Displaying items by tag: CNBM

China: China National Building Materials (CNBM) recorded operating sales of US$27.2bn in the first nine months of 2020, down by 1% year-on-year from US$27.4bn in the first nine months of 2019. Net profit rose to US$2.82bn, up by 22% from US$2.31bn.

The group said, “On 17 April 2020, the Company became the first batch of first-tier mature enterprises of the National Association of Financial Market Institutional Investors, and carried out unified registration of debt financing instruments (TDFI) (including but not limited to super short-term commercial paper, short-term commercial paper, medium-term debentures, perpetual debentures, asset-backed notes, green debt financing instruments) in the China inter-bank bond market, which were issuable in different types and separate tranches, with a registration term of two years.”

China: China National Building Materials has submitted a letter of intent of cooperation to its subsidiary Sinoma International Engineering, in which it proposes the sale of several engineering businesses to the latter. ET Net News has reported that the assets in question are under negotiation, but may include Beijing Triumph Building Materials, Nanjing Triumph International Engineering and Sinoma Mining Construction.

China: Gansu Qilianshan Cement has announced that it expects to record a profit of US$208m in the first nine months of 2020, up by 41% year-on-year from US$147m in the corresponding period of 2019, according to Reuters. It said the results would be in line with its growth trajectory thanks to a significant increase in demand towards the end of the first half of 2020.

Zimbabwe: LafargeHolcim subsidiary Lafarge Zimbabwe and China National Building Materials (CNBM) subsidiary CBMI have announced the signing of a contract for the establishment of a 0.7Mt/yr-capacity grinding plant at the 0.5Mt/yr Manresa cement plant in Harare. CBMI executive director and general manager Tong Laigou said that, when completed, the plant “will significantly increase the market occupation rate, competition and influence power of Lafarge Zimbabwe, and will also ease the cement supply tension in the country.”

Vietnam: China-based Sinoma International Engineering has announced its receipt of a provisional acceptance certificate (PAC) from the owner of the 1.8Mt/yr Tonglin cement plant, signifying the handover of the finished plant. The parties originally signed the engineering, procurement and construction (EPC) contract for the plant in August 2009.

Consolidation of the Chinese cement industry looks set to take a major step forward this week. China National Building Material Company (CNBM) announced that it is restructuring its cement production assets and companies under one subsidiary, Tianshan Cement. The move is significant since CNBM is the world’s largest cement producer, with a production capacity of over 500Mt/yr. That’s more than the total output of any single country except China. It’s also between a quarter and a third of national capacity domestically.

Little information has been revealed except that it concerns most of CNBM’s cement producing subsidiaries. Namely: China United Cement, South Cement, North Cement, Southwest Cement and Sinoma Cement. Note that this leaves out Ningxia Building Materials and Qilianshan Holdings, although some commentators have suggested that they may be merged in later on. It was announced to stock markets as a proposal with a ‘letter of intent of cooperation’ exchanged between CNBM and Tianshan Cement. CNBM will remain the controlling shareholder of Tianshan Cement after the restructuring. However, the assets concerned - the cement companies are still being discussed and considered. The aim of the reorganisation is to ‘facilitate resolving industry competition’ among the subsidiaries of CNBM.

The move is expected to significantly increase operational efficiency at the cement companies as they start to act in a more coordinated manner. It also fits the government-requested drive for the industry as a whole to consolidate and follow supply-side reform initiatives by, hopefully, eliminating old production assets and other measures. Indeed as CNBM’s president Peng Shou said in the company’s report for 2019, “Production overcapacity of the industry has not been fundamentally resolved. The task of cutting production overcapacity was arduous, and the supply-side structural reform remains the major task.” The company says it is committed to building a three-pillar development platform of cement, new materials and engineering services.

How much more operational efficiency the world’s largest cement producer will need to do this is a key question. In 2019 the sales revenue from its cement business rose by 12% year-on-year to US$18.7bn and its earnings before interest, taxation, depreciation and amortisation (EBITDA) increased by 19% to US$5bn. Growth at this level is novel to western-based multinational cement producers! So the implication might be that CNBM is hoping to turbo-charge its financial performance before (or if) the serious government-forced supply side cuts occur or a general economic slowdown happens so that it can return to ‘normal’ Chinese performance afterwards.

The Chinese Cement Association presented a good overview of the history of CNBM that you can read here. The quick version is that it’s the embodiment of the Chinese government’s desire to build and merge its cement industry since 2005. The latest restructuring with Tianshan Cement is the latest chapter in this 15 year story. What the reorganisation means internationally is ‘probably not much’ in the short term. Better coordination between CNBM’s cement companies could have implications in the longer term if they acted together on an international strategy, such as a strategy on exports for example, or if group-wide suppliers were agreed upon.

That’s all on China but finally if readers were not able to join us for Global Cement Live last week on 23 July 2020, we recommend watching the playback of Arif Bashir, Director (Technical/Operations) of DG Khan Cement Nishat Group Pakistan. He gave a great overview of Pakistan’s cement industry and the challenges it is facing and overcoming. Be sure to tune in for this week’s guest speaker, Regina Krammer from Loesche who will be discussing how the coronavirus crisis will change communications in the sector.

To register for Global Cement Live visit: www.globalcement.com/live

China: Song Shoushun has resigned as the chairman of China National Materials International Engineering (CNBM Engineering). He has left the position for personal reasons. The company is part of CNBM Group and it provides engineering services and equipment to the international cement, housing, industrial equipment and light industry sectors.

China: China National Building Materials (CNBM) has shared plans for a restructuring. Under the new arrangement, its subsidiary Tianshan Cement will take control of China United Cement, North Cement, Sinoma Cement, South Cement, Southwest Cement and CNBM Investment. The reorganisation awaits internal negotiations and finalisation and regulatory approval.

Huaxin Cement’s deal to buy ARM Cement’s assets in Tanzania has reportedly completed this morning. The Chinese cement producer will pour US$116m into Maweni Limestone to settle its liabilities and add another US$30m to complete plant construction and an upgrade, according to Reuters. Kenyan-based ARM Cement operates an integrated plant at Tanga and a grinding plant at Dar es Salaam.

Given the state of the world at the moment due to coronavirus the timing seems almost prophetic. There have been plenty of jingoistic warnings in Western media about renewed Chinese global dominance in the wake of the crisis. However, this agreement dates back to at least September 2019 when it was publicly announced, well before the current health scare. This is part of the Chinese expansion plan in Sub-Saharan Africa that’s been happening informally and formally since at least 2013. ARM Cement has seriously suffered since 2017 when cement demand fell in Kenya, a coal import ban in Tanzania caused production issues at its Tanga plant and increased competition hit both countries. It entered administration in the summer of 2018 and previous owner Pradeep Paunrana has been fighting PricewaterhouseCoopers’ attempts to sell the business to local rival National Cement. In some respects the timing of this deal may also be bad for Huaxin Cement given that it’s just suffered a 36% year-on-year drop in sales revenue to US$542m in the first quarter of 2020, related to the coronavirus outbreak. If the company can’t absorb this through the rest of the year then it might have a problem.

The real trend here in Chinese expansion strategy by its cement sector is a move from imports, building plants and co-financing projects to outright asset acquisition. This isn’t the first example either. West China Cement completed its purchase of a majority stake in Schwenk Namibia for US$104m in January 2020. This gave it control of Ohorongo Cement. Other recent Chinese moves in Sub-Saharan Africa include the supply of a modular grinding mill in Guinea by Sinoma and the competition of construction of a 1Mt/yr integrated plant in Lubudi Territory in Democratic Republic of Congo by another CNBM subsidiary, Tianjin Cement Industry Design and Research Institute.

An outlier from the more ‘traditional’ Chinese routes of either supplying equipment and/or co-financing cement plants in Africa has been the CNBM/Sinoma plan to build a 7Mt/yr ‘mega’ plant in Tanzania. Once completed it will nearly double local clinker production! Unsurprisingly, when it was first announced it was pitched towards the export market. Cement producers in East Africa might do well to remind themselves what has happened in Egypt since the 13Mt/yr government/army-run El-Arish Cement plant at Beni Suef opened in 2018: the over-supplied market collapsed. Together with the Huaxin Cement purchase, once the CNBM project completes, Chinese companies will own the majority of cement production capacity in Tanzania.

Looking at Sub-Saharan Africa, Chinese cement producers look set to benefit from any potential economic realignment following the coronavirus pandemic due to their conservative approach in expanding overseas. By investing cautiously and generally avoiding large-scale international acquisitions and mergers they have insulated themselves relatively well from any potential economic crisis. One weakness though is a reliance on the strong Chinese domestic market. If, say, it declines over a longer period due to the coronavirus crisis or ever reaches more ‘normal’ per-capita cement consumption figures then expanding too slowly overseas might look like the wrong strategy in retrospect. Yet, if western competitors start retreating further then the temptation to start to buy assets in bulk may grow. Another risk is how badly the coronavirus outbreak hits countries in Africa. The combination of poor healthcare systems, younger populations and warmer climates make it extremely unpredictable. Fortune may favour the bold but slow success seems to be working well for Chinese producers so far.

Many of the first quarter financial results are in from the multinational cement producers and a few points are worth discussing. As usual a few caveats are worth mentioning such as seasonal and geographical variations between companies, such as producers in the northern hemisphere experiencing a generally slower period. It’s also worth noting that this is a selective look at some of the larger cement producers as not all of them release detailed figures at this stage and others have been delayed. However, the economic effects of the coronavirus lockdowns are clearly showing an effect in a kind of wave as the pandemic has spread.

Graph 1: Sales revenues in the first quarter of 2020 from selected cement producers. Source: Company financial reports.

Graph 1 above shows the effects of the earlier lockdown in China upon the results of the Chinese producers like CNBM, Anhui Conch and China Resources Cement (CRC). What’s interesting with these companies is that they have all suffered revenue hits of 20 – 25%. Huaxin Cement, a producer based in Hubei province near Wuhan where the Chinese lockdown was strictest, is not shown in Graph 1 but its revenue fell by 35% in the first quarter. See GCW452 for more on coronavirus effects on the Chinese cement industry.

Looking more widely, both LafargeHolcim and HeidelbergCement suffered declines of around 10%. This is somewhat misleading as both companies are constantly selling assets making the like-for-like results not quite as bad, particularly in the case of LafargeHolcim with its South-East Asian divestments. Although note this week that LafargeHolcim’s deal to sell its majority stake in Holcim Philippines lapsed this week due to the local competition regulator not granting permission in time. Yet, they are also beneficiaries and victims to an extent of their wide geographical spread with worse performance in Asia and better results in North America. For a fuller look at LafargeHolcim’s first quarter results see last week’s column. The rest of the producers featured generally reflect their tighter market spread with Buzzi Unicem particularly benefiting from the relatively untouched market in the US. Shree Cement, an Indian producer, escaped relatively unscathed, possibly as the Indian lockdown only started in late March 2020. All eyes will be on the results of UltraTech Cement, the largest producer in India, when they finally emerge.

Graph 2: Cement sales volumes in the first quarter of 2020 from selected cement producers. Source: Company financial reports.

Cement sales volumes tell a similar story, although a few different companies are featured in Graph 2. Note CRC’s year-on-year fall of 26% to 11.2Mt in the first quarter. It’s the only larger Chinese cement producer that we’ve found so far that has released sales volumes. Semen Indonesia is interesting too because its figures jumped in January 2020 as its acquisition of Holcim Indonesia only went on the books in February 2019. It’s February and March sales volumes have each been 4 - 5% down year-on-year but it’s far from clear whether this is due to general production overcapacity in the country or from the global health crisis. Despite this, its export volumes from both the mainland and its TLCC subsidiary in Vietnam have held up well. Unfortunately though, its performance in Vietnam may be an outlier if data from the General Department of Vietnam Customs is to be believed this week. It indicated that overall cement exports from the country fell by 9.7% year-on-year to 7.73Mt in the first quarter of 2020. Cementos Argos is also worth looking at as it suffered from the government lockdown in Colombia despite having an international presence in the Caribbean and the US.

Most of the world’s largest cement producers are preparing for the economic shockwaves from lockdowns to hit balance sheets in the second quarter of 2020. Many have said exactly this and have paraded their liquidity levels in preparation. Alongside this the results of the Chinese producers in the next quarter may offer some light on what kind of recovery is possible from easing lockdown measures. Yet the risk of second waves of infections from coronavirus potentially jeopardises any kind of fast or easy recovery without a vaccine. Today’s news that Cemex is considering mothballing its integrated plant at South Ferriby in the UK has been blamed on an analysis of the company’s European cement supply chain. The company says it is not related to coronoavirus but it does suggest the company is making savings.

This week has seen international press coverage return to Wuhan, China and South Korea where small numbers of infections have started to build despite being thought mostly eradicated. No one wants the so-called ‘W’ economic recovery with its rollercoaster ride of crests and dips or indeed the ‘L’ with its slow tail of recovery. Yet, for better or for worse, some form of normality has to return after the lockdowns end. The UK, for example, the country with the worst death rate from coronanvirus in Europe, has allowed its construction workers to pick up tools this week. If and when they can do so in the UK and everywhere else without causing the basic reproduction number (R₀) to rise then the future starts to look a little brighter.