Displaying items by tag: CRH

Following on from last week's analysis column (Global Cement Weekly #107: Gimmie Water - water conservation in the cement industry) Irish cement producer CRH has released its 2012 Sustainability Report.

Unfortunately, no comparable figures for water usage per cement production were published and CRH noted usage measurement as a group objective. Its best estimate was that the group used 36Mm³ of water in 2012, with 12% of that figure (4.4Mm³) used in cement production.

Otherwise plenty of good news filled the report with improvements shown for most of the key indicators. Notably chief executive office Myles Lee pointed out that CRH had substantially increased alternative fuel usage in its European cement operations in 2012 and that this helped with rising energy costs.

Sticking with CRH, the Irish cement producer recently released information on its development strategy for the first half of 2013.

Despite - or perhaps because – of decreasing profits in 2012, CRH's development spend has nearly doubled year-on-year to Euro470m from Euro250m. The increase is mainly due to the asset swap with Cementos Portland Valderrivas (CPV), which was announced in February 2013. CRH agreed to transfer a 26% stake in Corporacion Uniland to CPV. In return, CPV agreed to transfer its 99% stake in Cementos Lemona to CRH, as well as giving CRH its UK-based cement importer Southern Cement.

In its press release CPV specifically mentioned that the asset swap would reduce its exposure to the Spanish cement market. On CRH's side the inclusion into the deal of a UK cement importer may be incidental but having an additional destination for potential excess Spanish cement production capacity can only be prudent.

Elsewhere this week, Turkmenistan's decision to protect domestic cement production with a 100% import duty raises interesting implications for exporters in the region such as Iran. It is unclear whether Turkmenistan is blocking Iranian exports altogether or just taxing them more. Either way, following news of a Iraqi block on Iranian exports, it seems likely to dent Iran's ambition to reach 18Mt of exports in the 2013 – 2014 Iranian calendar year, which will end on 20 March 2014.

Ireland: Donald A McGovern, Jr will join the board of CRH as a non-executive director effective from 1 July 2013.

McGovern, a US national aged 62 years, is currently Vice Chairman for Global Assurance at PricewaterhouseCoopers (PwC), a position he has held since July 2008. McGovern will retire from PwC on 30 June 2013, following a 39 year career with the firm, during which time he directed the US firm's services for a number of large public company clients. He is a member of the American Institute of Certified Public Accountants and holds a Master's Degree in Business.

With the annual results for 2012 in from Lafarge, Holcim and CRH we now return to look at how the European markets coped.

Holcim summed up the mood perfectly in its media release on its annual results for 2012. First it pushed the big positive (net sales up overall) but then finished its first (!) sentence with: '...despite the difficult economic environment in Europe.'

Overall in Europe, Lafarge saw its cement volumes fall by 9% to 29.6Mt from 32.5Mt. Notably sales volumes fell significantly in Spain and Greece, by 26% and 37% respectively.

Holcim saw its cement volumes fall by 2% in Europe to 26.3Mt from 26.8Mt. There were specific country figures from Holcim but it did comment that the 'severe crisis' in southern Europe had 'contaminated' economies further north such as a France, Benelux, Germany and Switzerland.

CRH was less candid about its cement business in Europe although it did report that its sales revenues fell by 10% to Euro2.69bn in 2012 from Euro2.99bn in 2011. Notable losses occurred in Poland (11% volume decline), Ireland (17% decline) and Spain (30% decline).

These figures compare against a 4% decline in volumes in Western and Northern Europe to 22.1Mt from 21.3Mt by HeidelbergCement, a 13% drop in overall net sales to Euro3.05bn in Cemex's Northern Europe section and a 16% drop in volumes to 16Mt from Italcementi in its Central Western Europe region.

The question to ask at this point is how HeidelbergCement and Holcim managed to suffer smaller losses compared to everybody else. Less exposure to southern Europe is one answer. Depressingly though they both suffered similar drops in profit indicators such as earnings before interest, taxes, depreciation, and amortisation (EBITDA) to the others (20% and 33% respectively).

Both Holcim and CRH are expecting continued tough conditions in Europe in 2013. However, both companies are mildly optimistic that the worst has passed, with talk of the work of the European Central Bank supporting peripheral Eurozone economies showing some effect. Lafarge doesn't even mention Europe in its outlook.

As mentioned in Global Cement Weekly #87 on 13 February 2013, EU regional GDP growth is forecast to become positive in 2013. Everybody is going to be watching the European quarterly results for the cement majors in 2013 very carefully indeed. In the meantime all every cement producer with a presence in Europe can do is to carry on cutting costs.

Ireland: Myles Lee, the Group Chief Executive of CRH, has confirmed to the board that he intends to retire from the company at the end of 2013 having reached the age of 60. CRH has indicated that it was likely that Albert Manifold, CRH's CEO, would become the new chairman.

Lee has completed a five year term as chief executive and 10 years as an executive director. Lee joined CRH in 1982, joining the board in November 2003 as finance director, later becoming chief executive in January 2009.

Step forward UltraTech Cement into the vertical rumour mill! The Indian cement producer is the latest company reported as wanting to buy Jaypee Group's cement business in Gujarat. It follows Italcementi, Aditya Birla and CRH, who announced in October 2012 that negotiations had been 'terminated' as the parties had been unable to agree terms.

This time the asking price has risen, with Ultratech allegedly offering US$160-165/t and Jaypee holding out for US$180-185/t. Whilst UltraTech hasn't publicly confirmed the move, it pointedly hasn't denied it either. The Aditya Birla Group subsidiary only commented to the Bombay Stock Exchange that it had not issued any press releases on the subject. Aditya Birla Group itself was reported in October 2012 as pursing interest at US$130/t for Jaypee's 9.8Mt/yr operations in Gujarat and Andhra Pradesh.

Given the number of rumours and cash-rich CRH's very public failure to strike a deal it seems likely that Jaypee has a specific price in mind and it's sticking to it. Prasad Baji of Edelweiss Securities stated in a television interview with CNBC-TV18 that he thought that the cement industry cycle was starting to look up. Crucially he predicted that India's capacity utilisation was set to rise from its current level of 78% to 82% despite price declines in the current quarter.

This is in sharp contrast with Fitch Ratings which rated the Indian cement industry with a negative outlook at the start of 2012 and reports in late May 2012 that capacity ultilisation had actually fallen from 76% to 71%. Since then ICRA Research reported in late September 2012 that it expected Indian capacity ultilisation to stick to 76% for 2012 with prices showing 'resistance' in some regions to cost increases due to rising input costs.

With all this in mind it seems likely that UltraTech will join the growing list of Jaypee's spurned buyers when it fails to reach terms or when the rumours simply fizzle out. However if UltraTech does strike a deal the Indian industry will be the one to watch in 2013. According to data in the Global Cement Directory 2013, an acquisition of nearly 10Mt/yr production capacity would boost UltraTech's capacity to 62Mt/yr making it the 12th largest cement company in the world.

Anyone need a spare cement plant? If so then it looks like India is the place to head to this week.

First, Italcementi denied that it was in talks with Jaiprakash Associates to buy one of their Jaypee Cement plants. Then, after much speculation, CRH announced publicly that it had entered negotiations to purchase an equity stake in Jaypee's entire cement business. In addition the Indian government has also revived a plan to sell six Cement Corporation of India (CCI) factories that have been closed for almost 10 years.

All of this raises a question: how much are Indian cement plants actually worth?

According to one source, Italcementi was thought to be offering US$100/t (installed capacity) in the bid it supposedly made but has denied making. Jaypee 'wanted' US$150/t. However analyst commentary with the CRH announcement suggested that Jaypee's asking price was too high! This is hardly surprising. Back in June 2012 when Jaiprakash announced that it was selling its plants it was reported that Holcim was offering up to US$160/t. Alongside the CCI story an analyst was quoted as putting the cost of Indian cement production capacity at US$110/t-US$120/t. Yet these plants have been shut for a decade.

Unlike in Europe, Indian cement industry profits have been rising in double digits in recent years. However, input costs like energy and transport are rising and they are starting to hit margins listed in quarterly reports. Serious additional costs have also arisen from the anti-cartel fines issued by the Competition Commission of India. Throw in questions on infrastructure raised by last week's nationwide power-cuts and Italcementi's (non)decision to stick to US$100/t seems prescient.

Unlike Italcementi however CRH has money to spend. Back in June 2012 it was reported that the company had Euro1.5bn to invest. With Euro250m gone in the first half of 2012 on so-called 'bolt-on' acquisitions that still leaves plenty in the pot to pick up the CCI plants. Now that would be a surprise.

Germany: Tomasz Czop, former Purchase Director of Ożarów Cement Poland (CRH Group) is now leading business development at MVW Lechtenberg & Partner, the German consulting firm for the implementation of alternative fuels from biomass and useable wastes in the cement industry.

As a former member of the management board of the Polish subsidiaries of Ireland's CRH he was directly responsible for the whole procurement of all business units in Poland and Ukraine. Within MVW Lechtenberg he will lead the business unit of alternative fuels and raw materials trade which is currently focused on the supply of refuse derived fuels for the cement and power generating industry in northern and eastern Europe.

Spend, spend, spend has been the advice for CRH this week. The suggestion by an industry analyst this week that Irish building material conglomerate CRH should go on a shopping spree seems almost perverse! Or at least like stockbrokers trying to drum up excitement.

Just as all of the big multinational cement producers are selling assets and tightening management structures to cope with the ongoing financial turmoil, CRH is the only player that hasn't ruled out acquisitions in 2012. The analyst from Dublin stockbroking firm Davy predicted that CRH could spend up to Euro3.5bn on acquisitions while remaining within its banking agreements; a more level-headed figure was given as Euro1.5bn.

CRH broke down its revenue in 2011 to 55% to the European divisions and 45% to the American ones, with European Distribution, Americas Materials and European Materials being its top three sections. European Materials, the worldwide division containing cement assets generated Euro2.99bn, 16.5% of total group revenue.

With 85% of CRH's European Materials division concentrated on Switzerland, Finland, Benelux, Eastern Europe, Turkey and Asia its exposure to the Eurozone economic slowdown has been reduced compared to the competition. Yet what to buy next is fraught with risk. If Greece exits the Euro for example, then there may be some bargains going, but how long it would take these assets to become profitable is a big unknown.

Similarly, the over-indebted Mediterranean countries present opportunities and challenges. CRH's decision to transfer its 49% holding in Portuguese cement joint venture Secil to Semapa in May 2012 may indicate CRH's intention to stay well away from the Eurozone until the dust settles. Given the amount of cash that CRH could potentially throw around however, it seems odd that the company didn't try to disrupt the ongoing Cimpor takeover by two Brazilian firms. If anything happened to the bid by Camargo Corrêa and Votorantim then CRH would be in a prime position to benefit should it wish.

Whatever CRH decides to do with its money, it's a good problem to have! Lafarge, Cemex, HeidelbergCement and Holcim must all wish they had the same dilemma.

Ireland: The board of CRH has appointed Nicky Hartery as chairman designate and Heather Ann McSharry as a non-executive director. Hartley will succeed the present chairman, Kieran McGowan after the company's annual general meeting in May 2012.

Hartery, aged 60, who joined the board of CRH in 2004, was vice president of manufacturing and business operations for Dell Inc.'s Europe, Middle East and Africa (EMEA) operations from 2000 to 2008. Prior to joining Dell he was executive vice president at Eastman Kodak and previously held the position of president and chief executive officer at Verbatim Corporation in the United States. Hartery is a chartered engineer, Fellow of the Institute of Engineers of Ireland, an electrical engineering graduate from University College Cork and holds an MBA from University College Galway.

McSharry, aged 50, is chairman of the board of trustees of Bank of Ireland Pension Fund and is a director of Ergonomics Solutions International, IDA Ireland and the Institute of Directors. She is a former managing director of Reckitt Benckiser and Boots Healthcare in Ireland and was previously a director of Bank of Ireland and Enterprise Ireland. She holds a Bachelor of Commerce and a Master of Business Studies degree from University College Dublin.

US: Doug Black, currently chief executive of CRH's Americas Materials Division, has been appointed to the newly created position of president and chief operating officer of Oldcastle Inc, the holding company for CRH's operations in the Americas. Black will report to Mark Towe, chief executive officer of Oldcastle. Aged 47, Black joined Oldcastle in 1995 and has held a series of key leadership positions at Oldcastle and in the Precast, Architectural Products (APG) and Materials operations.

CRH, the international building materials group, has announced a number of changes within its management team in the United States, effective from 20 February 2012. Commenting on these changes, Myles Lee, CRH chief executive said, "These appointments and subsequent follow-on changes strengthen our organisational structure and enhance our ability to execute our strategies and achieve long-term performance and growth."