Displaying items by tag: ACC

India: Holcim India subsidiary ACC has announced that industrial conglomerate Adani Group's open offer for Holcim's Indian business will open on 6 July 2022 and conclude on 19 July 2022. Live Mint News has reported that the parties expect the deal to subsequently close within 2022.

Holcim agreed to sell its Indian assets to Adani Group this week for US$6.37bn. These include Holcim’s stakes in its local subsidiaries Ambuja Cement and ACC. The deal, if approved by the local competition body, should complete in the second half of 2022. This is one of the larger sales of cement company assets over the last decade. Adani Group, an Indian-based conglomerate with businesses across energy, transport and more, is now poised to become the second largest cement producer in India.

Global Cement Weekly previously covered a potential sale of Ambuja Cement and ACC in April 2022 when the story that Holcim was looking for a buyer first emerged in the Indian press. At the time local press speculated that the sale could generate as much as US$15bn for Holcim. So it is interesting to see that a figure of US$6.37bn has been agreed upon instead, less than half of the speculative figure. Roughly, as ever, this places a value of a little below US$100/t of cement production capacity. This seems like a relatively low pricing for these plants by international standards over the last decade. However, this doesn’t take into account many factors such as, for example, the condition of the plants, Holcim’s desire to change its business, the ease of selling up in India all in one go, other non-cement assets and so on. For Adani Group though, buying into heavy building materials production in a large market like India clearly seemed attractive. It is also worth noting that, similar to other cement sector acquisitions recently, here again is a buyer with a background in another carbon-heavy industry buying into another heavy emitter.

Table 1: Selected large scale acquisitions of controlling shares in non-Chinese cement production assets since 2012. Source: Global Cement news and company releases. Italcementi acquisition value reported by Reuters.

Table 1 above provides some historical context to Adani Group’s agreed acquisition by comparing it to other large completed deals in the cement sector over the last decade. Don’t forget that it is only looking at this from the cement sector. This list excludes changes in ownership in the Chinese cement companies in this period because, generally, there has been a government-driven consolidation in the industry through mergers rather than large-scale acquisitions. So, for example, the world’s current biggest cement producer CNBM had a reported production capacity of 350Mt/yr in 2012 and this rose to 514Mt/yr in 2020 as it absorbed other state-owned companies. The big merger it underwent during this time was with China National Materials (Sinoma) in 2018, primarily an engineering company that also produced cement.

The most obvious trend in Table 1 is the journey of Lafarge and Holcim from their merger in 2015 and the gradual realignment of the business subsequently. During this time the company has sold up in large markets outside of its core regions in Europe and North America. Latterly, it has also started to diversify away from heavy into lightweight building materials. One notable ‘nearly happened’ was LafargeHolcim’s attempt to sell its business in the Philippines to San Miguel Corporation for US$2.15bn in 2019. That deal collapsed when the Philippines Competition Authority failed to approve it within a year of its proposal. CRH enlarged itself from assets sold during the creation of LafargeHolcim and then picked up Ash Grove in the US in 2018. CRH’s head Albert Manifold memorably said in 2018 that his company was focusing on markets in developed countries and CRH’s large-scale acquisitions have largely followed this.

As for the others, HeidelbergCement’s purchase of Italcementi in 2016 almost appeared as a riposte to the formation of LafargeHolcim, albeit on a slightly smaller scale. It confirmed HeidelbergCement’s place as the world’s second largest non-Chinese cement producer. It is also one of the minority of truly multinational acquisitions on this list. Unlike LafargeHolcim and now Holcim though, HeidelbergCement hasn’t exhibited a desire to downsize or diversify at quite the same speed. UltraTech Cement’s acquisition of Jaiprakash Associates in 2017 confirmed its place as the largest Indian producer. That deal was publicly one of the longer lasting one as it originally started out in at least 2014 on a smaller scale and was later slowed down by the Mines and Minerals (Development and Regulation) (MMDR) Amendment Act. Smikon’s purchase of Eurocement in 2021 almost looks like part of the isolation of the Russian economy, especially with the benefit of hindsight given by the invasion of the Ukraine in early 2022.

Mega-deals have lots of moving parts but two of the most tangible to broader audiences are the price and the timing. Cemex infamously got both of these wrong with its acquisition of Rinker in 2007 as it paid high just as the US subprime mortgage crisis started a wider global financial one. This was despite Cemex’s emergence over the previous 15 years as a multinational force to be reckoned with due in part to the so-called ‘Cemex Way’ approach to management, acquisitions and integration. Clear winners from the big acquisitions over the last decade are harder to spot but CRH and UltraTech Cement look strong so far. Adani Group has certainly picked a lively time to make a purchase on this scale following a global pandemic with ongoing global supply chain issues and disruptions to energy and food markets.

India: Holcim has agreed to sell its Indian business to industry, energy and ports conglomerate Adani Group for US$6.37bn. The assets consist of a 63% stake in Ambuja Cement, which in turn owns 50% of ACC, and a 4.5% direct stake in ACC.

ACC and Ambuja Cement employ 10,700 people and operate 31 cement plants in India. The deal will make Adani Group India’s second-largest cement producer.

Chair Gautam Adani said "With Holcim's global leadership in sustainability, we are acquiring some of the most efficient building materials operations in India, powered with clean technologies like heat recovery systems. We recognise that Ambuja and ACC operations are energy intensive and therefore, when combined with our renewable power generation capabilities, we gain a big head start in the decarbonisation journey that is a must for Indian industry."

Holcim says that its focus is now on expanding its solutions and products business. Reuters News has reported that the group plans to put the proceeds of the assets’ sale towards lower-carbon acquisitions. Its Indian operations contributed 26% of group CO₂ emissions.

Chief executive officer Jan Jenisch said "We will always make cement, but we will decarbonise cement.” He added “We are happy to build up other segments like building solutions and products."

India: UltraTech Cement has taken legal advice for its planned bid for Holcim's Indian business and says that it will volunteer to divest 15Mt/yr-worth of cement assets in order to accelerate the Competition Commission of India (CCI) approval process which would follow on from the acceptance of any offer. The Economic Times newspaper has reported that UltraTech Cement has filed five long form merger notifications for acquisitions of this type since 2013. These included its purchases of Binani Cement and Century Cement, and of Jaypee Group's Gujarati cement assets.

The Financial Express newspaper has reported that fellow contender Adani Group has offered 'more than' US$10bn for the assets, while JSW Group plans to offer US$7bn. BusinessLine Online News has reported that a fourth company, steel producer ArcelorMittal, has also held initial talks with Holcim over the assets.

In considering possible competition issues arising under any future deal, the CCI will factor in planned and upcoming cement capacity. In Gujarat, where Holcim India subsidiaries ACC and Ambuja Cements operate 6.8Mt/yr-worth of capacity, Adani Group plans to build a new 10Mt/yr cement plant at Lakhpat.

India: ACC has launched Holcim’s Houses of Tomorrow sustainable homebuilding initiative with the construction of a low CO₂ home in Puducherry called Gratitude Villa. Projects Today News has reported that architect Trupti Doshi selected building materials to reduce CO₂ emissions by 40% by comparison to conventional materials such as ordinary Portland cement (OPC). She opted for ACC’s Suraksha brand cement, fly ash bricks and ECOPact green concrete.

India: ACC has appointed Rashmi Khandelwal as its company secretary. She succeeds Rajiv Choubey who will remain with ACC as chief legal officer.

Khandelwal is a qualified company secretary with 13 years of professional experience. Previous roles include working for YES Bank and the legal company Mis Yaish Associates. She has also co-written two books about the government’s Companies Act 2013.

India: Adani Group has reportedly entered an advanced stage of discussions with Holcim over its possible acquisition of the latter's Indian cement operations. The Times of India newspaper has reported that Holcim subsidiaries Ambuja Cements and ACC together have a cement production capacity of 64Mt/yr. The value of their assets has a market cap of US$15.7bn.

This week’s big story has been that Holcim may be considering selling its business in India. Both the Economic Times newspaper and Bloomberg separately reported that the owner of Ambuja Cement and ACC has been holding early talks with local producers. The discussions have been described as exploratory and an eventual divestment is far from certain. The combined market value of both companies was placed at US$15bn, at the time that the story broke, making it one of the largest potential acquisitions in India. Holcim has refused to comment on the matter.

If it actually happened then the scale of this potential sale would be breathtaking. Holcim has been gradually slimming down since the merger between Lafarge and Holcim in 2015. The big divestments mostly came after the appointment of former Sika boss Jan Jenisch in 2017. Four integrated plants and other assets were sold in Indonesia for US$1.75bn in 2019, a 51% stake in three integrated plants and two grinding plants were sold in Malaysia for US$396m (also in 2019) and five integrated plants were approved for sale in Brazil for US$1.03bn in April 2022.

A complete divestment of Ambuja Cement and ACC in India would see 17 integrated plants and 14 grinding plants being sold with a production capacity of around 66Mt/yr. If any company did buy the lot in one go, at a stroke it would become the second-largest cement producer in the world’s second-largest second market. The nearest acquisition in the last decade that comes close to this was when CRH purchased 24 cement plants with a production capacity of 36Mt/yr from Lafarge and Holcim in 2015 for US$6.5bn.

2022 would certainly be a good time to sell up with both Ambuja Cement and ACC having reported strong sales and earnings figures in 2021 following the coronavirus-related lockdowns in 2020. Performance is even better compared to 2019. Ambuja Cement’s net sales and earnings before taxation, interest, depreciation and amortisation (EBTIDA) grew by 23% year-on-year to US$1.81bn and by 21% to US$420m respectively in 2021. ACC’s sales and operating EBITDA grew by 17% to US$2.07bn and 28% to US$393m respectively in 2021. However, ACC’s net sales growth was much lower compared to that in 2019. Ambuja Cement produced 25.9Mt of cement in 2021 with a production capacity of 31.5Mt giving it a utilisation rate of 82%. ACC produced 26.9Mt of cement in 2021 with a production of 34.5Mt/yr giving it a utilisation rate of 78%. Both of these rates are higher than the national cement sector rates forecast by analysts of up to 64% in the 2022 financial year. The corporate specifics of any sale are that Holcim owns a majority stake in Ambuja Cement, which in turn owns a majority stake in ACC. In other words: buy one, get the other.

One wider question here is whether there are still any companies and investors out there prepared to put money on this scale into a carbon-intensive industry with net-zero deadlines on the way. Ahead of the 2021 United Nations Climate Change Conference (COP26) in November 2021, India’s prime minister Narendra Modi pledged that his country would cut its emissions to net-zero by 2070. There’s plenty of time left to turn a profit, as cement kilns last about 50 years, but the risk of investing in a stranded asset is growing if the targets are honoured or even brought forward. As a recent Intergovernmental Panel on Climate Change (IPCC) report put it, “Cement and concrete are currently overused because they are inexpensive, durable, and ubiquitous, and consumption decisions typically do not give weight to their production emissions.” All of this suggests that buyers might well be more interested in purchasing parts of Holcim’s Indian operations rather than the whole bundle or breaking operations up further down the line. And that’s even before any competition concerns related to any local buyers are considered. Holcim, for its part, has shown with recent divestments, such as its business in Northern Ireland, that it isn’t necessarily against smaller piecemeal divestments. Negotiations, if they are indeed happening, will be closely guarded.

India: ACC’s earnings before taxation, interest, depreciation and amortisation (EBTIDA) fell by 26% year-on-year to US$83.1m in the first quarter of 2022 from US$113m in the same period in 2021. Net sales rose by 3% to US$566m from US$552m. Sales volumes of cement dropped by 3% to 7.71Mt but volumes of ready-mixed concrete grew by 5% to 0.87Mm³. The subsidiary of Ambuja Cement and Holcim said that its costs had been negatively affected by a global rise in fuel costs caused by ‘geopolitical events.’

The cement producer said that its new integrated plant at Ametha in Madhya Pradesh is scheduled to be commissioned in the fourth quarter of 2022. It commissioned an upgrade to its Tikaria grinding plant in Uttar Pradesh in February 2022. Waste heat recovery unit projects at its Jamul and Kymore plants are ‘on track’ and the board of ACC has approved the next phase of similar projects at its Chanda and Wadi plants.

India: Switzerland-based Holcim is reportedly in the early stages of selling its subsidiaries Ambuja Cement and ACC. The company has held discussions with JSW, Adani Group and others, according to sources who have spoken to the Economic Times newspaper. Multinational building material producers have also been approached. Holcim has not commented on what it described as ‘rumours.’ Ambuja Cement and ACC have a combined cement production capacity of 66Mt/yr