the press but this could include the company’s grinding plants as well as its integrated ones. Heidelberg Materials, itself, says it has a capacity of 12.1Mt/yr from three integrated cement plants, four grinding plants and a terminal across 12 states. Data from the Global Cement Directory 2024 suggests that this refers to the group’s integrated cement capacity. The plants are roughly split equally between subsidiaries Heidelberg Materials India and Zuari Cement. Heidelberg Materials entered the Indian market in 2006 when it acquired Mysore Cement, Cochin Cement and established a joint-venture with Indorama Cement. It later added Zuari Cement to its portfolio when it bought Italcementi in 2016. The group used to run four integrated plants in India until in May 2024, when it shut down clinker production at its Ammasandra plant in Karnataka, although grinding activity has continued at the site.

Back in 2021 Heidelberg Materials’ CEO Dominik von Achten said that the group had considered selling anything following a business review. "There are no sacred cows. Everything was on the table." Indonesia was generally perceived by analysts as a likely sale target in the developing markets but nothing happened in the end. India wasn’t mentioned at this time, although no doubt it was being considered. Yet Holcim divested its businesses there in 2022. These were picked up by Adani Group for US$6.4bn. This, in turn, kicked off the rivalry in the Indian cement sector between market leader UltraTech Cement and Adani Group. Both companies are now in a race to build production capacity through expansion, new plants and acquisitions.

One reason why Heidelberg Materials may have decided now in particular to talk to Adani Group can be seen in its recent financial reports. In 2023 it said that its “cement and clinker deliveries increased moderately, as massive excess capacities persist in our core markets.” It then followed this up in 2024 by noting that deliveries were slightly down year-on-year in the first half of the year. It blamed this on excess capacity in South India. The subsidiary reported a net loss of €6.3m in 2023. An article by Holtec Consulting in the October 2023 issue of Global Cement Magazine implied that capacity utilisation was 56% in 2023, the lowest of the country’s regions. This is a particular problem for the company given that Zuari Cement is based in the south.

Funnily enough, a sale of 12.1Mt/yr capacity for US$1.2bn suggests a price of US$99/t, a similar figure to what Adani Group paid to buy Holcim’s assets in India in 2022. This may explain why Adani Group is trying to avoid an open sale for the Heidelberg Materials assets. Then again, maybe the market in southern India really is suffering. By comparison, when Adani Group concluded a deal to buy Penna Cements in August 2024 it paid US$1.2bn for an integrated capacity of about 7Mt/yr or around US$170/t. Factor in the low capacity utilisation rate in south India and this potential Adani-Heidelberg Materials deal ends up at roughly the same price.

Something that may help Adani Group reach its goal might be a formal merger between its two main cement companies, Ambuja Cements and ACC. The Mint newspaper reported on it this week, saying that Jefferies and Axis Capital has been hired as an advisor. This certainly makes sense in synergy savings but moving all the mining and leasing rights around might prove cumbersome. Regardless, Adani Group is on an expansion drive, with a capacity of 140Mt/yr targeted by 2028. All the smaller cement companies in the country are potentially targets.

Austria: Haimo Primas has been appointed as the CEO of Holcim Austria. He succeeds Berthold Kren in the role.

Primas, aged 53 years, has worked for Holcim for over 20 years. He started working for Lafarge Zementwerke in the early 2000s and has worked for related companies, including Holcim CE Holding and Lafarge Slovenia. His responsibilities have included senior positions at cluster and national level in finance, business development, supply chain and human resources. Amongst other roles, he was the plant manager of the Retznei cement plant from 2022 to October 2024. Primas studied business administration at the Karl-Franzens-University Graz.

Czech Republic: Holcim Česko, owner of the Čížkovice cement plant, will construct a new calcined clay processing line with an investment of US$44m, marking the largest investment in its history. The project, beginning in January 2025 and aiming for completion by the end of 2026, aims to reduce energy use and end reliance on fossil fuels. The Czech Ministry of the Environment has contributed US$14.5m towards the construction.

Holcim Česko CEO Miroslav Kratochvil said "The new calcined clay processing line represents a revolutionary step in the cement industry. Calcined clays will become a key material in our company's new cement products and will have a significantly lower carbon footprint. This innovation will enable the company to make a significant contribution to environmental protection and emission reduction."

Austria: Holcim is set to significantly reduce its carbon footprint with the installation of a new clinker cooler system and a large-scale photovoltaic system at its Mannersdorf cement plant. The clinker cooler project is valued at approximately €10m, and aims to cut heat consumption and reduce CO₂ emissions by 18,000t/yr. Completion is expected in early 2025. The solar project will be fully operational by 2025, and will cover approximately 15% of the plant’s energy needs and reduce CO₂ emissions by an additional 12,700t/yr. 2.7MW of solar panels were erected at the site of the former chimney on the plant’s premises.

Plant manager Helmut Reiterer said "Sustainability requires decarbonisation, i.e. continuously reducing the CO₂ emissions from our production activities. We are placing an investment focus on energy-efficient production by modernising our machinery, but also on expanding green energy."

US: Holcim has invested in Sublime Systems to expand its range of solutions to decarbonise the construction industry. The partnership will advance Sublime’s first commercial manufacturing facility in Massachusetts, US, giving Holcim a large share of Sublime Cement produced there through a binding offtake reservation. Sublime’s first commercial-scale plant is set to start production in 2026 with a capacity of 30,000t/yr.

Chief sustainability officer at Holcim, Nollaig Forrest, said “The Sublime Systems team has developed a unique technology to decarbonise cement, cutting across the entire production process from the use of clean electricity to carbon-free raw materials. We are excited about this technology’s potential and are delighted to be partnering to bring it to market at scale. This investment advances our strategy to decarbonise construction by scaling up the most innovative technologies across our operations.”

CEO and cofounder of Sublime Systems, Leah Ellis, said “In the cement industry, scale is everything. We are proud to collaborate with Holcim, which supports our mission of swift and massive impact. By pairing Sublime’s technology with Holcim’s advanced global operations from manufacturing and logistics to commercial distribution, we can scale up our impact together.”

Argentina/Mexico/Spain: Holcim has appointed Pablo Bittar as the Country CEO of Argentina, Christian Dedeu as the Country CEO of Mexico and Ricardo de Pablos as the Country CEO of Spain. Dedeu succeeds Jaime Hill, who has become Region Head North America. Bittar succeeds Dedeu. De Pablos succeeds Carmen Díaz, who has been appointed as the Chief People Officer in Holcim Group.

Dedeu previously worked as the CEO for Holcim Argentina from 2020. Before this he was the Commercial Director for the company in the country. He originally started working for Holcim in Argentina in 2007 before moving to Holcim Costa Rica in 2016 where he eventually became Commercial Director (Central America). Earlier in his career he worked for ExxonMobil in Argentina from the late 1990s. He is a graduate from the University of El Salvador in Buenos Aires and holds a Master in Business Administration from the IAE Business School.

Bittar worked for Holcim Argentina from late 1990s until 2012, eventually becoming a Procurement Officer. He then worked for Holcim in Ecuador and Colombia becoming the Head of Supply Chain Latin America in 2023. Bittar is an qualified accountant from the National University of Córdoba with a master’s degree in business administration from the same institution.

De Pablos joined Holcim in 2005. He became Regional Director Aggregates in Spain in 2009, Director Mediterranean Area in Spain in 2012, Export Director in 2016 and Director of Business Development and Exports in 2022. Prior to working for Holcim he was a Senior Consultant for PriceWaterhouseCoopers. De Pablos holds a degree in industrial engineering from the Universidad Politécnica de Madrid and an executive degree in business administration from the IE Business School.

Guatemala: Cemex has sold its operations in Guatemala to Holcim Group for US$200m. The deal includes one grinding mill, three ready-mix plants and five distribution centres. The grinding mill has a capacity of 0.6Mt/yr.

CEO of Cemex Fernando González said "In 2024, we have accelerated the execution of our portfolio rebalancing strategy with the announced sale of more than US$2bn in assets located primarily in emerging markets. We are now primed for the next stage by redeploying most of the divestment proceeds in developed markets, primarily the US. We expect these efforts to drive sustainable growth for our business in the short and medium term."

Global: Holcim has made three senior appointments in North America and at the group level.

Jaime Hill, the Country CEO of Mexico, has been appointed Region Head North America with immediate effect. He succeeds Toufic Tabbara, who is leaving the company. Hill joined Holcim in 1996 and has over 30 years of international experience, in finance, sales and marketing in the US and Latin America.

Carmen Diaz, the Country CEO of Spain, has been appointed as Chief People Officer with effect from 1 October 2024. She succeeds Feliciano González Muñoz, who is planning to retire at the end of 2024. Diaz joined Holcim in 2002 and has held commercial and general management roles in Madrid, Paris, Lyon and London.

Lukas Studer, General Counsel Corporate and M&A, has been appointed as Group General Counsel with effect from 1 November 2024. He succeeds Mathias Gaertner, who is leaving the group. Studer joined Holcim in 2008 and has been General Counsel Corporate and M&A since 2017, supporting corporate, finance and M&A.

The mountainous eastern shore of the Adriatic Sea and its hinterlands in Europe’s Balkan Peninsula have one of the world’s highest densities of countries: six, across a broad equilateral triangle of 212,000km². All six states – Albania, Bosnia & Herzegovina, Kosovo, Montenegro, North Macedonia and Serbia – are historically characterised by political non-alignment, carrying over from the Cold War period, and all the more notable for the presence of the EU to the north (Croatia, Hungary and Romania) and east (Bulgaria and Greece).

A nine-plant, 9Mt/yr local cement sector serves the 16.8m-strong population of the unconsolidated ‘bloc.’ Albania has 2.8Mt/yr (31%), Serbia 2.7Mt/yr (30%), Bosnia & Herzegovina 1.6Mt/yr (18%), North Macedonia 1.4Mt/yr (15%) and Kosovo 500,000t/yr (6%), while Montenegro has no cement capacity – for now. Altogether, this gives this quarter of South East Europe a capacity per capita of 539kg/yr. The industry consists entirely of companies based outside of the region. Albania’s two plants are Lebanese and Greek-owned (by Seament Holding and Titan Cement Group respectively). Titan Cement Group also controls single-plant Kosovo and North Macedonia, and competes in the Serbian cement industry alongside larger and smaller plants belonging to Switzerland-based Holcim and Ireland-based CRH, respectively. Lastly, Bosnia & Herzegovina’s capacity is shared evenly between Germany-based Heidelberg Materials and Hungary-based Talentis International Construction, with one plant each.

Lafarge Srbija, Holcim's subsidiary in Serbia, announced plans for its second plant in the country, at Ratari in Belgrade, last week. No capacity has yet emerged, but the plant will cost €110m, making something in the region of the country’s existing 0.6 – 1.2Mt/yr plants seem likely. This would give Serbia over a third of total capacity in the Central Balkans and twice the number of plants of any other country there, expanding its per-capita capacity by 22 – 44%, from a regionally low 408kg/yr to 500 – 590kg/yr.

In announcing the upcoming Ratari cement plant, Lafarge Srbija laid emphasis on its sustainability. The plant will use 1Mt/yr of ash from the adjacent Nikola Tesla B thermal power plant as a raw material in its cement production. In this way, it will help to clear the Nikola Tesla B plant’s 1600 hectare ash dumps, from which only 180,000t of ash was harvested in 2023. Circularity has been front and centre of Holcim’s discussions of its growth in Serbia for some time. When Lafarge Srbija acquired aggregates producer Teko Mining Serbia in 2022, the group indicated that the business would play a part in its development of construction and demolition materials (CDM)-based cement and concrete.

Holcim’s Strategy 2025 growth plan entails bolt-on acquisitions in ‘mature markets,’ backed by strategic divestments elsewhere. Other companies have been more explicit about a realignment towards metropolitan markets, above all in North America, at a time when they are also diversifying away from cement and into other materials. Just why a leading producer should look to build cement capacity in Serbia warrants investigation.

Serbia is the only Central Balkan member of Cembureau, the European cement association. In a European market report for 2022, the association attributed to it the continent’s fastest declining cement consumption (jointly with Slovakia), down by 11% year-on-year. Like the rest of Europe, Serbia is also gradually shrinking, its population dwindling by 0.7% year-on-year to 6.62m in 2023, which limits hopes for a longer-term recovery. Serbia remains the largest country in the Central Balkans, with 39% of the total regional population.

Several factors have compounded Serbia’s difficulties as a cement-producing country. Firstly, like the Nikola Tesla B thermal power plant, its kilns run on coal. 50% of this coal originated in Russia and Ukraine in 2021, causing the entire operation to become ‘imperilled’ after the former’s brutal invasion of the latter in February 2022, according to the Serbian Cement Industry Association. In planning terms, this was a case of putting half one’s eggs in two baskets – and dropping them both.

Secondly, Serbia’s choice of export markets is mainly confined to either the EU or global markets via the River Danube, Black Sea and Mediterranean. Either way, it is in competition with a cement exporting giant: Türkiye. Serbia sold €19.7m-worth of cement in the EU in 2023, up by 63% over the three-year period since 2020 – 31% behind Türkiye’s €28.8m (more than double its 2020 figure).¹ One other Central Balkan country had a greater reliance on the EU market: Bosnia & Herzegovina. It exported €48.4m-worth of cement there, quadruple its 2020 figure and behind only China (€133m) and the UK (€54.7) in cement exports to the bloc by value.

Bosnia & Herzegovina’s cement industry underwent a different permutation at the start of 2024: an acquisition, replacing one EU-based player with another. Lukavac Cement, which operates the 800,000t/yr Lukavac cement plant in Tuzla, changed hands from Austria-based building materials producer Asamer Baustoffe to Hungary-based property developer Talentis International Construction. Talentis International Construction belongs to one of Hungary’s major family-owned conglomerates, Mészáros Csoport.

Besides Central Europe, Balkan countries have found a ready source of investments in the past decade in China. In construction alone, Chinese investments total €13.2bn in Serbia, €2.4bn in Bosnia & Herzegovina, €915m in Montenegro and €650m in North Macedonia.² This can be a booster shot to all-important domestic cement markets, but has some risks. Montenegro previously faced bankruptcy after Export-Import Bank of China began to call in an €847m loan for construction of the still upcoming A1 motorway in the country’s Northern Region. This did not put off the Montenegrin government from signing a new memorandum of understanding (MoU) with China-based Shandong Foreign Economic and Technical Cooperation and Shandong Luqiao Group for construction of a new €54m coast road in the Coastal Region in mid-2023.

In Montenegro, UK-based private equity firm Chayton Capital is currently funding a feasibility study for a partly state-owned cement plant and building materials complex at the Pljevlja energy hub in the Northern Region. Along with an upgrade to the existing Pljevlja coal-fired power plant, the project will cost €700m.

In 2026, EU member states will begin to partly tax third-country imports of cement and other products against their specific CO₂ emissions, progressing to the implementation of a 100% Carbon Border Adjustment Mechanism (CBAM) by 2034. Montenegro led the Central Balkans’ preparations for the EU’s CBAM roll-out with the introduction of its own emissions trading system in early 2021. Bosnia & Herzegovina will follow its example by 2026, but other countries in the region have struggled to conceive of the arrangement except as part of future EU accession agreements.

Based on the average specific CO₂ emissions of cement produced in the EU, the World Bank has forecast that exporters to the bloc will be disadvantaged if their own specific emissions exceed 5.52kg CO₂eq/€.³ By contrast, any figure below this ought to offer an increased competitive edge. Albanian cement has average emissions of 4.71kg CO₂eq/€, 15% below ‘biting point’ and 13% below Türkiye’s 5.39CO₂eq/€. Albania’s government consolidated its anticipated gains by quintupling the coal tax for 2024 to €0.15/kg. The figure is based on the International Monetary Fund’s recommended minimum CO₂ emissions tax of €55.80/t, 21% shy of the current EU Emissions Trading Scheme (ETS) credit price of €70.49/t.⁴

The Central Balkans is a region of apparently slow markets and industry growth regardless – to 11 cement plants, following the completion of current and upcoming projects. A recurrent theme of capital expenditure investments and the way investors talk about them may help to explain this: sustainability. Looking at the mix of technologies in the current nine plants, these include wet kilns and fuels lines built for conventional fossil fuels. This is not to presume that any given plant might not be happy with its existing equipment as is. Nonetheless, the overall picture is of a set of veteran plants with scope to benefit from the kind of investments which all four global cement producers active in the region are already carrying out elsewhere in Europe. Such plans may already be in motion. In late 2023, Titan Cement Group’s North Macedonian subsidiary Cementarnica Usje secured shareholder approval to take two new loans of up to €27m combined.

As the latest news from Serbia showed, taking care of existing plants does not preclude also building new ones. The cement industry of the Central Balkans is finding its position in the new reduced-CO₂ global cement trade – one in which old and new work together.

References

1. Trend Economy, ‘European Union – Imports and Exports – Articles of cement,’ 28 January 2024, https://trendeconomy.com/data/h2/EuropeanUnion/6810#

2. American Enterprise Institute, 'China Global Investment Tracker,' 3 February 2024 https://www.aei.org/china-global-investment-tracker/

3. World Bank Group, ‘Relative CBAM Exposure Index,’ 15 June 2023, https://www.worldbank.org/en/data/interactive/2023/06/15/relative-cbam-exposure-index

4. Ember, 'Carbon Price Tracker,' 26 August 2024, https://ember-climate.org/data/data-tools/carbon-price-viewer/

Switzerland: Holcim has entered a partnership with Kibag and Oxara for the production and distribution of Oxacrete Oulesse, a cement-free binder developed by Oxara. This new product reportedly aims to supply up to 10% of Switzerland's annual concrete market. Oxacrete Oulesse is made with materials from deconstruction, offering a low-carbon alternative to traditional cement.