Displaying items by tag: Canada

The last week marked a step change to the US industry with the news that Ireland’s CRH has agreed to buy Ash Grove Cement. The latter is the largest remaining cement producer still owned by an American company. Its history dates back 135 years to its founding in 1882, with links to the Sunderland family for over a century. Following the acquisition, each of the top five cement producing firms in the US will be operated by multinational corporations based in foreign countries.

Although this scenario is not new to many other countries around the world, it is rare for a nation with a cement industry of this scale. The US is the third biggest cement producer worldwide. Out of the top ten cement producing nations Global Cement Magazine identified in its Top 100 Report 2017 feature in December 2016 only Egypt doesn’t have a local company to match the multinationals. China has China National Building Material (CNBM), for example and India has UltraTech cement and so on and so forth.

The actual sale covers Ash Grove Cement’s eight cement plants and 23 cement terminals, as well as its ready mix concrete and aggregate businesses, for US$3.5bn. Altogether its cement plants have a production capacity of 9.5Mt/yr and this really puts into contrast the Cementir Italia deal last week. HeidelbergCement has agreed to buy that company for around Euro57/t. CRH is buying Ash Grove Cement for US$368/t. That’s more that five times as much!

To be fair they are very different markets, with Italy’s cement sector consolidating near the bottom of a business cycle and the US growing with some promise. For comparison with other recent US acquisitions, CRH is offering to pay about the same as Summit Materials did to Lafarge for a cement plant and seven terminals in mid-2015. Other than that a few of the more recent transactions have been between US$200 – 300/t. The gradual price inflation for cement production capacity indicates that there is confidence in the US cement market.

In terms of CRH’s enhanced presence in North America following the completion of the deal, it currently operates two cement plants in the US: the American Cement Sumterville plant in Florida, a joint venture with Elementia, and the Trident plant in Montana. The CRH US division also runs five terminals in the Midwest and Northeast. This compliments Ash Grove Cement’s presence in the West, Midwest and South. Throw in CRH’s Canadian cement plants in Ontario and Quebec and CRH has the makings of a seriously strong cement business in North America. The only obvious impediment could be the close proximity of the CRH Trident plant and the Ash Grove Cement Montana City plant. Both are in Montana within 115km of each other and they are the only integrated plants in the state. A Federal Trade Commission arranged divestment in this location seems likely.

Ash Grove Cement’s chairman Charlie Sunderland, described CRH as his company’s biggest customer when the acquisition was announced. Buying Ash Grove Cement fills in one more piece in CRH’s construction materials puzzle in North America. Its American divisions have generated more than half of its revenue since at least 2014 dominating asphalt, aggregate and ready mix concrete markets. Yet it has lacked a cement market presence to match this. This changes when the deal with Ash Grove Cement completes.

Canada: A man has died after falling nearly 10m from a catwalk at Lafarge Canada’s Beachville limestone quarry near Woodstock, Ontario on 23 August 2017. Walter Nuvoloni, 47, was a long-standing purchasing manager at the company. He had been in the position since 2001.

"This is a very difficult and tragic incident and we are deeply saddened at the loss of our colleague,” said Karine Cousineau, Lafarge spokesperson, in a statement. “Our thoughts are with our colleague's friends and family. Lafarge is providing the support of our employee assistance program to help co-workers cope with the loss." Cousineau added that Lafarge Canada would not be commenting further on Nuvoloni's death.

Police initially held the scene before turning over the investigation to the Ontario Ministry of Labour, which is investigating the death. Ontario Provincial Police Constable Stacey Culbert told local press that the ministry will re-contact police if the investigation deems any action to be criminal.

Ed Sullivan, the Portland Cement Association’s (PCA) chief economist was in tub-thumbing mood last week at the IEEE-IAS/PCA Cement Conference in Calgary, Canada. The headline figures that the PCA put out in a press release was a forecast of a 3.5% rise in cement consumption in 2018 and 2019. Yet behind this in a stirring speech given to a cement industry crowd craving growth was a tale of riches ahead. The audience lapped it up. There was only one problem: nothing has really happened yet to make any if this happen. It always seems to be riches ahead. As Sullivan freely put it, “Trump policies will impact cement… But we don’t know what they are!”

Sullivan broke down his forecast into three sections that hinged around President Trump’s desired policy changes kicking in from about the third quarter of 2019. At this point, owing to lack of information about what the Trump administration actually wants to do, Sullivan freely broke open the assumptions. These covered issues such as a tax reform, infrastructure budgeting, immigration reforms and more. As he explained it all of these issues interact, so that reducing taxes potentially pushes national debt up making infrastructure spending harder. Owing to the lack of specifics from the current administration though Sullivan was forced to resort to the more solid plans of Democratic presidential contenders Hillary Clinton and even Bernie Saunders for nuggets of information of how ‘a government’ might act. For example, he used a breakdown of Saunders’s intended infrastructure spend to try and predict how Trump’s policies could play out. Increases in highway building from the overall infrastructure spend in this context being good news for the cement industry. And as for Sullivan’s view on the impact of the Trump border wall: ‘overrated’.

The new forecasts for 2018 and 2019 appear to be retrenchment given that the PCA was predicting growth of 4% for 2016 in the middle of that year. It subsequently reduced its estimate to 2.7% for 2016 by December 2016 after the presidential election. However its figures for 2017 and 2018 have increased since the December forecast. Sullivan predicted that growth will start to surpass 5% in 2020 once Trump’s policies have time to make waves. The crescendo of his presentation at the IEEE-IAS/PCA was a prognostication of an extra requirement of 14Mt of cement in 2021 and 2022. Sullivan topped this off by saying that, “We have the supply infrastructure in place right now.” However, some delegates informally questioned afterwards where that cement might actually come from with mass international clinker capacity waiting in the wings from places like Vietnam and new cement plants such as the McInnis Cement plant in Quebec expressively targeted at the US import market about to come on line.

Sullivan has a tricky job trying to predict what will happen next in the US cement industry and sometimes his forecasts seems to change as much as the weather that cement company financial reports often blame their poor returns on. This column knows a little bit how he feels. As Sullivan’s biography points out he’s been cited by the Chicago Federal Reserve as the most accurate forecaster regarding economic growth among 30 top economists. In short he’s the best we’ve got. But Donald Trump’s approach to government so far has made his job exponentially harder. As we’ve said more than a few times when describing the US cement market, the basis are there for growth but something is holding back faster growth. Will Trump be the catalyst to break the 5% growth barrier? Looks like we’ll have to wait until late 2019 to find out.

Elsewhere, the conference brought together a large cross-section of the North American industry. Surprisingly perhaps given the change in leadership at the US Environmental Protection Agency (EPA) several parts of the speaker and discussion programme focused on coping with National Emission Standards for Hazardous Air Pollutants (NESHAP), carbon tax schemes in Canada and California and practical carbon capture methods at the plant level. The key here seemed to be a piecemeal approach that may not necessarily be at odds with less government environmental legislation. Next year’s outing in Nashville, Tennessee looks set to be an even more important event, especially if more on Trump's infrastructure plans become known.

Canada: McInnis Cement has appointed Hervé Mallet as its president and chief executive officer. Other new appointments include the assignment of Gaétan Vézina as Vice-President, Cement and Sustainable Development and Alexandre Rail as Vice-President, Operations – Port-Daniel–Gascons.

Previously Mallet was the Executive Vice-President – North America for Dynacast. He is a graduate of the University of Wolverhampton and Brunel University in the UK.

The McInnis Cement plant at Port-Daniel-Gascons in Quebec, Canada must be the most famous cement plant that hasn’t been built yet. Every single step of the project’s list has seemed dogged with infamy. Public money it seems comes with public scrutiny. This week, one of the principal investors took control of the plant following allegations of massive budget overruns and the disappearance of the company’s president.

To start with the money, the plant was originally budgeted at US$1bn for a 2.2Mt/yr facility. This has always seemed like an inflated figure given that the general cost of a new or greenfield cement plant is up to US$200/t. The original price tag for McInnis is double this figure. Throw in the need for infrastructure at the site and the requirement of a marine terminal and the cost starts to become a little more realistic with government backing. The importance of the sea links can’t be under stressed given that the plant is targeted at the US market. No port: no cement plant.

This then leads to the quagmire of criticism the project has found itself stuck within. American cement producers took exception to a foreign government-backed plant trying to eat their lunch so they went legal. When the government-subsidised project bypassed the normal environmental clearances Lafarge Canada backed a challenge in 2013. Then in 2014 the provincial opposition in Quebec attacked the local government’s financial involvement in the project describing it as a ‘sinkhole’ in return for a minority stake.

Once these hurdles were overcome, work on building the plant began until the Globe and Mail newspaper revealed in late June 2016 that the project was ‘massively’ over-budget by up to US$350m and that the Quebec government was not prepared to provide any more money. The budget over-run alone is enough to build a cement plant in a more conventional location! Six weeks later and the project has most likely had its chief executive fired and one of the investors has stepped in to run things.

So, some combination of the legal fees, the wrangling over the plant’s unique environmental clearance, the difficulties of the underdeveloped location and potential mismanagement by the company itself have led to the additional costs. This in turn has led to the Caisse de dépôt et placement du Québec, a pension fund firm, taking charge. It, like the previous management, also has no experience in building cement plants. Although it clearly knows how to calm investors. The first thing it did after announcing the new financing was to reassure everybody on the plant’s potential. Best not to consider at this stage what happens if the US bans Canadian cement.

McInnis Cement could be compared to other provincial industrial follies such as the closed Gaspésia paper mill in Quebec that also received over US$350m of government money. Yet if there is a project one might compare it to it is London’s Millennium Dome. Conceived as a national exhibition space to celebrate the start of the new millennium in 2000 the UK government of the time backed the project to much derision from the press as the costs spiralled and the visitors stayed away. However, today the venue has become a popular music and events venue. Flop or triumph: all those investors of McInnis Cement must be wondering what their fate will be. If nothing else perhaps renaming the plant once the dust settles (in an environmentally approved way) might be a good idea. Today, the Millennium dome is known as the 0₂.

Canada: Christian Gagnon, the president and chief executive officer of McInnis Cement, has left the company. The board of directors announced the departure and said that the cement producer is currently recruiting his replacement. A new executive committee has been put in place to take over the management of the company until the vacancy has been filled. It is composed of the following members: Louis Laporte, Chief of Operations; Ronald Bougie, Executive Vice-President, Engineering, Construction and Operations; and Marc Baillargeon, Management Advisor acting on behalf of la Caisse.

In other changes to the company’s executive team, Ronald Bougie has been appointed with immediate effect as the Executive Vice-President, Engineering, Construction and Operations. Bougie has experience in the construction of large industrial projects including the Stornoway site, a project in which Caisse de dépôt et de placement du Québec invested. Until a new president and chief executive officer is appointed, Bougie will report directly to McInnis Cement’s Executive Committee. Bougie will have direct access to the Board of Directors to provide progress reports. The board will closely monitor the final stages of the site’s construction.

Canada: Alexandre Rail has been appointed as plant manager of McInnis Cement's Port-Daniel-Gascons plant in Gaspé. Rail brings with him 15 years of experience in heavy industry. He joins the company from ArcelorMittal, where he served as a Steel plant manager for seven years.

"We are pleased with our recruitment of an experienced manager in the heavy industry who shares our values in the areas of health and safety, environment and quality. Rail has proven abilities to mobilise employees," said Christian Gagnon, CEO of McInnis Cement. "Rail's family comes from Gaspé, so he is undoubtedly happy to relocate to that region and eager to contribute its local economic development."

McInnis Cement has also named Mark T Newhart as vice president of Logistics and Distribution and as a member of the company's management team. He will develop an efficient distribution network, with responsibility for transport management and marine terminals. Newhart will report to Jim Braselton, senior vice president of Commerical and Logistics.

"With his 30 years of experience in logistics, which includes 20 years in the cement industry, the addition of Mark to our management team is a major milestone," said Gagnon. "Since our business model is based on marine transportation of our products, Newhart's expertise in transportation and marine terminal management will be beneficial for our organisation."

With Newhart's appointment, McInnis Cement's management team is now complete. It comprises: Christian Gagnon as CEO; André Racine as senior vice president of Corporate Development and Legal Affairs; Jim Braselton as senior vice president of Commercial and Logistics; Gaétan Vézina as senior vice president of Operations; Claude Ferland as CFO; Mark T Newhart as vice president of Logistics and Distribution; Marc Lachapelle as senior director of Human Resources; Maryse Tremblay as director of Communications and Corporate Social Responsibility. McInnis Cement has also announced the relocation of its corporate office in downtown Montreal.

CRH has made good on its intentions. This week it stumped up Euro6.5bn to buy assets from Lafarge and Holcim in four continents. The move follows preparation since at least May 2014 when the Irish building materials group announced a divestment programme. In October 2014 it announced that it would sell its brickwork division.

CRH is finding the cash through a mix of existing cash, debt and equity placing. Interestingly, back in 2012 an Irish stockbroking analyst who was interviewed reckoned that the company could spend up to Euro3.5bn on acquisitions whilst remaining within its banking agreements. Throw in the recent sales and planned divestments and the planned acquisition from LafargeHolcim doesn't seem like too much of a stretch for CRH.

If completed, the purchase will see CRH take on 24 cement plants with a production capacity of 36Mt/yr. As a back of the envelope calculation suggests the sale price of Euro6.5bn isn't far off the occasionally used price of US$200/t for western cement production. The deal also includes aggregates, ready mixed concrete and asphalt assets.

The purchase marks a change in CRH's buying strategy both in terms of scale and distribution. Much of CRH's previous acquisitions have been minority shareholdings that make it difficult to accurately report the company's position in the cement industry. For example, in our Top 100 Report CRH was reported to have a production capacity of 6.49Mt/yr for majority shareholdings with another 19.9Mt/yr for minority shareholdings. The new cement capacity being purchased blows this away because it more than doubles CRH's total capacity and it appears to be all majority owned. CRH thinks that this will propel it to become the world's third biggest building materials manufacturer after LafargeHolcim and Saint-Gobain, leapfrogging Cemex and HeidelbergCement in the process. Strangely there is no mention of the huge Chinese players in the top five manufacturers in CRH's acquisition presentation.

CRH has avoided buying plants in southern Europe but it is relying on the slowly improving growing UK market, where CRH will pick up four plants, to balance the risk. Elsewhere in Europe, the three Holcim plants in France have been suffering from continued low construction rates in that country and the two Lafarge cement plants in Romania are unlikely to have recovered from a production fall in 2013. Outside of Europe growth has been poor in Quebec in 2013 and 2014, where CRH is buying two plants from Holcim. Both Lafarge and Holcim have also seen a slowdown in Brazil. However, the Philippines does seem like a better bet for CRH, with solid cement volumes growth seen by Lafarge in 2013 and the first three quarters of 2014.

With CRH now looking like a company that wants to produce cement rather than one that owns parts of companies that produce cement, all eyes are on the construction markets. 14 of the 24 cement plants CRH are buying are in Europe. Buying at the bottom of a sustained production slump makes sense because the asking price will be low. However, has the bottom been reached yet?

On 31 January 2014, the Québec government announced that it would invest US$350m in a new US$1bn, 2.2Mt/yr cement plant and port facility, to be operated by McInnis Cement at Port-Daniel. To say that this has prompted outrage in the industry is an understatement. Rival cement producers, including Lafarge and Ciments Québec have been unanimous in condemning the funding, which they see as an unjustified affront to fair competition in the province's cement industry. There was an angry response on the Global Cement LinkedIn Group, with dissatisfaction on a number of levels.

Firstly, established manufacturers highlight that the Québec cement market is in a slump, with 100-150 members of Métallos, the United Steelworkers union, currently on rolling temporary furloughs at any one time. There is over-capacity as it is. How will another cement plant help this situation? One contributor to the Global Cement LinkedIn Group said that the funding was like, "Taking the money I pay as taxes to break my legs." Another said, "Imagine our tax dollars heavily subsidising our direct competitor - totally unacceptable!"

Secondly, the government will have a direct interest in the cement industry, diverting public funds to a sector that (in the West) is traditionally left to its own devices. What does the government have to gain from this move? Well, there are suggestions that the awarding of future government cement and concrete contracts can no longer be fair due to the rather obvious conflict of interest. Could the government effectively award contracts to itself? Arguments from the government and McInnis that its distribution will be outside the areas served by the other plants don't seem to wash with the established producers.

Thirdly, there are fingers pointed at the Gaspasia paper mill project, a failed government-funded installation that was not established in the 1990s at a cost to the taxpayer of US$300m. It is unlikely that any of the parties involved would like to see a repeat at Port-Daniel.

Finally, the Canadian government appears to have turned its back on its own 'Wood First' policy, signed in April 2013, which stated that wood should be preferred in construction over cement and steel due to environmental concerns over embodied CO2. At the time Canadian cement manufacturers were at pains to point out that cement and concrete constructions were actually sustainable in comparison to many other building materials, especially with repect to long-term use and minimisation of energy consumed during a building's lifespan. At worst this seems to be a government U-turn but it could yet get more ugly. Now, with funding for new cement capacity, Québec appears to have 'listened' to the cement producers. How long before some cynics point to this change as evidence that the government wanted McInnis Cement to happen all along?

Whether a gross miscalculation or a deliberate ploy by the government, the McInnis Cement saga will not be going away. Ciments Québec and Lafarge will line up to fight the decision and, in litigation-heavy North America, this story could run and run.

Canada: René Thibault and Bob Cartmel have been appointed by the Lafarge Group as its senior leaders for all markets and product lines in Canada. Thibault will oversee the four western Provinces and three Territories as well as the Pacific north west and the Dakotas in the US. Cartmel will oversee the six Eastern Provinces.

Thibault has over 20 years of experience with Lafarge in Canada, which has included an assignment at the Lafarge group headquarters in Paris, France. He has an Engineering degree from Queen's University in Ontario and has completed executive studies at Harvard Business School in the US.

Cartmel has over 25 years of experience with Lafarge spanning Canada, the United States and Latin America. He has a Bachelor of Business Administration degree from Wilfrid Laurier University in Ontario.

Lafarge said that the appointments, which are part of its wider geographical restructuring programme to bring all of Lafarge's businesses together under a single leader in each geographical area, would provide further career development opportunities for employees, strengthen the company's customer approach as it delivers sustainable solutions to the construction industry and allow its community investment projects to be more focused.