Displaying items by tag: Cementos Argos

Colombia: Rafael Olivella Vives has been appointed as the Vice President of Legal and Institutional Affairs at Cementos Argos. He succeeds Juan Luis Múnera who has secured the role as vice president of Corporate Legal Affairs at Grupo Sura. Olivella trained as the Universidad Pontificia Bolivariana and the Universidad de los Andes before working for Ignacio Sanín Bernal & Cía. He joined Cementos Argos in 2008 and subsequently became the vice president of Corporate Affairs at Celsia, the energy business of the Argos Group.

Dominican Republic: Colombian cement producer Cementos Argos has announced the appointment of Gary Manuel de la Rosa as its new Director General in the Dominican Republic. Previously, de la Rosa acted as a director of the industrial business unit at Cementos Argos in the Caribbean and Central American region.

Cementos Argos’ deal to buy the Martinsburg cement plant in West Virginia from HeidelbergCement makes a lot of sense. After all, the Colombian-based cement producer has seen its US cement assets perform well so far in 2016 with a cement sales volumes increase of 29% year-on-year to 1.99Mt and an overall sales revenue boost of 19.7% to US$700m. Compare that to the challenges the company has faced so far this year on its home turf in Colombia. There, cement sales volumes fell by 15.5% to 2.47Mt and sales revenue fell slightly to US$465m.

Argos has picked up the Martinsburg cement plant and eight cement terminals in the surrounding states for US$660m. The sale was mandated by the US Federal Trade Commission as one of the conditions of HeidelbergCement’s purchase of Italcementi including its US subsidiary Essroc, the current owner of the plant.

Symbolically, the purchase takes Argos right up to the Mason–Dixon line, the old survey line sometimes used to describe the dividing line between the so-called ‘north’ and ‘south’ in the US. The cement plant is south of the line in West Virginia but some of the cement terminals are firmly in the north-east. Outside of the company’s home turf in Colombia it has a maritime presence around the Gulf of Mexico. Although Martinsburg is inland, the new terminals in Norfolk, Virginia and Baltimore push Argos’ distribution network up the east coast. This could potentially push Argos into conflict with the subject of last week’s column, McInnis Cement, a Canadian cement plant under construction with eventual aspirations to sell its cement to the US.

Back in the US specifically the new plant will bring Argos’ total of integrated cement plants to four, joining Roberta in Alabama, Newberry in Florida and Harleyville in South Carolina. All together the producer will have a production capacity of around 6Mt/yr in the US following the acquisition. Back in 2014 when Global Cement visited Martinsburg the plant was distributing its cement about 60:40 via truck and rail. At that time the plant was shifting cement in an area from central Ohio eastwards to western Pennsylvania and south to southern Virginia, as well as in North Carolina.

Argos has paid US$300/t for Martinsburg’s production capacity of 2.2Mt/yr. As ever determining the cost of the terminals proves difficult. This compares to the US$267t/yr that Grupo Cementos de Chihuahua (GCC) paid to pick up two plants from Cemex in May 2016 or the US$375/t that Summit Materials paid Lafarge for a cement plant and seven terminals in July 2015. Previous Argos purchases in the US were around US$220 – 250/t for deals with Lafarge and Vulcan in 2011 and 2014 respectively. It is also worth considering that Essroc upgraded Martinsburg significantly in 2010 to a dry-process kiln and that the site has a waste-to-solid-fuel plant from Entsorga due to become operational in 2017.

The purchase of Martinsburg by Argos seems like an obvious move. It predicts a compound annual growth rate of 5.4% for cement consumption in the American states it operates within between 2016 and 2020. However, this may be optimistic given that the Portland Cement Association’s chief economist Ed Sullivan has downgraded his consumption forecasts for the US as a whole to 3.4% from 5% as he waits for the recovery to really kick in. The southern US states have also recovered faster since a low in 2009 than the northeastern ones. The purchase marks a new chapter in Cementos Argos’ expansion strategy

Colombia: Camilo Restrepo has been appointed the Vice President of the Caribbean and Central Region for Cementos Argos. He replaces Mauricio Ossa, who recently became president of the Colombia construction company Odinsa.

Restrepo was educated at the University of Maryland and is currently completing MBA studies at Emory University's Goizueta Business School in Atlanta, US. He joined Cementos Argos in 2005 as a research and development analyst. He became the Vice President of Innovation in 2012.

Colombia: As of 1 March 2016, the current President of Cementos Argos, Jorge Mario Velasquez, will be the new President of the entire Argos group in Colombia.

Velasquez, born in Bogota in 1960, will replace the retiring Jose Alberto Velez. Velasquez joined Cementos Argos in 1984 and, on his way up within the company, has served as General Director of Cementos del Nare, President of Cementos Paz del Rio and Vice President of Logistics at Cementos Argos. He became the latter's President in June 2012. Velez has said that the main challenges awaiting Velasquez are the integration of Odinsa into Grupo Argos, the consolidation of Pactia (the property fund established with Conconcreto) and the expansion of Cementos Argos and Celsia.

This week we heard news of two potential bidders for Lafarge and Holcim divestments. However, for a change it was where they will not be bidding that was of interest: Brazil. India's UltraTech Cement and Colombia's Cementos Argos now seem to have no interest in developing their positions in South America's largest cement market, having both previously stated their interest.

The Brazilian assets to be sold are three integrated cement plants and two grinding plants that share a capacity of 3.6Mt/yr (as well as a one ready-mix plant). Cementos Argos came out and said that it would not be bidding. UltraTech's position is more of a rumour, given by 'a source close to the company' that was not revealed by local media. However, both stories suggest that Brazil is currently not a good place for cement producers to buy up assets.

The reasons for these decisions are related to the state of the Brazilian economy, which has seen sub 2% growth in the last 11 quarters. The economy actually contracted by 0.9% in the second quarter of 2014 and by 0.25% in the third quarter of 2014. A 0.2% rise in the fourth quarter will be negated by a fall of 0.28% in the first quarter of 2015. Over the course of 2015 the IMF forecasts growth of 1.4%.

Although Brazilian cement production has risen from around 40Mt/yr in 2006 to around 70Mt/yr in 2013, it has been growing by lower and lower amounts each year. In 2013, it rose by 1.5% year-on-year, down from a 6.7% rise in 2012, an 8.3% rise in 2011 and a near 16% rise in 2010. Taken along with the IMF's GDP growth forecast, there is a genuine chance that Brazilian cement sales could plateau in 2014 or 2015. There will certainly be better places to try to sell cement over the next couple of years, hence the eagerness with which Cementos Argos declared its position.

One country that Cementos Argos has said it's looking at Lafarge and Holcim assets in is Mexico. Its economy is anticipated to grow by 3.5% in 2015, more than twice as quickly as Brazil and far more than the Americas as a whole (2.2%). Another anticipated strong performer in 2015 will be the US (3.1%), where Cementos Argos acquired assets in 2013. This week also saw the news that the Portland Cement Association's 8.1% cement consumption forecast for 2014 will be met.

Taking this all together, it appears that economic growth, and hence cement demand growth, will return to North America in earnest in 2015. Meanwhile South America's largest market is starting to lag behind. How will the rest of the two continents fare in 2015 and beyond?

The creation of Lafarge Africa, the clearance of the Cemex West acquisition by Holcim in Germany and the sale of Lafarge's assets in Ecuador all hint at the scale of business that LafargeHolcim will command when it comes into existence. Despite the media saturation of coverage on the merger the implications in developing markets are still worthwhile exploring, especially in Latin American and Africa.

In sub-Saharan Africa, Lafarge is merging its cement companies in Nigeria and South Africa to create Lafarge Africa. Analysts Exotix have described the move as, 'the birth of a leading player on a continental scale'. Indeed, if Lafarge wanted to grow Lafarge Africa to encompass its many other African cement producing subsidiaries it could hold at least 17 integrated cement plants (including plants in north Africa) with a cement production capacity of at least 40Mt/yr in 10 countries and infrastructure in others. That puts it head-to-head with Dangote's plans to meet 40Mt/yr by the end of 2014 through its many expansion projects. Following these two market leaders would come South African-based cement producer PPC with its expansion plans around the continent.

Meanwhile across the Atlantic in Latin America the Lafarge-Holcim merger threatens Cemex. Unlike in Africa where Lafarge has a ubiquitous but disparate presence, Lafarge and Holcim's cement assets are more evenly scattered around the Caribbean, Central and South America. In terms of cement production capacity Cemex and Lafarge-Holcim will both have around 30Mt/yr, with Cemex just in front. The next biggest cement producers in Latin America will be Votorantim (present mainly in Brazil) with just over 20Mt/yr and Cementos Argos (Columbia) with about the same. This includes some new acquisitions in the United States for the growing Columbian producer. In Ecuador Lafarge and Holcim held over 50% of the market share, hence the sale by Lafarge of its assets to Union Andina de Cementos for US$553m.

Depending on how well the merger integrates the two companies, corals the various subsidiaries and implements strategic thinking the merger could just create business as usual with little disruption to the existing order. Yet in both continents the merger has the opportunity to shake up and reinvigorate the cement markets as existing players suddenly discover serious new competition and react accordingly.

Africa has a population of 1.1bn and it had a Gross Domestic Product (GDP) of US$2320/capita in 2013. South America had a population of 359m in 2010 and a GDP of US$8929/capita. This compares to US$27,250/capita in Europe and US$54,152/capita in the US. The economic development potential for each continent is humongous. Post-merger, LafargeHolcim will be first or second in line for some of this potential in Latin America and Africa.

Two stories from the US have drawn our attention this week, even with a US$1.3bn cartel fine in Brazil, more new business in Africa, the possible closure of CBR's white cement plant in Belgium and strange metrological goings-on in India also in the headlines.

Firstly, it was announced that Colombia's major cement producer Cementos Argos has agreed to acquire Vulcan Materials' building material assets in Florida. Argos, active in the US since June 2011 when it acquired its Harleyville and Roberta plants from Lafarge, will more than double its capacity in the country from 2.7Mt/yr to 6.2Mt/yr and go from a small player to a significant force in the western US.

Argos may have moved at just the right time. Despite suffering disproportionately in what is often termed the 'Great Recession' in the US, Florida's cement market is fundamentally solid, with significant residential construction and a good commercial construction baseline. If the PCA's expectations that the US will consume 80Mt/yr of cement in 2014 and a release of that much talked-about 'pent-up demand' are realised, Argos could be in a position to make good sales.

Indeed, Argos' move takes on even more significance in the light of the second US story from this week, which sees Texas Industries (TXI) taken over by Martin Marietta. The acquisition, which comes on the back of a failed bid by Martin Marietta for Vulcan Materials in 2012, also makes perfect sense for the company. Indeed, Martin Marietta's chief executive, C Howard Nye, said, "We like the Texas market a lot."

And well they should. Developments around the Eagle Ford shale gas reserves in the centre of Texas have led to a building boom in terms of both new constructions and oil well cement. Despite this, TXI announced a loss of US$17.6m in the quarter to 30 September 2013, although it saw higher sales. It blamed interest repayments. There are obviously clear gains for Martin Marietta in buying TXI, but it had better have a plan to sort out TXI's finances.

For all the talk of major restructuring in China , and mergers and acquisitions in India, it is the US cement industry that is showing the most movement so far in 2014. Could this be the year when things finally look up?

Dominican Republic: The Dominican Association of Cement Producers (Adocem) swore in Carlos Gonzalez as its president for 2013 – 2014. Gonzalez, who is also president of Cemex in the country, joins Gabriel Ballestas of Cementos Argos as treasurer and Jose Caceres of Cementos Cibao as secretary.

Eagle Materials has picked up two cement plants in the US from Lafarge with a combined capacity of 1.6Mt/yr for US$446m. The deal also included six distribution terminals, two aggregates quarries, eight ready-mix concrete plants and a fly ash business.

Following our column in August 2012 following an acquisition in India we decided to ask a similar question: how much are American cement plants worth?

Eagle's acquisition now increases its presence in the Midwest and South Central regions of the US, giving it a rough line of plants across the country nearly connecting Lake Michigan to the Gulf of Mexico. As shown in our industry report on the US between 2005 and 2011 cement consumption fell in both the states the plants are located in. Missouri's consumption fell by 45% from 2.82Mt to 1.56Mt, just above the US national average. By contrast Oklahoma's consumption only fell by 11%, from 1.6Mt to 1.43Mt, the fourth smallest decline in the country.

However, Eagle has demonstrated financial health in contrast to the US sector as a whole, reporting a 21% rise in total revenue in the quarter to 30 June 2012 and a 60% rise in operating earnings year-on-year in the quarter to 31 March 2012. The combined operations at the two plants generated about US$178m in revenue during the year ending in June 2012. By contrast Eagle Materials' revenue totalled US$529m during the same period. The plants' additional capacity will increase Eagle's total by about 60%.

Lafarge are still thinking big though, with the proviso that Eagle will supply certain Lafarge operations with cement for four to five years, as well as an agreement with a Lafarge affiliate to supply low-cost alternative fuels to the acquired operations. According to its 2011 annual report North America comprised 11% of Lafarge's cement sales. Lafarge's sales in the US remained flat in 2011. In that year the company's capacity was 12.8Mt with a 12% market share. This picture has started to change in 2012 with a reduced loss in earnings before interest, tax, depreciation and amortisation (EBITDA) in the first quarter followed by volume and sales increases of above 10% in the second quarter.

Back in June 2011 Cementos Argos picked up two plants from Lafarge in Roberta, Alabama and Harlyville, South Carolina for US$760m with a combined capacity of 2.7Mt/yr. As with the Eagle deal the sale included a number of peripheral assets including a clinker mill, cement mixer lorries and a marine port.

Cementos Argos recently put the world average at US$250m/t when publicising the expansion of its Rioclaro plant. The European Cement Association reports the figure at being above US$200m/t on its website. In August 2012, at the time of the potential CRH acquisition in India, the cost of Indian cement production capacity was placed at US$110/t-US$120/t.

Perhaps the question we should ask is how much is a US cement plant worth when it used to belong to Lafarge. Both the Cementos Argos sale and the Eagle deal worked out at US$280/t including all the ancillaries. The actual question we should ask is why has Lafarge chosen these specific plants to sell to a competitor in the US market?