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Holcim profit shock - The tip of the iceberg?
Written by Global Cement staff
18 January 2012
Holcim announced yesterday a shock profits warning after it included Euro641m in one-off charges in its 2011 accounts. Over half of this amount, a massive Euro343m, came from writedowns at its former South African subsidiary AfriSam, which has been unable to deal with poor trading conditions there. Writedowns in the US and parts of Europe made up the rest of the one-off costs. The move has prompted fears from analysts that other cement manufacturers may follow suit, taking the sector into unknown territory. What other skeletons are hiding in the cupboards of the big multinationals?
Meanwhile, an old cement industry problem that is not unfamiliar to AfriSam, cartelisation, has reared its ugly head again. After five Spanish producers were ordered to pay a combined Euro11.1m over an alleged cartel in northern Spain, authorities in Pakistan searched the offices of its national cement association, the APCMA, on Monday. They were following a tip-off that cement companies have been monitoring each others' dispatches, a practice deemed illegal in previous investigations. A previous cartel case from 2009-2010 is still pending in Pakistan so any action against producers will likely to take years to be brought.
Elsewhere, the situation has gone from bad to worse at the East Africa Portland Cement Company in Kenya, with protests over the re-instatement of previously-fired board members turning violent on Monday. With one worker hospitalised after being shot by an over-zealous security guard, it is hard to see how the current situation can be resolved without the removal of the current management. The government has assured the workers that it is working on the problem.
At the same time in Kenya, National Cement Company's (NCC) plans to build a quarry and clinker plant south of Nairobi have been slammed by local Massai groups, environmental NGOs and even the state-owned Kenya Wildlife Service. NCC plans to 'buy-off' the Massai with a jobs scheme, but this doesn't address the conservation issues. Global Cement urges NCC to re-examine its plans and the location of its proposed plant, and to work closely with the Kenya Wildlife Service.
Holcim's hopes for New Zealand
Written by Global Cement staff
11 January 2012
Holcim seems to be back on track with its beleaguered Weston plant, with the news of a port deal for an undisclosed amount.
Since the plant was proposed in 2007 a string of delays have occurred. In July 2011 it had been asking contractors to register interest in the project. As reported in October 2011 Holcim put its New Zealand project on hold due to the 'global economic downturn'. Then in November 2011 Holcim reported a staggering 32% drop in income in the third quarter and blamed it on the strong Swiss franc: ideal for a little overseas spending. Even in the current global economic gloom there may be some benefits.
Back in Africa we have a third 'reality' from the local industry of a much more familiar nature: corruption.
With the former board of the East African Portland Cement Company (EAPCC) going to court against the Kenyan government over allegations of corruption and counter-allegations of government strong-arm tactics it puts into perspective why EAPCC might have changed its clinker supplier last week. With current price rises of 25% in Nigeria and even two positive stories from South Africa this week, the gains may be high but so are the risks.
African Industry Realities
Written by Global Cement staff
04 January 2012
The East Africa Portland Cement Company's (EAPCC) decision to change clinker supplier highlights two of the realities of the industry in Africa.
Firstly in the wake of the on-going East African production boom opportunity abounds. As reported in Global Cement Weekly #27, Kenya and Tanzania are leading an investment boom in East African capacity with surges in consumption of 12% and 18% respectively. Although it's not all good news as the on-going debacle with AfriSam's debts show.
Secondly, it exposes the hangover from state-ownership that much of the key players are still suffering. Certainly as our Vietnam story shows this week there is less room for uncompetitive legislation with producers outside the region lying in wait to secure sales. Indeed such is the growing optimism for cement in the continent as a whole that the Nigerian president described the cement industry as 'critical' to making his nation's economy more diverse.
Elsewhere this week we present some optimism with new contracts for FLSmidth in Brazil, expansion in Saudi Arabia and encouraging research on US infrastructure spending. Despite recent tough times the US retains its position as the third largest cement consumer globally. If Kenya, Tanzania or Nigeria ever overtake the US on consumption then we'll know that the world has changed.