Displaying items by tag: Cemex
Roundup of non-Chinese cement producers in 2015
30 March 2016LafargeHolcim was the last of the major non-Chinese cement producers to report its annual financial results when it did so on 17 March 2016. With the full set in, as it were, Global Cement will compare the progress of the world’s largest multinational cement companies in 2015.
The first thing to note is that whilst cement production growth rates have hardly been inspiring in 2015, growth or holding the status quo is occurring. The emerging markets have faced challenges in 2015 following the prolonged depression in the construction sector in Europe since 2008. As Wolfgang Reitzle and Eric Olsen put it in the forward of the 2015 LafargeHolcim annual report, “…our share price has been significantly affected, mainly by the volatility associated with emerging markets.”
Figure 1: Cement & clinker sales volumes from five major cement producers, 2011 – 2015. Source: Annual reports. Note: Sales volumes are calculated for LafargeHolcim for 2011 – 2013.
Figure 1 shows cement and clinker sales volumes for the major cement producers from 2011 to 2015. This graph isn’t quite as depressing as it looks because it shows a drop in cement production for the major producers and it has started to show remedial action being taken. Where growth isn’t happening in a market, pressure builds to find it through mergers and acquisitions.
So, Lafarge and Holcim merged and the decision may be now starting to show promise with its sales volumes remaining static year-on-year in 2015 rather than falling. It should be noted here that the drop from 2013 to 2014 is due to the divestments Lafarge and Holcim both made before the merger to satisfy competition bodies and because the sales volumes were calculated here from the separate Lafarge and Holcim annual reports.
Even more so, HeidelbergCement’s plan to buy Italcementi may be a good idea here. Already it has been growing its cement production each year since 2013. The acquisition could potentially speed up the growth considerably. Elsewhere, both Cemex and Buzzi Unicem are showing signs of picking up cement production since 2013.
Figure 2: Earnings before interest and taxation (EBIT) for five major cement producers, 2011 – 2015. Source: Annual reports. Note: Cemex and LafargeHolcim figures have been converted from US Dollars and Swiss Francs respectively at current exchange rates.
Figure 2 shows one indicator of profitability for the major cement producers by comparing their earnings before interest and taxation (EBIT). This is less useful than cement sales volumes because it covers the producers’ entire businesses including aggregate and concrete sectors. However, it does show the problems Italcementi has faced and it offers one reason why the company might have allowed itself to be taken over. Note also how Cemex has continued to increase its EBIT despite its high levels of debts.
Returning to the LafargeHolcim comments about volatile emerging markets, most of the producers reported tough trading in their Asian territories in 2015. The exceptions were Cemex with its reliance on the Philippines booming market and Buzzi with its limited assets in the region. However, Cemex suffered in its own major emerging market in South and Central America. Despite these setbacks though all of the producers featured here benefitted from growing sales volumes in North America, particularly in the US.
Both LafargeHolcim and Cemex announced divestments promptly following their results announcements suggesting that they feel they need to do more to regain the profitability they once had. LafargeHolcim plans to sell assets in South Korea and Saudi Arabia. Cemex has agreed to sell cement plants in Bangladesh and Thailand and a minority stake in its business in the Philippines. This last decision may suggest how serious Cemex is about tackling its debts considering the strong market in that country at present. HeidelbergCement is due to complete its acquisition of Italcementi in the second half of 2016.
Finally, the major changes to the multinational cement producers will continue in 2016 as CRH asserts itself following its major acquisitions from Lafarge and Holcim in 2015. Already its Europe Heavyside Divison reported sales revenue of Euro3.61bn in 2015 surpassing that of Buzzi Unicem. Other international producers such as Eurocement, InterCement and Votorantim were also poised for continuing growing but poor domestic markets (Russia and Brazil) may cripple their ambitions in the short term.
Cemex takes charge of its debts
16 March 2016Cemex has taken action towards its debts over the course of the last week. First, it announced that it had amended its credit agreements in order to delay the looming effects of consolidated financial leverage and coverage ratio limits by one year to March 2017 with other similar deadlines also delayed. Then it announced the pricing of US$1bn of Senior Secured Notes due in 2026, a form of secured borrowing. This was followed by confirmation of asset sales in Bangladesh and Thailand. Finally, it announced that it was seeking regulatory permission to sell a minority stake in its subsidiary in the Philippines.
This column has discussed the on-going financial travails at Cemex a few times, notably recently when the group released its fourth quarter results for 2015 and in the wake of HeidelbergCement’s announcement to buy Italcementi. Basically, it all comes down to debt, as the following graph shows.
Figure 1 - Cemex assets, debt and equity, 2006 - 2015
Cemex took on large amounts of debt following its acquisition of Rinker in 2007. Since then the value of its assets have been falling faster than it has been able to reduce its debts. However, its equity (assets minus debts) is looking like it might dip below its debts in 2016. Hence, action needs to be taken. Cemex appears to have attempted to do this over the last week. Will it be enough?
The credit amendment was probably the most pressing issue for the Cemex management given that the terms have been reliant on maintaining a leverage ratio (debt divided by assets) below a set limit. Cemex has extended the terms of the borrowing in its favour so it can keep the leverage ratio higher for longer without penalty from its creditors. Note that the leverage ratio here means the ratio between debt and operating earnings before interest, taxation, depreciation and amortisation (EBIDTA).
Selling assets and shares in Asia is the next step in cutting debt in the window the group has negotiated for itself. It holds minor cement production assets in Thailand and Bangladesh that it is selling to Siam City Cement for US$53m. These include a 0.8Mt/yr integrated cement plant in Saraburi, Thailand and a 0.52Mt/yr cement grinding plant in Madangonj, Bangladesh. Unfortunately for Cemex it purchased the Saraburi plant for US$77m in 2001 from Saraburi Cement making it a loss of at least US$24m.
A minority sale of shares in its Philippines assets is more promising. The group runs two integrated cement plants in the country, the Solid Cement Plant in Rizal and the APO Cement Plant in Cebu with a combined cement production capacity of 6.23Mt/yr and a new 1.5Mt/yr production line on the way at Solid Cement also. Local media estimate that the sale could earn Cemex as much as US$850m from the booming market. The Cement Manufacturer's Association of the Philippines reported that cement sales volumes grew by 14.3% to 24.4Mt in 2015 with more growth predicted for 2016.
The credit amendment and asset sales of US$0.9bn may give Cemex the breathing room it requires to keep the creditors at bay for a while longer. It originally refinanced its debts in 2009 at the height of the financial crisis to keep the business running until the markets picked up again. They haven’t. A question that might be legitimately asked at Cemex’s analyst day later this week, on 17 March 2016, is this: when is Cemex going to seriously tackle its debts? As the situation continues the group may end up devoting more time to managing its debts than it will to actually making cement and other building products.
Philippines: Cemex Philippines has started proceedings to sell a minority stake in its assets. The subsidiary of Cemex has filed a registration statement with the Securities and Exchange Commission (SEC) of the Philippines and the Philippine Stock Exchange. Subject to obtaining approvals from both bodies it will then sell a minority interest in the company’s cement manufacturing assets in the Philippines, the company said in a statement.
Cemex runs two integrated cement plants in the country, the Solid Cement Plant in Rizal and the APO Cement Plant in Cebu. The decision to sell shares of assets in the Philippines is part of Cemex’s wider asset divesture plant.
Court annuls information request by European Commission into cement company competition probe
11 March 2016Europe: The European Court of Justice has annulled a request for information by the European Commission into several cement producers in a cartel probe. The judgement could restrict the competition watchdog's investigative powers, according to reporting by the Wall Street Journal.
The commission opened an antitrust investigation in late 2010 looking at the activities of Cemex, Holcim, Lafarge, HeidelbergCement and others. Originally the cement companies were suspected by the commission of colluding with rivals to fix prices and share markets in Austria, Belgium, the Czech Republic, France, Germany, Italy, Luxembourg, the Netherlands, Spain and the UK. However, the investigation was closed in mid-2015 due to insufficient evidence. Since then the cement producers have challenged the commission’s right to ask for the level of detail they requested. The ruling overturns a 2014 decision by the EU's General Court, which said the commission questionnaires were justified.
Mexico/Thailand/Bangladesh: Cemex has signed an agreement for the sale of its operations in Bangladesh and Thailand to Siam City Cement for US$53m. The proceeds obtained from this transaction will be used mainly for debt reduction and for general corporate purposes. The deal is expected to be finalised in the second quarter of 2016 subject to regulatory approval.
Cemex runs a 0.8Mt/yr integrated cement plant in Saraburi, Thailand. The plant was originally purchased from Saraburi Cement for US$77m in 2001. Cemex operates a 0.52Mt/yr cement grinding plant in Madangonj, Bangladesh.
Cemex obtains consent to amend its credit agreement
08 March 2016Mexico: Cemex has obtained consent to amend its credit agreement dated 29 September 2014 in order to delay the scheduled tightening in its consolidated financial leverage and coverage ratio limits by one year. The formalisation of the amendment is subject to customary conditions and is expected to be finalised in the following days.
The amendment to the credit agreement will allow the leverage ratio covenant to remain at 6.0 times until and including 31 March 2017. It will then gradually decline to 4.0 times by 30 June 2020. The margin grid in the credit agreement will be modified such that if the consolidated leverage ratio is greater than 5.50 times in the reference periods ending on 31 December 2016, 31 March 2017, 30 June 2017 and 30 September 2017. The applicable margin will be 425 bps instead of 400 bps. All other levels in the margin grid remain unchanged.
In addition, the credit agreement will be amended to allow Cemex the right, subject to meeting local requirements in the Philippines, to sell a minority stake in a subsidiary that directly and indirectly mainly owns Cemex’s cement manufacturing assets in the Philippines.
Global CemFuels Awards 2016 announces winners
26 February 2016Czech Republic: The Global CemFuels Awards 2016 has announced winners in six categories. The Suez Environnement solid recovered fuel facility at Malpas Farm, Rugby, which supplies the Cemex Rugby cement plant, won Outstanding Alternative Fuels (AF) project. LafargeHolcim won AF-user company of the year. N+P, Netherlands received the award for AF-supplier company of the year for the second consecutive year. Linder-Recyclingtech won the award for innovative technology for AF use. Frederico Contente, Masias Recycling was awarded project manager of the year. Jan Theulen, HeidelbergCement was awarded CemFuels Personality of the Year.
The Global CemFuels Awards 2016 took place as part of the Global CemFuels Conference and Exhibition. The awards are nominated and voted for across the alternative fuels industry. The specialised annual alternative fuels conference for the cement and lime industries took place on 22 – 23 February 2016 in Prague.
Featured image: Jan Theulen, HeidelbergCement (right) and Robert McCaffrey, Global Cement (left)
Cemex: wrong place, wrong time?
10 February 2016Cemex trumpeted last week that it had returned to positive net income for the first time in six years in its fourth quarter results for 2015. In effect the multinational building materials company was saying it is putting its house in order following taking on too much debt in the late 2000s. Similar reassuring noises have repeatedly been made as it has cut its debts down since that time.
The figure Cemex was shouting about this time was its controlling interest net income or the net income attributable to the controlling shareholder. It has risen to a gain of US$75m after being negative, or in loss, since 2010. In that year the sting from the financial crash in 2008 caused havoc and net sales for the company hit a low of US$14bn, having been at over US$20bn in the boom times of 2007 and 2008.
Meanwhile, the company has been steadily whittling away at its total debt reducing it down to just US$15.3bn in 2015. This is a massive figure given that its total equity was US$9.5bn in 2015.
By comparison, Lafarge was reporting a net debt of Euro9.3bn in 2014 compared to a total equity of Euro17.3bn. Its debt-to-equity ratio was far smaller than Cemex’s despite being perceived as the weaker partner financially going into the merger with Holcim in 2015. Unsurprisingly, it was news in August 2015 when Cemex refinanced a bank loan agreement for a US$15bn debt that was previously renegotiated in 2009. Everyone is watching Cemex’s debts keenly.
Against this financial backdrop Cemex’s cement business has been steadily producing fairly static levels of cement since 2009. It 2015 it has reported that it produced 66Mt. However, net sales fell in 2015 by 8% year-on-year to US$14bn, a disappointing result following sales growth since 2012. Fernando A Gonzalez, Cemex’s Chief Executive Officer, blamed it on a ‘challenging’ macroeconomic environment.
Notably overall net sales have been down in Mexico, Northern Europe and Central and South America in 2015. Although Cemex hasn’t released cement sales volumes, volumes fell by 3% in Northern Europe, 2% in its Mediterranean region and 4% in Central and South America in 2015. Thankfully, growth continued to pick up the US, bolstered by housing and infrastructure spending. The Philippines has remained a powerhouse in cement consumption in Asia.
Reviewing Cemex’s expansion projects in 2015 suggest muted capital expenditure with a focus on upgrades and side projects rather than clinker production growth. Such announcements included projects in Nicaragua, the Dominican Republic, Colombia and Mexico. The exception was in the Philippines where a full-on US$300m project including a new 1.5Mt/yr plant was announced in May 2015. Given the surging cement volume sales in the country this is likely a safe investment.
As discussed previously in this column and elsewhere Cemex has suffered from high debts at exactly the time its major international rivals have started to merge. At the same time its Chinese rivals in terms of production capacity have undergone similar capacity consolidation as part of state mandated capacity reduction initiatives. This has left Cemex between the mega-cement producers like LafargeHoclim and HeidelbergCement and the up-and-comers such as Eurocement or Votorantim.
Now, its reliance on markets in the Americas it hitting a roadblock from reducing growth south of the US as global commodity prices tumble and economies suffer. It couldn’t have happened at a worse time for the company. Bar the odd bright spot such as the US and the Philippines it seems that all Cemex can do is wait it out.
Cemex announces return to positive income in 2015
04 February 2016Mexico: Cemex has announced its results for the fourth quarter and full year 2015. On a like-for-like basis, for ongoing operations and adjusting for currency fluctuations, consolidated net sales increased by 2% during the fourth quarter of 2015 to US$3.4bn. They rose by 5% for the full year to US$14.1bn. Operating earnings before interest, tax, depreciation and amortisation (EBITDA) (also on a like-for-like basis) increased by 7% during the fourth quarter to US$663m and went up by 9% for the full year to US$2.6bn.
The increase in consolidated net sales, on a like-to-like basis, was due to higher prices of Cemex's products, in local currency terms, across most of its operations, as well as higher volumes in the US, the Mediterranean and Asia. On a like-for-like basis, operating earnings before other expenses, net, in the fourth quarter increased by 11% to US$410m and in the full year increased by 17% to US$1.7bn versus the same periods in 2014.
Fernando A Gonzalez, Cemex Chief Executive Officer, said, "Despite a challenging macroeconomic environment, which has affected many of our markets, our industry and Cemex in particular, we have been able to meet these challenges and deliver strong operating and financial results, on a like-to-like basis."
"Our full-year net income was positive for the first time in six years. In addition, our operating EBITDA increased by 9%, on a like-to-like basis, reflecting our cost-reduction program of US$150m as well as a positive operating leverage in several of our markets, which translated into a 1.1 percentage-point improvement in operating EBITDA margin. I am particularly pleased with the growth in our free cash flow after maintenance capex of more than US$480 million, which enabled us to reduce our debt by close to US$1bn during the year."
Sales in Cemex's Mexican operations decreased 19% in the fourth quarter of 2015 to US$672m, compared with US$827m in the fourth quarter of 2014. Operating EBITDA decreased by 10% to US$231m versus the same period of last year.
Cemex's operations in the United States reported net sales of US$967m in the fourth quarter of 2015, up by 5% from the same period in 2014. Operating EBITDA increased 26% to US$173m in the quarter, versus US$138m in the same quarter of 2014.
In Northern Europe, net sales for the fourth quarter of 2015 decreased 18% to US$738m, compared with US$901m in the fourth quarter of 2014. Operating EBITDA was US$71m for the quarter, 14% lower than the same period of 2014.
Fourth-quarter net sales in the Mediterranean region were US$370m, 4% higher compared with US$357m during the fourth quarter of 2014. Operating EBITDA decreased 5% to US$63m for the quarter versus the same period in 2014.
Cemex's operations in South, Central America and the Caribbean reported net sales of US$436m during the fourth quarter of 2015, representing a decrease of 15% over the same period of 2014. Operating EBITDA decreased 25% to US$125m in the fourth quarter of 2015, from US$165m in the fourth quarter of 2014.
Operations in Asia reported a 4% increase in net sales for the fourth quarter of 2015 to US$162m, versus the fourth quarter of 2014, and operating EBITDA for the quarter was US$46m, up by 4% from the same period of 2014.
Mexico: Cemex has contributed to the restoration of the Monterrey-Nuevo Laredo highway, the main export-import route between Mexico and Texas, US. With 52% of Mexico's imports and exports moving along this highway, it is one of the main trade routes across the Mexican and US border.
With more than 15,000/day of trucks using the highway, its repair required extremely resistant and durable construction materials that guarantee road safety. To this end, Cemex supplied 98,000m3 of hydraulic concrete to restore a 15.6km stretch of the highway.
Cemex solved the challenge of paving the road without stopping traffic by utilising different work shifts to minimise the potential effect on this crowded highway and, simultaneously, guarantee correct placement of the hydraulic concrete. The project, which required 30,000t of cement, directly employed more than 100 people.