Displaying items by tag: Cemex

Back in November 2012 this column asked whether the UK cement market had become more competitive following the sale of the Hope cement plant. Broadly, we thought it had. Half a year later though and it seems that the UK Competition Commission doesn't think so. On 21 May 2013 it released provisional findings that the UK's three major cement producers were failing to compete on price with each other.

Its three main points of evidence included increases in average cement prices between 2007 and 2011, rising profitability for UK producers between 2007 and 2011 and only small changes in annual market share of sales. All of these market outcomes occurred despite a 'significant' slump in demand for cement from 2007 to 2009.

The problem here is that the Competition Commission's data refers to the UK market before it took action. In 2012 it forced the sale of Lafarge's Hope cement plant as a condition of the joint-venture between Lafarge and Tarmac. Subsequently, Lafarge and Tarmac's combined cement production capacity in the UK fell from 5.15Mt/yr to 3.85Mt/yr. However, the Competition Commission has modelled Hope Construction Materials as an effective replacement of Tarmac's previous market share in its analysis. With no major change to the status quo in the UK cement industry, it feels that competition is unlikely to improve. Hence the need for further action.

It must be emphasised that the Competition Commission did not find any evidence of explicit coordination between the producers. Professor Martin Cave, Competition Commission Deputy Chairman and Chairman of the Inquiry Group, summed it up as follows: "In a highly concentrated market where the product doesn't vary, the established producers know too much about each other's businesses and have concentrated on retaining their respective market shares rather than competing to the full."

To look at just one example, it should be noted that most of the management team of Hope Construction Materials came originally from jobs at either Lafarge or Tarmac. However in Hope's defence, who else would the new company hire except seasoned industry personnel. Naturally they would want the best people possible!

With the revival of the UK construction industry hanging in the balance the Competition Commission has a tough job ahead to ensure increased competition in the future.

Congratulations to Cemex for their work on alternative fuels in Germany. In April 2013 Cemex reached an alternative fuels substitution rate of over 80% at its German cement plants, with the Kollenbach plant beating 90%. Impressive stuff.

The German cement industry as a whole is already one of the leaders in the industry for alternative fuels use, reaching levels above 60% in 2010. This compares favourably with, for example, the UK's (high) rate of 40% in 2011 and the Cembureau average rate of 28% for its 27 European member states in 2009.

To show how fast the change in alternative fuels usage has been in Germany, in 2000 the rate was around 25%. For Cembureau members it was about 10.5% in 2000. Cemex's achievement at Kollenbach even surpasses HeidelbergCement's alternative fuels rate of 85% that it achieved across the border in 2011, at its Eerste Nederlandse Cement Industrie (ENCI) plant in the Netherlands.

Globally, Cemex seems likely to meet its 2015 target of 35% alternative fuels substitution rate. The other large multinational cement producers have similar plans in place. For example, Lafarge intends to reach 50% usage by 2020.

For more information on the German cement industry, read our feature 'Germany: A modern force in cement' in the May 2013 issue of Global Cement Magazine.

This week we present the 100th issue of Global Cement Weekly, Global Cement's weekly cement industry news digest. To mark the occasion we would like to know what you think about what we are doing. Let us know by taking the Global Cement Reader Survey 2013. All completed submissions will be entered in a draw to win an iPad Mini.

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Once again the winter weather was bad in Europe. Once again the major European cement producers reported a fall in sales. So what has changed between the first quarters of 2012 and 2013?

Lafarge's cement sales volumes in Western Europe for the first quarter of 2013 fell by 24% year-on-year, compared to an 11% drop in 2012. Holcim's decline in volumes stabilised, compared to a 13.2% drop in 2012. HeidelbergCement's volume decline increased slightly, from a drop of 8% in 2012 to one of 10% in 2013. Cemex didn't release sales volumes figures for cement but overall net sales in its Northern Europe region fell by 13% in 2013 compared to 11% in 2012. Italcementi's cement sales volumes maintained a steady decline in both the first quarters of 2012 and 2013 at about 19%.

Even with the reduced number of working days for the quarter in 2013 taken into account, things are not looking good. Generally the results fit the prediction made by the UK Mineral Products Association (in the UK at least) that construction activity remains subdued in 2013 so far.

Profitability measures for the European divisions of the big producers, such as earnings before interest, taxes, depreciation and amortisation (EBITDA), reinforce the gloomy outlook, suggesting that most of the cost cutting exercises aren't having much effect on investor balance sheets quite yet. Lafarge's EBITDA in Western Europe fell by 94% to Euro5m. HeidelbergCement's loss before interest and taxes (EBIT) increased to Euro91m. Cemex's operating EBITDA fell from US$55m in 2012 to a loss of US$17m in 2013. Italcementi's EBITDA decreased to Euro12.8m.

Only Holcim reversed this trend, growing its EBITDA by 43% to Euro23.5m. The Holcim Leadership Journey appears to be working. Although the sale of a 25% stake in Cement Australia certainly helped.

Elsewhere, we have an additional story at add to last week's focus on Iraq, with the announcement that Mondi has opened an industrial bags plant in Iraq. It's based in Sulaimaniyah in northern Iraq near to the new Sinoma-Lafarge project that we reported on.

Finally, the news that the Competition Commission of India has been asked to investigate a complaint against a Chinese waste heat recovery vendor raises tensions between the world's largest two cement producers. The story echoes similar trends in the gypsum wallboard business in April 2013 where a selective anti-dumping duty was imposed on imports from China, Indonesia, Thailand and the UAE. Watch this space.

Three of the big multinational cement producers - HeidelbergCement, Cemex and Italcementi - have already released preliminary reports for 2012. Here's what they tell us.

Geographically, performances in the Americas and Asia propped up balance sheets. Europe, however, continued to ruin the party in 2012.

In its Western and Northern Europe section HeidelbergCement saw a 3.9% decrease in sales of cement and clinker to 21.3Mt from 22.1Mt in 2011. However this was still higher than the sales in 2010 of 19.7Mt.

Cemex's Northern Europe section witnessed a 13% drop in overall net sales to Euro3.05bn. Its Mediterranean section did worse, with a 15% drop in net sales to Euro1.08bn. Both declines were similar to the falls in cement volumes in these regions. Italcementi watched its Central Western Europe region plummet by 16.1% to 16Mt.

To demonstrate the comparative exposure to Western Europe, 25% of HeidelbergCement's sale volumes came from Western Europe and 35% of Italcementi's sale volumes came from Western Europe. Cemex hasn't released any figures for sales of cement in its preliminary results but overall in cement, aggregates and concrete, 37% of its sales came from its two European regions.

HeidelbergCement noted that demand for construction materials remained stable in Germany and Northern Europe. However it weakened in the UK and the Netherlands. By contrast Cemex noted a decrease in cement volumes for the year in Germany although it became stable by the fourth quarter. For the UK it had the same experience as HeidelbergCement, with a similar downturn in France and Poland. In its Mediterranean region Cemex recorded a whopping 40% decrease in cement volumes. Although light on detail, Italcementi pointed out a 25% drop in cement consumption in Italy and a 8% drop in France and Belgium.

In November 2012 the European Commission forecast that gross domestic product (GDP) would fall by 0.3% in the European Union (EU) in 2012. Broadly in line with the national situations reported above, Germany's GDP is forecast to have risen in 2012; the UK's, the Netherlands', Belgium, Italy and Spain's GDPs looks to have fallen in 2012. Curiously though, both France and Poland were forecast to have improving GDPs in 2012. HeidelbergCement and Cemex's experiences suggest that this didn't happen in the French construction industry. The (next) light at the end of the tunnel for 2013 is that EU regional GDP growth is forecast to become positive again.

With Lafarge and Holcim due to release their annual report for 2012 in late February 2012, we'll revisit this topic in a few weeks time.

The results are in from the European cement majors and the news from the Mediterranean producers is grim. A common phrase found in most of these financial reports was the 'challenging economic environment' in western Europe. Here's what this means.

In Spain, Cemex saw its net sales in its Mediterranean region (consisting mainly of Spain) slump by 17% to Euro1.10bn. Cementos Portland Valderrivas (CPV) posted a loss of Euro83m for the first nine months of 2012, almost 10 times the loss for the same period in 2011. In July 2012 the Spanish cement association Oficement noted that demand had fallen by 60% year-on-year.

In Italy, Italcementi reported a 92% crash in net profit, to Euro17.1m, for the first nine months of 2012, and a drop in revenue of 4%, to Euro3.39bn, for the first nine months of 2012. Buzzi Unicem reported a 21% decline in sales volumes of cement and clinker, and a drop in sales of 15% to Euro430m. Vicat reported that Italian sales across all its business lines were down by 9% for the year.

By contrast, beleaguered Greek producer Titan has finally started to show a (slight) increase in its revenue. It has been able to report a second consecutive quarter where turnover has risen year-on-year. Although Titan's net profit for the same period still plummeted by 96% to Euro2m.

Elsewhere progress of a kind is being made despite the ongoing European slump, mainly due to profitable assets held outside of western Europe.

Lafarge reported that its overall sales were up by 4% to Euro4.39bn in 2012 so far. Yet its income has fallen by 44% to Euro332m and its profits are suffering from its restructuring programme. In western Europe Lafarge noted that cement volumes were down by 11% to 12.5Mt so far in 2012 and that sales were down by 9% to Euro2.43bn.

Holcim reported a 5% increase in overall net sales and a 7% increase in operating profits to Euro1.57bn. In western Europe Holcim's sales volumes were down by 4.6% (like-for-like) to 20.1Mt and sales were down by 6% to Euro3.68bn.

HeidelbergCement reported a 2.5% increase in overall sales but pre-tax profits have fallen by 5% to Euro601m. HeidelbergCement's revenue from its cement business in western and northern Europe was down by 5% to Euro1.3bn. Buzzi Unicem reported overall flat sales at Euro2.15bn but net profit rose by 50% to Euro85m. Despite this Buzzi Unicem reported a drop of 8.5% in Germany.

Vicat reported little change in sales at Euro1.73bn for the year so far. Vicat's financial reporting made it hard to tell how much was lost in Europe but French cement sales were noted as being down by 12%. Cemex's sales volumes were down by 13% in northern Europe, with net sales down by 15% to Euro3.09bn. Italcementi's cement sales volumes in central and western Europe fell by 16.8% to 12.2Mt.

Of the major producers only Lafarge failed to state the obvious in its outlook about western Europe: that sales will continue to decline in 2012 and 2013. If Titan has set the bar for how much more pain the other European producers have yet to face then conditions are likely to get worse. Get ready for even more 'challenges' in 2013.

News from Mexico and the US over the past week confirms the contrasting fortunes of the cement industry in the 'Old World' and the 'New World,' of Europe and North America. First, Cemex reported a significantly reduced loss of US$203m in its third quarter, compared with a loss of US$730m in 2011. However, the firm's European units again faired worse than other regions. 

The European problem is not limited to Cemex, but while much of the continent has seen a poor 2012 so far, North America appears to be in the midst of a construction renaissance. HeidelbergCement estimates US cement sales growth of 8-11% in 2012. In Mexico, a strong and growing industry, it has also been announced that the Mexican billionaire Carlos Slim had partly financed a new US$300m plant in Mexico, due to go into production early in 2013.

In light of this apparent upward trend in North America, it is surprising that France's Lafarge has agreed to sell two more of its US cement plants, this time to Eagle Materials. If the Eagle deal is approved, it will represent (along with the May 2011 sale of Lafarge's Roberta and Harleyville plants to Cementos Argos) a continued and substantial reduction in Lafarge's presence in the US. In under 18 months, Lafarge will have offloaded four plants, taking its total from 12 to eight.

Lafarge's decision to sell to Eagle seems like an attempt to meet its own debt-reduction schedule. Yet to do this it may be losing important territory in North America. This can't have been an easy decision.

Coal ash seems to be in short supply in the Philippines. Lafarge Republic has signed a deal with a local energy producer to buy coal ash from a new 600MW coal plant.

Although the cost of the deal was not announced, the agreement will run from when the plant starts operation until 2019. This move follows a similar arrangement by Cemex Philippines in June 2012. In that instance Cemex agreed to purchase coal ash from the 200MW Kepco SPC Power Corp plant in Naga, Cebu for US$0.95/t.

Distinctively both arrangements were set up in conjunction with local government. For the Lafarge deal part of the agreement involved donating at least 10,000 bags of cement per month for use in various infrastructure projects of the province. Bataan governor Enrique Garcia put the value of the deal at US$1.19m/yr. For the Cemex deal the Cebu Provincial Government signed the agreement. In November 2009 Cebu Province and Kepco entered into an Ash Disposal Agreement, where Cebu Province was granted exclusive rights to the ash produced by the power plant.

Adding to the suspicion that the Philippines lacks sufficient coal ash, back in the autumn of 2011, the Cement Manufacturers' Association of the Philippines (CeMAP) asked the Department of Trade and Industry (DTI) to impose mandatory quality standards on raw materials, such as coal ash. This followed accusations by CeMAP that poor quality coal ash might be behind complaints from contractors working on infrastructure projects. In 2009 a DTI profile on the cement industry placed the demand for Portland cement at 73% and the demand for pozzolan cement at 27% of the total.

Cement sales in the Philippines have been steadily growing over the last decade. Lafarge Republic announced in August 2012 that it was increasing its capacity to just below 9Mt/yr in 2013. Around the same time CeMAP released data showing that sales were up 20% year-on-year for the first half of 2012. The local industry reported combined sales of 15.6Mt in 2011. Previous to this, Holcim Philippines announced the US$9.46m upgrade to a previously closed mill in Batangas.

US: Jose Llontop has joined Giant Cement as its new CEO and president. He joins the company with 14 years of experience in the industry. Previously he has held senior level positions at Cemex, including being the regional president for a US$1bn sales operation for countries in Central Eastern Europe and being the president of Cemex Egypt.

"Llontop is a professional with a long and successful career in the cement industry, who has held positions of high responsibility in different countries and achieved excellent results," said Juan Bejar, chairman and CEO of Cementos Portland Valderrivas, the Spanish company that owns Giant.

Llontop received his undergraduate degree in mechanical engineering from the University of Virginia, Charlottesville, VA, completed his MBA at Rice University, Houston, Texas, USA, and attended the Harvard Business School's General Manager Program in Cambridge, Massachusetts, USA.

Llontop served as chairman of the Cemex supervisory board in Austria and as vice chairman of the Cemex board in Egypt. Since 2010 Llontop was the president of Saudi Readymix, and the senior vice president of Building Materials for Alturki Group in Al Khobar, Saudi Arabia.