Displaying items by tag: Europe

France: Lafarge has stockpiled carbon permits in the European Union for the first nine months of 2013 due to weak prices. The multinational cement producer confirmed the situation to Reuters following the release of its third quarter results on 6 November 2013.

"Given the current price for CO₂ rights there is not a strong rationale for sale compared to holding them for the future," said a Lafarge spokeswoman. Lafarge made Euro56m from selling carbon permits in the first nine months of 2012. Holcim reported in its third quarter results for 2013 that its revenue from the sale of CO₂ emission certificates in the first nine months of 2013 fell by 17% year-on-year to Euro8.10m from Euro9.7m.

The EU Emissions Trading Scheme (ETS) has seen the price of carbon permits fall by over 80% to Euro4/t in August 2013 from Euro30/t in 2008. The scheme has been undermined by an oversupply of permits.

Spain: The European Commission intends to assess the proposed acquisition of Holcim's cement operations in Spain by Cemex following a request by Spanish authorities. The Commission decided that the transaction threatens to affect competition within Spain and that it is the best placed authority to assess the potential cross-border effects of the transaction. It has left a similar transaction between Cemex and Holcim in the Czech Republic to local regulators to examine.

In August 2013 the Mexican cement producer Cemex and Swiss multinational cement maker Holcim announced plans to swap assets in Europe. In Spain, Holcim and Cemex want to combine all their cement, ready-mix and aggregates operations. In the Czech Republic Cemex intends to acquire all of Holcim's assets. Other transactions are also prosed between the cement producers in Germany, France and the Netherlands.

Cemex's decision to head deeper into eastern Europe as part of the Cemex-Holcim asset swap announced this week suggests some nerve. Cement production levels started to fall in the region from 2012, according to Cembureau figures, with continued problems reported so far by the multinational cement producers in 2013. Cemex seems likely to lose money from the start with its new assets in the Czech Republic.

In more detail, Cemex will acquire all of Holcim's assets in the Czech Republic, which include a 1.1Mt/yr cement plant, four aggregates quarries and 17 ready-mix plants. In return Holcim will give Cemex Euro70m and Cemex will give Holcim its assets in western Germany including one cement plant and two grinding mills that encompass a total capacity of 2.5Mt/yr, one slag granulator, 22 aggregates quarries and 79 ready-mix plants.

Cemex must believe that it can wait out the recovery of the construction sector in eastern Europe or make savings from having a more easterly spread of assets. Certainly Cemex said in its press release on the asset swap that its earnings before interest, tax, depreciation and amortisation (EBITDA) would start to rise from US$20m to US$30m from 2014.

The question for the buyers at Cemex who considered this deal is whether the construction market has bottomed out in the Czech Republic yet. According to World Bank figures, following the 2008 financial crisis Czech Gross Domestic Product (GDP) fell to a low of US$197bn in 2009, rose again until 2011 but then fell to US$196bn in 2012. Currently the Czech National Bank is anticipating a further fall in growth in 2013. Meanwhile, data from a third quarter 2013 Czech construction sector analysis by CEEC Research reported that a drop of at least 4.7% was expected in 2013 with a follow-on decline of 2.7% in 2014.

Possibly one deal-maker for Cemex was the prospect of combined operations with Holcim in Spain across cement, aggregates and ready-mix. Similar to the Lafarge-Tarmac joint-venture in the UK, the move offers reduced risk in a declining western European market. How the Spanish competition authorities will respond remains to be seen. Elsewhere on the continent this week the decision by the Belgian Competition Council to fine the Belgian cement sector shows an example of behaviour the Spanish authorities will want to avoid.

Europe: Mexican cement producer Cemex and Swiss multinational cement maker Holcim have announced that they have reached an agreement to conduct a series of transactions in Europe. The transactions will are expected to be complete in the final quarter of 2013, subject to regulatory approval.

Cemex will acquire all of Holcim's assets in the Czech Republic, which include a 1.1Mt/yr cement plant, four aggregates quarries and 17 ready-mix plants.

Cemex will sell its assets in the western part of Germany to Holcim, which include one cement plant and two grinding mills that encompass a total capacity of 2.5Mt/yr, one slag granulator, 22 aggregates quarries and 79 ready-mix plants. Cemex will retain its interests in other parts of the country.

In Spain, Cemex and Holcim will combine all their cement, ready-mix and aggregates operations. Cemex will have a 75% controlling interest over the combined operational assets and Holcim will control 25%.

As part of these transactions, Holcim will pay Cemex Euro70m in cash. Additionally, the transactions are expected to generate synergies that will result in a recurring improvement in Cemex's EBITDA (earnings before interest, tax, depreciation and amortisation) of US$20-30m, which will begin to be realised in 2014.

"When finalised, this will be an important strategic step that should allow Cemex to improve its footprint in Europe and it will consolidate our portfolio in the continent," said Lorenzo H Zambrano, Chairman and CEO of Cemex.

"This transaction will significantly strengthen our presence in Germany while at the same time giving us the necessary flexibility in Spain," said Holcim CEO Bernard Fontana. "Overall, our footprint in Europe will be considerably strengthened."

Half-year results from some of the major global cement producers are starting to present a detour from the usual European doom-and-gloom and optimism for the BRIC economies (Brazil, Russia, India, China and South Africa) of recent years.

Yes, Europe is dragging balance sheets down (particularly certain countries), but some indicators are starting to stabilise following a good second quarter. Very possibly the cost cutting programmes of the multinational cement producers are starting to kick in. Alternatively, perhaps these cement markets have finally bottomed out.

Lafarge has suffered a bad six months with cement sales down by 6%. However, its sales decline in Western Europe has slowed down with the worst news now coming from Central & Eastern Europe. Cemex has reported a better second quarter in 2013 with overall sales up by 4%. It too can show softened declines in its European territories. Italcementi and its subsidiary Ciments Français both saw revenues falling in the half year but either at a reduced rate or with a slowdown in the rate that earnings before interest, taxes, depreciation and amortisation (EBITDA) are declining.

Only HeidelbergCement's results have resisted any direct signs of an improvement in Europe. Overall revenue has remained stable for the half year with its profit up year-on-year. In Europe its revenue reduction has worsened to 4.7% for the half year. However it did observe a 'significant' improvement in cement sales in the UK.

Meanwhile, one of the cement industry's more reliable markets in recent years – India – is showing signs for concern.

As our news roundup this week reports, the country's largest standalone cement producer, UltraTech, had its profits drop year-on-year by 13.5% to US$111m for the most recent quarter and its net sales actually dropped slightly. Holcim has also been active in India with the announcement that it is simplifying its corporate structure to cut costs. In addition Lafarge reported that its market growth in India was 'subdued', considerably down from the 24% growth in cement sales seen in that country in the first half of 2012.

The news from UltraTech and Lafarge suggest that the rate of growth of the Indian cement industry is slowing. The unanswered question from Holcim's activity in India is whether they are doing it to counteract European losses or to counteract a loss of profitability in India.

Holcim's half-year results will make interesting reading when they are released in mid-August 2013 and may help to decide whether the worst is over in Europe.

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.

With the annual results for 2012 in from Lafarge, Holcim and CRH we now return to look at how the European markets coped.

Holcim summed up the mood perfectly in its media release on its annual results for 2012. First it pushed the big positive (net sales up overall) but then finished its first (!) sentence with: '...despite the difficult economic environment in Europe.'

Overall in Europe, Lafarge saw its cement volumes fall by 9% to 29.6Mt from 32.5Mt. Notably sales volumes fell significantly in Spain and Greece, by 26% and 37% respectively.

Holcim saw its cement volumes fall by 2% in Europe to 26.3Mt from 26.8Mt. There were specific country figures from Holcim but it did comment that the 'severe crisis' in southern Europe had 'contaminated' economies further north such as a France, Benelux, Germany and Switzerland.

CRH was less candid about its cement business in Europe although it did report that its sales revenues fell by 10% to Euro2.69bn in 2012 from Euro2.99bn in 2011. Notable losses occurred in Poland (11% volume decline), Ireland (17% decline) and Spain (30% decline).

These figures compare against a 4% decline in volumes in Western and Northern Europe to 22.1Mt from 21.3Mt by HeidelbergCement, a 13% drop in overall net sales to Euro3.05bn in Cemex's Northern Europe section and a 16% drop in volumes to 16Mt from Italcementi in its Central Western Europe region.

The question to ask at this point is how HeidelbergCement and Holcim managed to suffer smaller losses compared to everybody else. Less exposure to southern Europe is one answer. Depressingly though they both suffered similar drops in profit indicators such as earnings before interest, taxes, depreciation, and amortisation (EBITDA) to the others (20% and 33% respectively).

Both Holcim and CRH are expecting continued tough conditions in Europe in 2013. However, both companies are mildly optimistic that the worst has passed, with talk of the work of the European Central Bank supporting peripheral Eurozone economies showing some effect. Lafarge doesn't even mention Europe in its outlook.

As mentioned in Global Cement Weekly #87 on 13 February 2013, EU regional GDP growth is forecast to become positive in 2013. Everybody is going to be watching the European quarterly results for the cement majors in 2013 very carefully indeed. In the meantime all every cement producer with a presence in Europe can do is to carry on cutting costs.

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.

UK: French multinational cement producer Lafarge has been named in a list of top ten companies surrendering offsets into the European Union's (EU) emissions trading scheme (ETS) by environmental campaign group Sandbag. According to Sandbag's report 'Help or Hindrance? Offsetting in the EU ETS,' Lafarge purchased 181,425 certified emissions reduction (CERs) credits in 2011.

Carbon offsetting by the European cement sector grew by 246% in 2011 compared to 2010 figures. Carbon offsetting by all European companies grew by 85% in 2011. The companies policed by the EU's Emissions Trading Scheme (ETS) submitted a total of 254 million credits to offset 13% of their carbon emissions. Sandbag's report observed that the majority of these offset credits were due to be banned from the scheme in 2013.

Lafarge surrendered 181,425 credits in 2011, HeidelbergCement surrendered 101,314 credits in 2008, Miebach Gruppe surrendered 65,813 credits in 2011, Colacem surrendered 59,756 credits in 2009 and Italcementi surrendered 37,867 credits in 2010. Sandbag did not report the breakdown of so-called 'grey' and 'green' credits for the cement industry.

"Offsetting was supposed to be a price containment measure to ensure that carbon prices didn't rise too high, but carbon prices have remained low due to excess supply in the market. Offsets are contributing significantly to this oversupply and are now depressing prices so low that the EU ETS almost ceases to have a function," said Rob Elsworth, policy officer at Sandbag.

Europe: Koen Coppenholle took over as the new Chief Executive of Cembureau on 1 July 2012. He follows Dr Jean-Marie Chandelle, who retired at the end of June 2012.

Following a distinguished legal career, Koen Coppenholle has been Head of European Affairs for ArcelorMittal in Brussels since November 2007. Between September 2000 and November 2007, he was Senior Counsel European Affairs with General Electric Europe in Brussels. Coppenholle joined the Cembureau team on 2 April 2012 to help to ensure a smooth transition.

Jean-Marie Chandelle has held the position of Chief Executive of Cembureau since 1996. A qualified lawyer, with a Master of Law and a PhD, Chandelle has held numerous positions in his native Belgium and abroad.