Displaying items by tag: Cementos Molins

Spain: Cementos Molins says that 13 of its 14 directors want to keep the company’s headquarters in Madrid following a request by a minority shareholder. This represents a hardening by the board on the issue following its move from near Barcelona in 2017, according to Crónica. The cement producer decided to move its registered address away from Sant Vicenc dels Horts in Catalonia following moves by the regional government to push for independence.

Cementos Molins’ financial results took a tumble this week, in part due to the poorly performing Argentinian economy. A decrease in sales in Mexico was also to blame but rampant inflation in Argentina caused the Spanish cement producer problems.

Cementos Molins owns a 51% stake in Cementos Avellaneda, with Brazil’s Votorantim Cimentos owning the remainder. Molins took pains in its financial report to point out that the aggregate rate of inflation had been 109% in mid-2018. Accordingly, its income and earnings in 2018 would have been much better if the economy had been in a better state. As it was, its income fell by 24% year-on-year to Euro134m and its earnings before interest, taxation, depreciation and amortisation (EBITDA) dropped by 30% to Euro30.3m. Adjusted for negative inflationary effects these should have risen by 43% and 31% in 2018.

Graph 1: Construction activity in Argentina (year-on-year growth, %). Source: El Instituto Nacional de Estadística y Censos de la República Argentina (INDEC).

Graph 2: Monthly changes in cement despatches in Argentina (year-on-year growth, %). Source: Asociación de Fabricantes de Cemento Portland (AFCP).

The other major local producers, Loma Negra and LafargeHolcim Argentina, are owned by Brazil’s InterCement and Switzerland’s LafargeHolcim respectively. Both companies are due to present their financial results later this week but the signs were not looking good earlier in the financial year. In its third quarter results Loma Negra said that the general economy was dragging on cement demand. Construction activity data from El Instituto Nacional de Estadística y Censos de la República Argentina (INDEC) showed that growth nosedived in mid-2018. This corresponds roughly with falling year-on-year cement despatches. Loma Negra noted that the depreciation of the Argentine Peso was hitting its bottom line and that its cement sales volumes dropped by 6.2% to 1.61Mt in the third quarter of 2018 from 1.72Mt in the same period in 2017. Despite this, its net revenue grew by 42.3% in the nine months to the end of September 2018.

Understandably, much of the talk in Loma Negra’s third quarter earnings call was about the effects of local currency depreciation with questions about how the expenditure for its L’Amalí plant expansion project was split between different currencies or how fuel costs were being affected. More revealing though was information about Loma Negra’s plans to reduce production capacity as national demand falls. Chief executive officer (CEO) Sergio Faifman said that the production cost at L’Amalí would be US$15/t less than the national average and that its Olavarría and Barker integrated plants would be first in line for production cuts given their closeness to L’Amalí.

Holcim Argentina reported ‘significant’ growth until May 2018 in its third quarter report. From here its sales fell and it expected zero growth for the year as a whole. It blamed this on the state of the general economy, the lower attractiveness of mortgages in the residential sector and problems with infrastructure project financing. Its sales volumes of cement rose by 6.4% year-on-year to 2.54Mt in the first nine months of 2018 from 2.39Mt in the same period in 2017. Holcim Argentina also has an upgrade project underway, at its Malagueño cement plant near Córdoba. Once completed by the end of 2019, the project is expected to increase the unit’s production capacity by 0.73Mt to over 3Mt/yr.

The problems facing the Argentine cement producers are clearly due to the poor general economy. The government took a US$56bn loan from the International Monetary Fund (IMF) in mid-2018 to shore up the situation. Since then the Argentinean Peso seems to have stabilised against the US Dollar and inflation has settled. At this point the question is whether this is the bottom of the economic trough. The other thing to note is that Argentina has faced economic problems at the same time as Turkey. Although Turkey has a much bigger cement industry, both countries are prominent cement producers in their regions.

The sad thing though is that the local cement market was facing shortages in late 2017, producers were investing in new production capacity and Loma Negra launched an initial public offering (IPO). All of this growth in the cement industry has been jeopardised by the general economy. Let’s hope it rebounds soon.

Spain: Cementos Molins’ turnover fell by 8.9% year-on-year to Euro588m in 2018 from Euro646m. It blamed the falling sales on currency depreciation in Argentina and a decrease in sales in Mexico. Its net income decreased by 4.2% to Euro85.3m from Euro89.1m. Its cement sales volumes rose by 7.5% to 6.05Mt from 5.6Mt but its concrete sales volumes reduced by 4.5% to 1.5Mm³ from 1.58Mm³. Spain remained the group’s biggest sales territory and these rose by 11.1% to Euro260m.

Argentina: Aumund Brazil and Aumund China have collaborated with Sinoma Tianjin TDI to supply two clinker-conveying orders for cement plants. No value for either order has been disclosed.

Aumund will supply three chain bucket elevators, eight belt bucket elevators, five pan conveyors and a drag chain conveyor for Line 2 at Loma Negra’s L’Amali cement plant. The order also includes 19 silo discharge gates. In August 2017 Loma Negra awarded Aumund the order to build a second kiln line with a capacity of 5800t/day at the L’Amali plant in Olavarria in Buenos Aires province. The new line, which will produce 2.7Mt/yr of clinker, will be located adjacent to the existing kiln line. Production will start early in 2020.

In June 2018 Aumund Brazil worked with Aumund Brazil and Sinoma to supply four belt bucket elevators, three chain bucket elevators and three pan conveyors via Sinoma TDI to Cementos Avellaneda. Cementos Avellaneda is a joint venture operated by Brazil’s Votorantim Group and Spain’s Cementos Molins.

Spain: Cementos Molins has allocated Euro200m towards dismantling old production lines at its Sant Vicenç dels Horts plant near Barcelona. Kilns, towers, silos and obsolete buildings will be removed as part of the project, according to the La Vanguardia newspaper. The plant operates a single 1.4Mt/yr production line that was commissioned in 2010.

Spain: Cementos Molins has benefited from good performance in Mexico, Argentina and Spain. Its sales revenue rose by 13% year-on-year to Euro779min 2017 from Euro691m in 2016. Its earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 15% to Euro192m from Euro168m. The cement producer attributed its increase in sales to higher prices and sales volumes.

As readers in colder climes will understand: nobody likes a gas bill. Save some pity for LafargeHolcim Bangladesh then this week, as it faces attempts to hike the price it’s paying.

As reported by local press the government-run Jalalabad Gas Transmission and Distribution Systems (JGTDS) is trying to raise the rate for natural gas to the cement producer. Allegedly, LafargeHolcim Bangladesh is paying a lower unit cost for gas supplied to a power plant at its Chhatak cement plant than the fixed amount set by the country’s energy regulator. LafargeHolcim Bangladesh says the rate was set in a gas sales agreement (GSA) signed between JGTDS and its predecessor, Lafarge Surma Cement, in January 2003. The state body meanwhile has referred the issue up the chain of command to the Energy and Mineral Resources Division under the Ministry of Power, Energy and Mineral Resources.

JGTDS says that the plant is consuming around 450,000m3/day of gas. Of this, about a quarter is used to run the power plant and the remainder is used to power the cement plant’s kiln. The plot thickens though as LafargeHolcim Bangladesh is actually paying above the industry tariff for gas of US$0.09/m3. Commentators reckon the price of gas is set to rise in the future. Naturally the cement producer wants to stick to the pre-agreed price for the economic viability of the country’s main integrated cement plant. The Spanish embassy, representing Cementos Molins one of the owners of the company along with LafargeHolcim, has even gone as far as intervening in the argument.

The pressure is on LafargeHolcim Bangladesh because its sales revenue fell slightly year-on-year in 2016 but its fuel costs rose by 12%. As the country’s sole clinker producer it suffered from falling international clinker prices in a nation full of grinding plants. So far in the first nine months of 2017 its sales revenues have risen a little yet its profit has more than halved. Any change to its fuel costs would seem likely to damage the company at a delicate moment.

Energy costs for cement plants are nothing trivial as the graph above shows. It uses data from the German cement industry but the key takeaways are that the calorific ratios of the different types of energy cement production uses don’t directly correlate to the cost. Hence, in Bangladesh and other countries where the electricity grid might be unreliable or expensives, running one’s own captive power plant makes sense both for cost and supply reasons. As an aside that may not be applicable to Bangladesh right now, the stark disparity between the energy produced by alternative fuels and their cost proportion is a great reason to use them if the necessary supply chains can be organised. LafargeHolcim launched local operations for its waste management wing Geocycle in December 2017 so this point has not been lost the company.

The situation in Bangladesh is reminiscent of the bind Dangote Cement found itself in towards the end of 2016 in Tanzania. A dispute over gas prices for its Mtwara plant led to company boss Aliko Dangote negotiating personally with President John Magufuli to protect his investment. Governments want inward spending in the form of new industrial plants and multinationals want assurances on some of their costs, like fuel supplies, before they reach for the chequebook. However, if one side is seen to be getting too good a deal then the relationship can break down. LafargeHolcim Bangladesh may have bagged itself a scandalously low gas deal and the Bangladesh government may also be breaking an agreement. Bear in mind though, that with sales of nearly US$28bn in 2016, LafargeHolcim took in revenue nearly one tenth of Bangladesh’s gross domestic product. If the two parties don’t reach an accord, the consequences for both parties could be negative.

Tunisia: The National Chamber of Ceramics Manufacturers has expressed concern about the a shortage of white cement following the closure of the Société Tuniso-Andalouse de Ciment Blanc’s (SOTACIB) plant at Férien. The ceramics association has called for the government to speed up the import process, according to the L'economiste Maghrebin magazine. SOTACIB’s 0.65Mt/yr white cement plant closed on 19 January 2018 for a six-month period following a strike by workers in December 2017. Spain’s Cementos Molins is the majority shareholder in the company.

Bangladesh: Lafarge Holcim Bangladesh has completed its purchase of Holcim Cement Bangladesh for US$60.2m. The deal includes three cement grinding mills with a total production capacity of 2.2Mt/yr. Lafarge Holcim Bangladesh, formerly known as Lafarge Surma Cement, is a joint venture between LafargeHolcim, Cementos Molins and other local partners.

Forget the news stories about poor markets in Colombia and Brazil. Argentina is riding a construction boom right now. Local producer Loma Negra recently ran an initial public offering and it picked a good time to do it. It aimed to generate up to US$800m from the flotation and in the end it raised over US$1bn. Good news for its Brazilian owner InterCement no doubt, which was last reported as aiming to sell a 32% stake in the company in order to cover its debts. More cheer must have followed from Loma Negra’s third quarter results this week. Its cement sales volumes rose by 9% in the latest quarter to 1.72Mt due to expanding local construction activity.

Graph 1: Cement production and consumption in Argentina Q1 – 3, 2008 – 2017. Source: Asociación de Fabricantes de Cemento Portland (AFCP).

As Graph 1 shows its experience mirrors the wider industry. Cement production rose by almost the same rate for the industry as whole, by 10% year-on-year to 3.19Mt for the quarter, according to Asociación de Fabricantes de Cemento Portland (AFCP) data. For the nine months as a whole production has also risen by 9% to 8.7Mt. This figure is the third highest in the last decade since 2008. Production peaked in 2015 before dropping a major 10Mt following a subdued construction industry in the wake of devaluation of the Argentinean Peso in late 2015 and early 2016. At the time LafargeHolcim, the operator of Holcim Argentina, also blamed the negative influence of neighbouring Brazil’s own financial woes. The economy has bounced back giving the country’s its highest nine month cement consumption figure, 8.8Mt, in the last decade.

Earlier in the year LafargeHolcim said it was importing 0.25Mt of cement into Argentina between May 2017 and April 2018 because it couldn’t meet local demand from its own plants. Given the over-abundance of clinker in the world one might be forgiven for being sceptical about this claim. Bolivia’s Itacamba announced it was also exporting cement to Argentina this week. However, the other point to note from the graph is that consumption has been about 90,500t higher than production so far in 2017. This is an envious position for local producers to be in. One more striking feature that sticks out from the graph above is the undulating curve than both production and consumption has. The Argentinean economy has been through the ringer in recent years and this shows in the ups and downs of the figures.

From the perspective of the three major domestic producers, Loma Negra’s sales revenue rose by 53.9% year-on-year to US$620m in the first nine months of 2017. Its adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by a whopping 73% to US$157m. Cementos Avellaneda, owned by Spain Cementos Mollins and Brazil’s Votorantim, reported similar good news with its overall results boosted by the Argentine market. Its sales revenue in the country rose by 28.3% to Euro130m and its EBITDA rose by 59.5% to Euro32.4m. Although Mollins did make the point that inflation had been particular problem in Argentina, although its impact had been ‘greatly’ outweighed by price rises. LafargeHolcim has had its problems globally so far in 2017 but Argentina hasn’t been one of them. Its operations in the country have been propping up the group’s Latin American results each quarter so far in 2017. Despite being one of its smaller regions by sales revenues, its sales and earnings delivered some of the group’s highest growth in the third quarter of 2017.

In this kind of environment new production capacity can’t be far away. Sure enough Cementos Avellaneda plans to increases the capacity of its San Luís cement grinding plant by 0.7Mt to 1Mt/yr by the second quarter of 2019. US$200m has been earmarked for the project.

So, great news for Argentina and proof that poor markets can turn around. The Brazilian cement association SNIC reckoned in October 2017 that the rate decline of cement sales was slowing, suggesting that the bottom of the downturn was in sight. On the evidence of the current situation in Argentina once the market does revive, South America will be the place to watch.