
Displaying items by tag: Argentina
Argentina: Data from the Asociación de Fabricantes de Cemento Portland (AFCP) shows that cement shipments grew by 44% year-on-year to 5.52Mt in the first half of 2021 from 3.83Mt in the same period in 2020. Local consumption of cement increased at a similar rate. The association has forecast the local market to grow by 15% year-on-year to 11.4Mt in 2021 from 9.87Mt in 2020.
Update on Argentina
23 June 2021Two news stories merit a closer look at Argentina this week. Firstly, Loma Negra fired up the kiln on its new 2.7Mt/yr production line at the L’Amalí cement plant in Olavarría. Work on the US$350m started in 2017 but was delayed due to the coronavirus pandemic. Notably, engineers from China-based Sinoma International Engineering, who built the plant, caused a stir when they arrived in Argentina in full personal protective equipment in late 2020 to continue work on the project. Full commissioning of the second line at the plant is scheduled for July or August 2021.
Almost at the same time, the Argentine government announced it had persuaded local building materials producers to stick to reference prices for construction materials, including cement, in order to control inflation. Loma Negra, Cemento Avellaneda and Petroquímica Comodoro Rivadavia (PCR) were said to be on board with the ‘voluntary’ plan. Building materials prices generally were reported to have risen 85% year-on-year in May 2021 compared to a national inflation rate of 49%. The new arrangement is planned to last until the end of 2021 with revisions to the reference prices every two months.
Graph 1: Cement sales in Argentina including imports and exports, 2016 – 2021. Note that the 2021 figure is an estimate. Source: Asociación de Fabricantes de Cemento Portland (AFCP).
Data from the Asociación de Fabricantes de Cemento Portland (AFCP) doesn’t show any obvious signs of disruption from inflation so far in 2021. Cement sales grew by 50.5% year-on-year to 4.55Mt in the five months to May 2021 from 3.02Mt in the same period in 2020. The cement market in Argentina didn’t shut down but it hit a low of 0.41Mt in April 2020 before compensating with a strong second half of the year, most likely due to pent-up demand as the economy reopened following local coronavirus-related lockdowns. At the time of writing the AFCP has forecast that cement sales will reach 11.3Mt in 2021, a slight rise over the 11.1Mt reported in 2019, when the market was more stable. However, cumulative sales to May 2021 are slightly behind similar sales in 2019.
Loma Negra’s upgrade at its L’Amalí plant follows Holcim Argentina’s inauguration of a new 0.5Mt/yr clinker production line at its Malagueño cement plant in Cordoba in May 2021. This project also added a 0.63Mt/yr cement grinding unit at the site as well as a new 120,000 bag/day despatch unit. Altogether it had a price of US$120m. This followed the announcement in late April 2021 that the subsidiary of LafargeHolcim was planning to open 1000 new branches of its Disensa retail chain in the country by 2024.
Loma Negra reported a 13% drop in sales to US$436m in 2020 from US$500m in 2019. However, its adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 3% to US$139m from US$136m. This was partly aided by the sales of its Paraguayan operations during 2020. At face value, Cemento Avellaneda had a tougher time of its in 2020 with its sales down by 22% to Euro111m and EBITDA down by 9% to Euro37m. However, once adjusted on a like-for-like basis with constant currencies and without a hyperinflation adjustment, its sales and earnings actually rose by 22% and 45% respectively.
Holcim Argentina’s director Christian Dedeu was interviewed by national news agency Télam in May 2021 around the time of the upgrade at the Malagueño cement plant was officially completed. When asked by the company had made the investment he said that the country had potential for both the residential and infrastructure sectors. He also pointed out that the subsidiary of Switzerland-based LafargeHolcim had been forced to import clinker at times of high demand previously. The announcements for both the Loma Negra and Holcim Argentina new lines were made at the end of 2017 when the market hit a high in sales volumes. Since then the country has faced rocketing inflation, further delays to it debt repayment programme to the International Monetary Fund (IMF) and the coronavirus pandemic. Producing more commodities, such as clinker, domestically certainly seems enticing with high inflation and unfavourable foreign currency exchange rates. So, the new production lines from Loma Negra and Holcim Argentina are well timed in this sense unless they get hit by any mounting input costs, from imported raw materials for example. On the other hand the government’s measures to curb inflation such as reference prices for cement may constrain the cement producers’ flexibility. As the local construction industry slowly recovers after 2020, continued uncertainty lies ahead.
Argentina: Loma Negra has ignited its new 2.7Mt/yr kiln line at the L’Amalí cement plant in Olavarría. The Clarín newspaper has reported that the new second line expands the plant’s capacity by 40%. The cost of its construction was US$350m.
Chief executive officer Sergio Faifman called the project’s completion a ‘milestone’ in the company’s history. He said, “I would like to thank everyone who was working on the site: Loma Negra employees, Sinoma and contracting companies. We have had and gone through economic and social difficulties and it is thanks to the efforts of all that we are here today. With effort and commitment, dedication and teamwork, you can go a long way.”
Argentina: The Ministry of Internal Trade has secured an agreement from national building materials producers, including Loma Negra and Cemento Avellaneda, to restrict the price of building products such as cement. The Clarín newspaper has reported that average building materials prices rose by 85% year-on-year in May 2021, nearly double the inflation rate. The primary cause is a rise in domestic construction. Currency effects have further increased the cost of building due to the dollarization of materials such as steel.
The ministry previously negotiated concerted price reductions in September 2020 and December 2020. Minister for Internal Trade Paula Español urged building materials producers to maximise their capacity utilisation to meet demand and protect the domestic market.
Holcim Argentina inaugurates new clinker line and grinding plant at Malagueño cement plant
20 May 2021Argentina: Holcim Argentina, part of Switzerland-based LafargeHolcim, has inaugurated a new 0.5Mt/yr clinker production line at its Malagueño cement plant in Cordoba. The new line increases the plant’s clinker production capacity by 45%. Additionally, a new 630,000t/yr grinding plant will increase the plant’s cement capacity to 4.7Mt/yr.
Chief executive officer Christian Dedeu said, "With this expansion of our capacity, more than 450km of road and more than 7.2Mm2 of housing can be built - equivalent to more than 72,000 houses." He added, "The new line is a big bet on the domestic market and responds to the growing national demand for materials for residential construction, private investment and infrastructure works."
What’s in a name?
05 May 2021What’s in a name? Well maybe quite a lot when the company in question originally formed as a ‘merger of equals.’ So the news this week that the shareholders of LafargeHolcim have agreed to change its group name to Holcim suggests quite a lot. The name will only apply to the group company name and all market brands will remain as they are. Yet something fundamental appears to have changed.
As readers may remember, the original merger arrangements between Lafarge and Holcim ran into difficulties in early 2015 when Holcim’s shareholders expressed discontent at the perceived difference in value between the two companies in 2014. The deal was saved with a move away from a proposed 1-1 share exchange ratio towards one more in the favour of the Holcim shareholders and the removal of Lafarge’s chief executive Bruno Lafont as the designated chief executive of the new entity. However, from this point onwards the nagging suspicious was that the merger was really a glacial takeover of Lafarge by Holcim. Lafont and LafargeHolcim’s first chief executive officer (CEO) Eric Olsen became embroiled in legal proceedings surrounding Lafarge’s historic conduct in Syria. Then in mid-2018 LafargeHolcim decided to close its Paris headquarters, Lafarge’s old hub. During an extraordinary general meeting in May 2015 held by Holcim it was agreed to rename Holcim Ltd as LafargeHolcim Ltd as part of the merger process. The latest decision by shareholders in 2021 has reversed this.
For consumers of building products the bit about market brands staying as they are, as LafargeHolcim changes its name, is probably more important than the corporate wrangling over whatever the faraway parent company may or may not be called. So, Holcim Argentina’s plans this week to open 1000 new branches of its Disensa retail chain by 2024 may be far more important for existing and potential customers in that country. This is an enormous number of hardware stores for just one country by most reckonings and its gives one an idea of LafargeHolcim’s ambitions in the sector. It also carries echoes of the trend of business chains taking over the previously independent convenience store sector in the food sector in other parts of the world in recent decades. The Disensa franchise already operates over 2500 stories in eight countries - Argentina, Brazil, Colombia, Costa Rica, Ecuador, Mexico, Nicaragua and El Salvador – and it holds claim to being the largest building materials network in Latin America. And they aren’t stopping with just selling building materials. One innovation announced in April 2021 was the introduction of financial services to small businesses wanting to buy building products at its stores.
LafargeHolcim isn’t saying how much its retail chains contribute to the bottom line but no doubt it’s helping in a variety of ways. During an earnings call for its fourth quarter results in 2020, for example, its chief financial officer Geraldine Picaud noted that growth in Latin America in the second half of 2020 was driven by branded product in all distribution channels, including the Disensa chain. She also added that the region had the highest margin in the group at the time. Another thing to consider is, if the rumours about LafargeHolcim preparing to sell its operations in Brazil are true, what will it do with the local Disensa chain? Divesting carbon-intensive heavy industries, such as cement production, but migrating outwards and upwards in the building materials supply chain would certainly suggest that the company is preparing for its place in a low-carbon future.
Yet with all this talk of what LafargeHolcim or Holcim wants to call itself it is interesting to note that it was under Holcim in 2005 that Disensa was turned into a franchise network in its original home of Ecuador. A similar version of this model called Binastore was expanded and launched by LafargeHolcim in 2018 for Africa and the Middle East. ‘Joe Public’ or rather ‘José Public’ may not care what LafargeHolcim is called when they are buying cement from their local Disensa store. Other hardware stories are of course available.
Argentina: Holcim Argentina, part of Switzerland-based LafargeHolcim, has completed a US$120m upgrade at its integrated Malagueño cement plant in Córdoba province. In a meeting with the Minister of Productive Development, Matías Kulfas, the cement producer said it was planning in inaugurate a newly refurbished 0.51Mt/yr production line at the site later in May 2021. The work also included adding a vertical roller mill and new bagging area with a capacity of 120,000bags/day. The project was originally announced in late 2017 and Germany-based KHD was awarded a related contract in early 2018.
Argentina: Holcim Argentina, part of Switzerland-based LafargeHolcim, has announced plans to open 1000 new branches of its Disensa retail chain by 2024. The Diario Financiero newspaper has reported that the chain opened 40 new locations during 2020.
General manager Natalia Soler said, "Being considered an essential sector, builders merchants continued to operate during quarantine. This scenario benefited us, coupled with the number of customers who took advantage of the context and their savings to make repairs to their homes."
Argentina: Loma Negra has completed the replacement of an electrostatic filter at its integrated Zapala cement plant in Neuquén with a new baghouse filter. The Gaceta Mercanil newspaper has reported that the company said that the new product has the benefit of being able to work without an electricity supply. Additionally, it is able to operate at higher inlet temperatures than the previous filter, reducing water consumption by approximately 50%. Work began in early 2019 and the total investment cost of the project was US$7m.
Loma Negra reports adjusted earnings growth in 2020
12 March 2021Argentina: Loma Negra’s consolidated adjusted earning before interest, taxation, depreciation and amortisation (EBITDA) grew by 3% year-on-year to US$146m in 2020 from US$143min 2019. Sales fell by 13% to US$458m from US$526m and net profit rose by 107% to US$125m from US$60.6m. Consolidated cement, masonry and lime sales fell by 6% to 5.2Mt from 5.5Mt, but rose by 27% in the fourth quarter of 2020 to 1.6Mt from 1.3Mt. The company noted a fourth-quarter increase in bulk cement sales of 7%. Bagged cement also made a ‘robust recovery’ from the negative effects of the strict Covid-19 lockdown in the second quarter of 2020, according to the company. It attributed the rise to the partial lifting of lockdown for private works. Throughout the year, the group decreased its net debt by 81% to US$22.8m from US$119m.
In 2020 the producer continued with its L’Amali cement plant expansion and divested its Paraguayan asset. All detailed engineering is reported complete and all equipment and materials supplies have been delivered to the site. Commissioning and start-up has been completed at the crushing section and a new primary crusher is fully operational. Commissioning and start-up at raw mill department and clinker line are in progress.
Chief executive officer Sergio Faifman said, “We finished the year in a very good way when considering the unprecedented scenario that we were presented with from the beginning of the year. At that point in time, the fragile macroeconomic environment in the country was impacted by the emergence of the Covid-19 pandemic, making the future uncertain and blurred. More than ever, it was in that challenging context that we lean on our competitive strengths.” He added, “At the beginning of the crisis, we focused on managing our cash position and cash generation, and we sought to optimise our productive structure. As the market began to pull in demand, we relied on our value chain to speed up sales, especially of bagged cement. All of this allowed us to expand our profitability, and enhanced our already solid balance sheet.”