Displaying items by tag: Acquisition

A few news stories from Chile give us the opportunity to take at look at the local cement market this week. Firstly, Freehill Mining was keen to promote a new order it has obtained from Cementos Melón. The Australia-based company operates magnetite mineral concessions at Yerbas Buenas, about 500km north of Santiago. The US$180,000 deal starts in March 2024 but the raw material supplier says it is currently negotiating a longer-term supply contract with Melón for larger volumes in the future.

A large order for raw materials is not unusual, although the public nature of the Freehill Mining one suggests that the mining company is promoting itself. The story also highlights the importance of the mining sector in Chile. However, a wider view of the Chilean cement sector could be glimpsed recently from the latest cement despatch data from La Cámara Chilena de la Construcción (CCHC). Despatches fell by 11% year-on-year to 5.2Mt in 2023 from 5.9Mt in 2022. As can be seen in Graph 1, despatches recovered in 2021 following the first year of the Covid-19 pandemic but they have declined since then.

Graph 1: Cement despatches in Chile, 2018 – 2023. Source: La Cámara Chilena de la Construcción.

Two of the three larger cement producers have reacted to these market conditions in the last couple of years by cutting costs. Cementos Melón started a restructuring process in late 2022 whereupon it closed down a concrete plant at Penalolen near Santiago and embarked on a spending review. Its income fell by 4% year-on-year to US$182m in the first nine months of 2023, from US$189m in the same period in 2022. Cemento Polpaico followed suit in November 2023 by closing two concrete plants in the Santiago Metropolitan Region and temporarily suspending operations at its Quilicura cement grinding plant with work shifted to the integrated Cerro Blanco plant instead. In June 2023 it reported that its income had risen slightly year-on-year for the first half of 2023, but it noted a loss compared to a profit previously. Cbb (formerly Cementos Bío Bío) managed to avoid the fate of its peers mainly through the performance of its lime division. Its cement and concrete shipments fell by 9% and 15% year-on-year to 775,000t and 750,000m3 respectively in the first nine months of 2023. It blamed the falling sales volumes on a decline in economic activity that dragged upon investment in infrastructure and housing. However, lime shipments grew by 2% following tough trading conditions in 2022 due to high fuel costs, amongst other reasons. Altogether this meant that the company’s earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 54% to US$44.3m from US$28.8m.

Finally, a third news story this week illustrated one reaction to the poor construction market in Chile, when Unacem Chile announced that it was buying two concrete plants, at San Antonio and Talca. Once the US$1m deal completes, the subsidiary of Peru-based Unión Andina de Cementos (UNACEM) will hold 12 concrete plants in the country. This follows its entry into the market in 2018 when it acquired Hormigones Independencia from Cementos Polpaico. In December 2023 Grupo Gloria subsidiary Cal y Cementos Sur (Calcesur) said that it was preparing to strengthen its presence supplying lime to the mining sector both at home in Peru and in neighbouring countries including Chile. While this isn’t a cement story, Grupo Gloria does operate the integrated Yura plant near Arequipa in southern Peru and this resonates with both the mining and lime sectors.

Chile’s cement market is suffering as the general construction market contracts. Yet as the stories from Freehill Mining and Calcesur show, the mining sector remains a key part of the national economy and this links to the cement industry. Another related story, for example, is a US$39m deal that Denmark-based FLSmidth signed in mid-2023 to supply equipment for a copper mine. Chile’s northern neighbour Peru has a cement sector that is nearly twice as large based on production capacity and some of its producers look internationally for expansion opportunities, as in the example of Unacem Chile. The CHHC didn’t hold back in mid-January 2024 when it said that it forecast that 2024 would be the worst year for investment and construction spending since the late 2010s. Yet it also expects the decline in the construction sector to slow as gains from government infrastructure spending continue to almost counteract falls in the private sector. Until the situation improves, it continues to lobby for economic reforms.

For more information on cement markets in South America read the feature in the February 2024 issue of Global Cement Magazine

India: JK Lakshmi Cement has acquired an 85% stake in Agrani Cement. The value of the deal is US$39.2m. Agrani Cement was established in Kolkata, West Bengal in 2022.

US: CRH has completed its acquisition of a portfolio of cement and ready-mix concrete assets from Martin Marietta Materials for US$2.1bn. The portfolio includes the 2.1Mt/yr Hunter cement plant in Comal County, Texas.

Netherlands: Siam Cement Group has acquired new shares in electrochemistry start-up Avantium through its affiliate Senfi Ventures. Reuters has reported that the Thailand-based group now holds a 3% stake in Avantium, through total investments of US$4.82m.

Avantium’s technologies include the Volta system, which produces commercial chemicals using captured CO₂. Avantium previously tested the system at a Titan Cement Group cement plant in Greece.

Philippines: DMCI Holdings has entered into negotiations to acquire Cemex Holdings Philippines, Reuters has reported, citing three sources ‘familiar with the matter.’ The sources expect the value of the transaction to exceed Cemex Holdings Philippines' current market capitalisation of US$375m. One source reportedly valued any future deal at an estimated US$714m.

Chile: UNACEM has gained full ownership of precast concrete company Prefabricados Andinos. The group said that it completed the acquisition of the outstanding 50% stake in the company on 6 February 2024.

Portugal: The Portuguese Competition Authority has approved Taiwan Cement Corporation (TCC)’s outright acquisition of Cimpor. Jingshi News has reported that TCC received the approval on 1 February 2024, enabling it to proceed with its acquisition of the outstanding 60% stake in Cimpor.

Rwanda: South Africa-based PPC has completed the sale of its 51% stake in the Rwandan cement producer to Kenya-based Devki Group subsidiary National Cement, for US$42.5m. The divestiture advances PPC's strategic exit of Central and East Africa. As a result, the group's financial position is now cash positive. It had previously reduced its debt by 50% to US$20.3m from US$40.7m between March 2020 and September 2023.

PPC CEO Matias Cardarelli said "I am pleased with the timely completion of the sale of our stake in Cimerwa. The disposal allows us to focus on our core Southern African markets, where we see opportunities to drive improved profitability and secure a more sustainable return on capital."

Ukraine: The Antimonopoly Committee of Ukraine (AMCU) has launched an investigation into Ireland-based CRH's acquisition of certain Central-Eastern European assets of Italy-based Buzzi Unicem. The assets in question include two Ukrainian cement plants. The AMCU will assess the potential impacts of the consolidation on the cement market in Ukraine. The parties concluded the deal in June 2023, and expected to conclude it in September 2024. The AMCU first rejected CRH's application to it in September 2023, but subsequently agreed to reopen its examination of the deal in October 2023.

South Africa: Mining and materials company Afrimat says that further regulatory conditions as part of its ongoing acquisition of Lafarge South Africa have been met. The Minister of Mineral Resources and Energy of South Africa has consented in terms of the Mineral and Petroleum Resources Development Act, the Financial Surveillance Department of the South African Reserve Bank has approved the acquisition in terms of the Exchange Control Regulations and the respective Competition Authorities in Botswana and eSwatini have approved the implementation of the acquisition. Approval by the Competition Commission is still outstanding but it recommended the transaction to the Competition Tribunal in November 2023. However, the Competition Commission highlighted ‘horizontal overlaps’ in the aggregates and ready-mix concrete sectors and recommended that the parties be required to divest assets across the affected sectors.

Afrimat first announced in June 2023 that it had agreed a share purchase agreement with a Holcim Group subsidiary, Caricement, to acquire 100% of the issued share capital of Lafarge South Africa. The proposed acquisition will become unconditional and be implemented once approval by the Competition Tribunal has been obtained.