Displaying items by tag: CNBM

UK: The Global Cement and Concrete Association (GCCA) has held its inaugural annual general meeting and symposium in London. Member companies ratified key deliverables for the association and set-out its priorities and work program. Albert Manifold, chief executive officer (CEO) of CRH, was confirmed as GCCA President and will serve for two years. Fernando A González, CEO of Cemex and Jianglin Cao, CEO of CNBM, were confirmed as Vice-Presidents.

The work program will focus on: position concrete as the sustainable building material of choice; promote international best practice in the areas of safety, production and the use of cement and concrete in the built environment; foster innovation in the cement and concrete sectors; make a positive contribution to global sustainable development; and promote the principles of a circular economy across the value chain.

“Concrete is the enabler of critical buildings and infrastructure that enhance the way we live – safe and durable homes, roads, hospitals, clean water, effective wastewater management, as well as providing the vital structures for the clean energy of tomorrow,” said Benjamin Sporton, the CEO of the GCCA.

The association was launched in January 2018. It represents 32 member companies with nine affiliate organisations. Its members hold 35% of global cement production.

HeidelbergCement is set to release its third quarter financial results later this week. In the meantime what can the results from the other major cement producers tell us?

Graph 1: Revenue from major cement producers, Q1 -3 2018. Source: Company reports.

The biggest of the big beasts, China National Building Material (CNBM), released its third quarter update last week. As usual for a major Chinese producer it was the expected story of continuing double-digit growth. Operating income up, profit up and little other information besides.

CNBM’s half-year report back in August 2018 had more information, revealing that cement production volume fell by 5% year-on-year to 143Mt in the first half of 2018 from 150Mt in the same period in 2017. This was pinned on ‘flat’ demand, increased pressure on environmental protection and rising costs of fuel and raw materials. As we mentioned at the time the state-owned company is attempting to cope with the aftermath of China’s great construction boom. National Bureau of Statistics (NBS) data shows that local cement sales dropped by 8% year-on-year to 158Mt in the first nine months of 2018. CNBM’s cement sales are likely to have dropped also so far in 2018 but continuing industry consolidation and/or the merger with Sinoma may save them. With this in mind note the lack of sales volumes figures from CNBM and Anhui Conch in Graph 2 below.

Graph 2: Cement sales volumes by major cement producers, Q1 -3 2018. Source: Company reports.

Of the other larger Chinese producers, Anhui Conch’s third quarter report was similarly sparse, sticking to the facts (revenue and profit up) and discussing in more detail a recent large-scale sale and purchase agreement with Jiangsu Conch Building Materials with a value of up to around US$230m. China Resources Cement is typically more verbose in its results releases. Its turnover and profits are also up so far in 2018 but it actually explained that cement and clinker prices had risen by 32%.

Outside of China, LafargeHolcim’s results were mixed in a direct year-on-year comparison but more favourable on a like-for-like basis. Net sales and cement sales volumes are growing slowly but recurring earnings before interest, taxation, depreciation and amortisation (EBITDA) fell very slightly. Growth in Europe and North America was countered by issues in Asia Pacific, Latin America and Middle East Africa. Chief executive Jan Jenisch was more optimistic than at the same point in 2017 with no talk of ‘lacking potential’ and more emphasis on ‘positive momentum.’

As for the others, both Cemex and UltraTech Cement are looking good so far. Growth in Mexico and the US has bolstered Cemex’s performance giving, it a 7% year-on-year boost to US$10.9bn in the first nine months of 2018. Cement sales volumes grew more slowly at 3%, although operating EBITDA remained flat. Part of this was down to poorer markets south of Mexico, notably in Colombia. UltraTech Cement is still looking good after its acquisition of Jaiprakash Associates’ plants in 2017 but earnings and profits have started to decline. The Indian market leader has blamed this on mounting energy and logistics costs coupled with local currency depreciation effects.

So, in summary, generally good news from the big producers, although issues are present in certain markets, notably South America. HeidelbergCement has already set the scene for its third quarter results with a warning that its earnings are down due to poor weather in the US and rising energy costs. Sales volumes and revenue are said to be ‘within expectations.’ Its Indian subsidiary, HeidelbergCement India, reported storming figures for its half-year to the end of September 2018 with double-digit growth across sales, sales volumes and earnings. Less reassuringly, its larger Indonesian subsidiary reported falling sales for the first nine months of 2018. All eyes will be on HeidelbergCement later in the week to see how this plays out.

China: China National Building Material’s (CNBM) revenue rose by 21.5% year-on-year to US$22.5bn in the first nine months of 2018 from US$18.5bn in the same period in 2017. Its net profit nearly doubled to US$1.7bn from US$956m.

China: Lubao Cement has ordered three vertical roller mills from Germany’s Loesche for a new 4500t/day plant that is being built at Bei Liu in Guang Xi. The project is being handled by Sinoma (Suzhou) Construction, part of Sinoma International Engineering and China National Building Material Group (CNBM) in turn.

Loesche is supplying three mills for the project, one each for raw material, coal and clinker/slag. One four-roller mill with a capacity of 450t/hr will be used for grinding cement raw material to a fineness of 12% with a sieving residue of R 80μm. Another mill with a throughput of 200t/hr will be used for the subsequent grinding of cement clinker to a fineness of 3400 - 3600 Blaine. A large three-roller mill with a capacity of 42t/hr will be used for grinding fuel coal to a fineness of 2% and a sieving residue of R 80μm.

No value for the order has been disclosed.

The world’s largest cement producer China National Building Material (CNBM) released its half-year results this week and the figures were generally good. Despite falling production, the state-owned company has managed to raise its prices year-on-year to generate significant sales revenue and earnings increases. As usual the level of detail was fairly light, although not much lighter than some non-Chinese producers on the international market. The key point was that cement production fell by 5% year-on-year to 143Mt. This was due to poor demand, mounting environmental regulations and rising input costs.

The half-year report was significant because it is the first financial report from the company since its merger with China National Materials (Sinoma) completed in early May 2018. Just like the reports of LafargeHolcim and HeidelbergCement following mergers or acquisitions, CNBM has seen a boost to its performance. Further gains from scale and synergy are expected. The union has indisputably created the world’s biggest cement producer, putting aside any European or American cries of over-calculation of production capacity on the part of their Chinese rivals. However, size comes with particular problems.

Placed in a wider context CNBM and its owners, the Chinese government, are attempting to manage a wind-down from the biggest construction boom in human history. National Bureau of Statistics data show that sales of cement fell by 10% to 984Mt in the first half of 2018 from 1.1Bnt in the same period in 2017. So, falling cement production volumes are not a surprise. What is curious, though, is how cement prices have appeared to rise in a country with massive production overcapacity. Each of CNBM’s cement producing subsidiaries reported that its average selling price of cement grew year-on-year.

Graph 1: Sales of cement in China, 2014 – 2018. Source: National Bureau of Statistics of China.

Regional variation could explain some of this in a country as large as China and similar trends can be observed in India with its own diverse internal markets. The local focus on environmental regulations offers another explanation. In June 2018 the government’s State Council issued regulations to reduce the production capacity of construction materials, set up emission limits for pollution, implement peak shifting of production and to establish a ‘strict’ accountability mechanism for all of this. CNBM has followed these directives with its ‘Price – Cost – Profit’ (PCP) strategy and all of its subsidiaries have conformed to this. What is not covered in the report is whether there is a negative financial effect of peak shifting and other environmental regulations and how bad this is.

It’s easy to dismiss the performance of a state-controlled company but the enlarged CNBM is facing a unique set of challenges. It appears to be off to a great start but both its scale and its challenges are unprecedented. In its outlook for the second half of 2018 it said that the, “contradiction of overcapacity in the industry has not been changed fundamentally.” This suggests that, although cement prices and profits have held up so far, there is no guarantee that this situation will continue.

China: China National Building Material’s (CNBM) cement production volume fell by 5% year-on-year to 143Mt in the first half of 2018 from 150Mt in the same period in 2017. It has attributed this decrease to ‘flat’ demand, increased pressure on environmental protection and rising costs of fuel and raw materials. As part of its ‘Price – Cost – Profit’ (PCP) initiative the group has focused on reducing production capacity and output, implementing peak shifting production and eliminating old production facilities.

Despite the headwinds, the group’s sales revenue from its cement division rose by 22% to US$7.41bn from US$6.06bn. Its adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) increased by 38% to US$2.08bn from US$1.51bn. Average cement prices also rose year-on-year. External sales from its engineering companies increased by 13% to US$2.18bn from US$1.92bn. Overall, group sales revenue rose by 22% to US$14bn from US$11.5bn.

CNBM completed its merger with China National Materials Company (Sinoma) on 2 May 2018. Its cement producing subsidiaries include China Untied, South Cement, North Cement, Southwest Cement, Sinoma Cement, Tianshan Cement, Ningxia Building Materials and Qilianshan. Its engineering subsidiaries include Sinoma International, China Triumph and Sinoma Milling.

Zimbabwe: Sino-Zimbabwe Cement (SZC) has been granted certification by the International Organisation for Standardisation (ISO). The company says that ISO certification will make its products attractive to compete on the international market, according to the Herald newspaper. SCZ produces three types of cement: MC 22.5 X, PC 32.5 N and 42.5N. Most of the cement is consumed by the Zimbabwean market, with a small amount exported to neighbouring countries. The company plans to produce PC 42.5R later in 2018 to target local infrastructure projects.

The cement producer’s 0.3Mt/yr Gweru plant was built in the 1990s in a joint-venture between China National Building Material Company (CNBM) and the Industrial Development Corporation of Zimbabwe.

China: Sinoma International Engineering’s sales revenue rose by 14% year-on-year to US$1.47bn in the first half of 2018 from US$1.29bn in the same period in 2017. Its net profit increased by 45% to US$94.6m from US$65.1m. The subsidiary of China National Building Material (CNBM) said that signed new contracts in the cement sector with a value of US$1.26bn in the reporting period, including seven cement production lines and two grinding units.

There have been quite a few new cement plant project announcements in the past week, with expansions announced in Mexico, Nigeria, Bangladesh, Indonesia, India and Uzbekistan. 11.8Mt/yr of new capacity has been announced in just a week, mostly from a whopping 9.0Mt/yr project in Central Sulawesi, Indonesia, the first in that Province. Notable in this project, as well as two of the others, is the involvement, once again, of large Chinese-based cement plant manufacturers and / or finance and associated influence from Chinese parties.

Of course, this trend is nothing new. The rise of Chinese cement plant manufacturers, particularly into Africa and other developing cement markets, has been covered in previous Global Cement Weekly columns. However, it does appear to be stepping up a notch in 2018 compared to previous years. So far this year we have reported on 21 confirmed Chinese cement plants being built in 15 countries other than China, from the planning stage to ‘up-and-running.’ A total of 37.2Mt/yr, more than the capacity of Germany, is being built across Algeria, Cambodia, Cameroon, Indonesia, Kyrgyzstan, Namibia, Nepal, Nigeria, Pakistan, Russia, Tajikistan, Turkey, Ukraine, Uzbekistan and Zambia. That’s not including a similarly large number of news stories where the supplier is not explicitly stated. This is seen a lot in Indian projects, as well as in Vietnam, where the cement sector appears to still be expanding, despite the government’s pronouncements. In many of these cases, and elsewhere, these unidentified suppliers are likely to be Chinese.

The driver for this increase in Chinese-led cement sector investment is, of course, the severe overcapacity in China’s domestic cement sector. The government is currently undertaking its most drastic capacity reduction measures so far. The ongoing integration of Sinoma and CNBM is one example of the lengths it will go to to reduce the current inefficiencies in the sector. This week the Chinese government reiterated its strict prohibition on new greenfield cement plants. It also warned that any producer that wants to upgrade its plant with a new line must only install the same capacity as the line that will be replaced, amid concerns that some were flouting this rule. This comes as the profits of major producers have been rising. Presumably the government would like them to climb further still.

So where does this leave the more established (read ‘European’) cement plant manufacturers such as Fives, FLSmidth, KHD and thyssenkrupp Industrial Solutions, some of which are fully or partly-owned by Chinese companies? Well, with fewer full-line projects available in developing regions due to the rise of the Chinese, they have become increasingly specialised in specific areas. Those that want European equipment will increasingly specify a pyro-line from Supplier A, a mill or two from Supplier B, conveyors and storage from supplier C, and so on. Arranging this, as it turns out, is something that Chinese plant manufacturers are quite keen to do. Take, for example, FLSmidth working for Sinoma (China) alongside Atlas Copco (Sweden) and Kawasaki Heavy Industries (Japan) on a cement plant in Indonesia. Indeed, FLSmidth signed a framework with CNBM on future collaborations in July 2018. FLSmidth and CNBM already have an extensive ‘back catalogue’ of joint projects. FLSmidth has valuable expertise that Chinese firms need to complete these kinds of projects.

Of course, another European supplier, Germany’s KHD, is mostly owned by China’s AVIC. In a forthcoming interview in the September 2018 issue of Global Cement Magazine, KHD’s CEO Gerold Keune states that the Engineering, Procurement and Construction (EPC) scene is now ‘completely dominated’ by Chinese suppliers. KHD fits in by providing a wide range of equipment but, crucially, great expertise in pyroprocessing and crushing solutions. It itself relies on smaller firms to provide their knowledge to specific parts of a larger project, be it conveyors, feeding systems or silos. Everyone is getting better and better, but in a smaller and smaller area.

Also in the September 2018 issue of Global Cement Magazine will be a report from the VDMA’s Large Industrial Plant Manufacturer’s group (AGAB) in Germany, which highlights another advantage for the Europeans: Digitisation. According to a VDMA survey, the industry anticipates a positive influence from digitisation activities on sales and earnings and expects to see margins improve by up to 10% as a result of the efficiencies it offers over the next three years. In this regard they are ahead of the Chinese mega-suppliers.

The conclusion from this wide-ranging column? The integration of Chinese weight and European know-how is stepping up a notch and will only accelerate from here. Can everyone be ‘winners?’ The next few years may reveal some of the answers.

Zambia: China National Building Material (CNBM) Zambia has commissioned a building materials plant at Chongwe Mapande Industrial Park near Lusaka. The company has invested an estimated US$500m in the project, according to the Lusaka Times. The first phase of the project includes a 1Mt/yr cement plant, a brick plant, a ready-mix concrete plant, an aggregate production line and a sand plant.