Germany: Susanne Fuchs has been elected to the supervisory board of Fuchs Petrolub in place of her father Manfred Fuchs. Manfred Fuchs, aged 78 years, resigned as deputy chairman of the board at the end of the group’s annual general meeting. The company’s chairman of the executive board is Manfred Fuchs’s son, Stefan Fuchs. Susanne Fuchs holds a doctorate in veterinary medicine and successfully completed her MBA at the Open University in the UK in 2016.

France: Julien Soum has been appointed as the European business development manager at Anderman Ceramics. Soum has worked as a commercial engineer in Europe for the last five years with knowledge of the refractory markets for cement and steel working for Refractaria and Hepha. He was educated at the University of Montpellier and the Kedge Business School in Marseille.

The Philippines has been messing up the balance sheets of cement producers so far in 2017. Over the last week Holcim Philippines, CRH and Cemex have each reported lacklustre first quarter results dragged down by poor performance in the country. CRH’s chief executive officer Albert Manifold seemed to receive the worst kicking when analysts in a conference call refused to let it pass that the company’s sales had dropped by 12% year-on-year in Asia. Although to be fair to him the group’s Asian division only represented 2% of global sales at Euro0.5bn…

CRH’s quarterly financial reports tend to be in the form of sparse trading updates. So this lack of detail and CRH’s plans to invest over Euro300m in the market may have prompted Manifold’s grilling. According to the Irish Times he blamed the situation on cheap imports from south-east Asia pulling down the price. He then defended the investment on the grounds that local producers would have an advantage as they increase production capacity due to constant production and ‘guaranteed’ regulation and certification.

CRH isn’t the only organisation that has been burned by the Philippines. Before Christmas this column was praising the local industry for being in a boom. Cement sales had risen by 10.1% year-on-year to 20.1Mt according to CEMAP data in the first nine months of 2016 and the Duterte Infrastructure Plan was starting to target hundreds of billions of US dollars towards infrastructure spending. In the end cement sales rose by 6.6% to 26Mt for the full year in 2016 and this was a solid performance despite being brought down by the fourth quarter.

From the cement producers mentioned above, Cemex reported that its Ordinary Portland Cement sales volumes fell by 9% in the first quarter. It blamed the fall on bad weather and a tough quarter to compare against in 2015. Holcim Philippines said that its net sales fell by 12% to US$176m and it attributed it to lower public infrastructure spending, tighter industry competition and higher production expenses. Eagle Cement meanwhile, the fourth of the country’s major producers, is preparing to float on the local stock market in May 2017 to fund an expansion drive. The poor results of the other three cement producers may dent its proceeds from the initial public offering (IPO).

The words CRH’s Albert Manifold used in his defence were that, “Brand matters over there.” Funnily enough the other big Philippines cement industry news story that has been rumbling away for the last few months is an investigation by the Philippine Competition Commission (PCC) into the conduct of the Cement Manufacturers Association of the Philippines (CEMAP) and some of the leading cement producers. Naturally this includes CRH’s joint venture Republic Cement. The enquiry was prompted in mid-2016 by the accusation of anti-competitive agreements by a former trade official. He also made direct allegations against Ernesto Ordonez, the head of CEMAP. The investigation is on-going and perhaps it will find out exactly how much ‘brand matters’ in the Philippines.

Germany: Klaus Paul has been appointed as the Technical Managing Director of Schade Lagertechnik. His appointment is in response to the impending retirement of Karl-Heinz Fiegenbaum on 30 June 2017. Fiegenbaum has been Managing Director of the company since July 2011. He will be replaced by Christoph Seifert, who moves across to this position after having started with Schade as Technical Managing Director in February 2015.

Paul started his career in 1977 with Friedrich Uhde where he started working as a draughtsman at the age of 16. Following the competition of an engineering degree he stayed with the company, which eventually became part of ThyssenKrupp Group. From 2012, he was with Uhde OOO, a subsidiary of ThyssenKrupp in Russia, first as Director of Project and Site Management, and later as one of the Managing Directors of Uhde / OOO ThyssenKrupp Industrial Solutions Russia.

LafargeHolcim’s investigation into its conduct in Syria claimed its biggest scalp so far this week with the shock resignation of chief executive officer (CEO) Eric Olsen. His decision landed with the publication of the group’s investigation into the conduct of the legacy Lafarge operations in the country in 2013 and 2014. As per the initial findings of the investigation that were released in March 2017, it confirmed that selected personnel had engaged in dealings with terrorists in connection to one of its cement plants in the country during 2013 until the unit closed in September 2014. The board decided that Olsen had no connection or even awareness of the misconduct. However, he decided to quit anyway in order to restore ‘serenity’ to the company.

In its latest public statement on the investigation, LafargeHolcim outlines five weaknesses with its compliance led by improper payments related to Lafarge Syria’s security and supply chain. It then goes on to list a failure of line management, inadequate controls over expenses and a failure to detect improper payments and improperly recorded payments. It’s all presented as ‘chaos reigned’ or wayward staff in tough circumstances trying to do their muddled best for the company. Unfortunately for this narrative, selected members of group management were aware of the situation and appeared to have done nothing about it. This then begs the question: who knew what when?

Olsen may have been exonerated by the board on his departure but he was Lafarge’s Executive Vice-President of Operations for Lafarge in 2014. If he didn’t know what was going on in Syria during his watch then he wasn’t doing his job properly or it was being hidden from him. The head of Lafarge itself at the time, Bruno Lafont, might also have been a viable target for discipline but he decided to stand down from the board of LafargeHolcim in early April 2017. No doubt other former members of the Lafarge management team may bear more responsibility. LafargeHolcim’s implementation of its remedial measures may turn up more culprits, as may the on-going criminal complaints process continues in France.

French newspaper Le Monde, the newspaper that originally broke the story, is probably on the money with its assessment that Olsen’s departure is actually the continuation of the boardroom battle between the board and its shareholders that has raged since before Lafarge and Holcim formally merged. Bruno Lafont was originally lined up to become the CEO of the new company until Lafarge’s worsening financial position compared to Holcim’s prompted a backlash from Holcim shareholders. Le Monde describes how LafargeHolcim’s shareholders include four prominent billionaires: Switzerland’s Thomas Schmidheiny, Belgium’s Albert Frère, Canada’s Paul Desmarais and Egypt’s Nassef Sawiris. Schmidheiny, readers may remember, was one of the principal actors who sunk Lafont’s bid to be CEO back in early 2015.

Placed in this context, Olsen’s departure might seem forced, especially if he had no connection to the debacle in Syria. LafargeHolcim has faced a tough couple of years following its formation with consistently falling sales revenue. Asset divestments and cuts have been the cure as the group struggled to find its new size. Yet, the group saw its adjusted operating earning before interest, taxation, depreciation and amortisation (EBITDA) start to rise in 2016 suggesting that the remedial action was starting to work. LafargeHolcim’s management and shareholders will be acutely aware of its performance so far in 2017 ahead of the public release of its first quarter results in early May 2017. Under these circumstances it seems unlikely that serenity will be restored to the upper echelons of LafargeHolcim any time soon.

Mexico: Martha Soledad Rodríguez Rico, the chief financial officer of Grupo Cementos de Chihuahua (GCC) has died. The company is conducting a succession process that will appoint a replacement in due course.

Germany: Eliza Suk Ching Yuen has decided to step down from the position of Supervisory Board Member of KHD Humboldt Wedag International (KHD). The resignation will take effect from the end of the next Annual General Meeting on 23 May 2017. Yuen was elected to the board in 2012.

Data from the Peruvian cement association (ASOCEM) presents a potential bounce in the fortunes of the local industry in March 2017. Cement production rose slightly year-on-year to 0.79Mt. This is the first monthly rise since July 2016. The first quarter of 2017 as a whole is down by 4.5% year-on-year to 2.35Mt but any fillip is surely welcome.

Graph 1: Cement production in Peru, 2012 – 2016. Source: ASOCEM.

Graph 1 shows that production peaked in 2014. Although it has fallen since then it is still above the level in 2012. Cementos Pacasmayo blamed the overall fall in 2016 on a strong end to 2015 associated with El Niño prevention investments although, given that its production volumes also fell in 2015, albeit slightly, it may be being optimistic in its analysis. It also blamed the widening fallout from the Brazilian Petrobras corruption scandal for delaying investment by the Peruvian government on an infrastructure drive.

Graph 2: Cement and clinker imports to Peru, 2014 – 2016. Source: ASOCEM/SUNAT.

Another point to examine in ASOCEM’s latest release is the import figures as can be seen in Graph 2. Overall cement and clinker import volumes have hovered around 10 – 15% of local production but the ratios have changed since 2014, with a focus on ground cement. Cementos Pacasmayo provided one possible reason in its fourth quarter report for 2016 with the news that it had started replacing imported clinker with its own clinker as it increased production at its new Piura plant. Most of this cement has been coming from Vietnam through 2015 and 2016. Coincidentally, Vietnam’s General Department of Vietnam Customs has reported this week that local exports of cement and clinker are up by 11% to 4.82Mt for the first quarter of 2017 and that Peru is one of the top destinations. Also of note in February 2017 was a significant cement import of 30,800t from China following no imports from that country in 2016 and most of 2015.

Recent production and import trends aside, the Peruvian cement industry’s industry base hasn’t changed much since last time this column coved it (GCW183, January 2015). The country has three main producers – UNACEM, Cementos Pacasmayo and Grupo Gloria – who operate 49%, 43% and 8% respectively of the local 11.4Mt/yr production capacity. They each operate production units in north-south geographical bands in the country with Pacasmayo in the north, UNACEM in the central coastal region near to Lima and Gloria’s subsidiaries in the south.

As mentioned above, Cementos Pacasmayo has been increasing production at its newer Piura plant since mid-2015. Gloria Group purchased Cementos Otorongo, a project to build a cement plant in the south, from Votorantim in mid-2016 and Cemex was reported as having gained government approval for a grinding plant project in Lima in early 2016. On the financial side, UNACEM’s income fell by 4% to US$573m in 2016. Cementos Pacasmayo’s sales fell slightly to US$381m and its earnings before interest, taxation, depreciation and amortisation (EBITDA) for its cement operations fell by 4.6% to US$118m.

Like lots of African countries the outlook for the construction industry in Peru is good in the medium term with plenty of scope for development and a growing economy despite a contraction of 6% in the construction industry in 2016. The Gross Domestic Product (GDP) growth rate hit a low of 2.4% in 2014 but it has since started to pick up again. Once or if the Kuczynski administration starts spending on infrastructure then all the signs should point to growth in the cement industry. Given the amount of clinker sloshing around the world if any producers actually start opening terminals or grinding plants this would suggest they are confident of a return on investment.

UK: Bunting Magnetics Europe has appointed Tom Higginbottom and Gordon Kerr to its sales team. Higginbottom joins Bunting’s external sales team and has an engineering background, with particular knowledge of hydraulics. Kerr will be responsible for business development in a new internal role. He previously held a sales and marketing position at Anglian Home Improvements before becoming a project manager at Ceramica & Stone.

Bunting Magnetics supplies magnetic separators and metal detectors. The European manufacturing headquarters are based in Berkhamsted, Hertfordshire. In January 2017, the company acquired Master Magnets.

Unsurprisingly the European Commission blocked Duna-Dráva Cement’s (DDC) attempted purchase of Cemex Croatia this week. Merging the country’s biggest cement producer with its largest importer was going to be a challenge for the commission. Whereas in previous transactions the various parties offered business disposals to ease the commission’s concerns, here all they were got was access to a cement terminal in Metković in southern Croatia. And this facility on the Neretva river is currently being leased by Cemex! Clearly this didn’t give the impression of being a long term solution.

Compare this with the merger between Lafarge and Holcim in 2015 where multiple sales were proposed to make sure the deal went through. Or look at the acquisition of Italcementi by HeidelbergCement in 2016 where the parties sold Italcementi’s Belgian subsidiary Compagnie des Ciments Belges to Cementir to make the deal happen. In comparison to these deals the attempt by HeidelbergCement and Schwenk, through their subsidiary DDC, comes across as a calculated gamble designed to test the resolve of the commission. If the commission had somehow passed the proposed acquisition then the companies would have cornered the market. If it turned it down, as it has, then nothing would be lost other than putting together the bid. HeidelbergCement had its mind on bigger things as it bought and then integrated Italcementi.

Commissioner Margrethe Vestager summed up the mood of the commission: “For mergers between direct competitors, we generally have a preference for a clean, structural solution, such as selling a production plant. HeidelbergCement and Schwenk decided not to offer that. Instead they proposed to give a competitor access to a cement terminal in southern Croatia. Essentially, this amounted to giving a competitor access to a storage facility – without existing customers or established access to cement, without brands and without sales or managerial staff.”

Elsewhere, the other big story in the industry news this week was Votorantim’s decision to focus on the lime business in Brazil by adding lime units to some of its existing cement plants. Given the dire state of the local cement and construction industry, initiatives to break the deadlock have been expected. The alternative is plant closures and divestures, such as the ongoing talks by Camargo Corrêa to sell the other big local producer, InterCement. Votorantim plans to build lime units attached to the cement plants at Nobres in Mato Grosso, Xambioa in Tocantins, Primavera in Pará and Idealiza in Goiás. Unfortunately the agricultural areas of the country and ones with cement plants don’t overlay neatly. Cement production is mainly focused in the south-eastern states and Votorantim are targeting the Cerrado, in the centre of the country, for the lime business.

The scale of the project, at US$50m, the scale of the lime business generally and the addition of lime units at cement plants suggest that the pivot to lime can only be a sideline to cement and construction. Given the similarity of the cement and lime production processes the announcement would be much more significant were Votorantim set to convert clinker kilns into lime ones. A notable example of this was at Cement Australia’s Gladstone plant in Queensland, Australia. Here a mothballed FCB-Ciment clinker kiln was converted into a lime kiln in the early 2000s. At the time the cost of the conversion project was valued at just under US$20m. If Votorantim was seriously thinking of doing this at a few of their underperforming cement plants then one would expect the bill to be higher than US$50m. However, it’s early days yet.