Displaying items by tag: Forecast
India Ratings upgrades 2013 outlook for cement sector
16 January 2013India: India Ratings has revised its outlook for Indian cement manufacturers to 'stable to negative' for 2013 from 'negative' in 2012, driven by limited downside risk for demand. The ratings agency also expects consolidation in the medium-to-long-term with large-scale merger and acquisition activities, according to a report. "We expect consolidation in cement industry in the medium-to-long-term with large merger and acquisition activities in the sector," the rating agency said.
The agency expects credit profiles of large cement firms with superior cost positions and a presence across India to remain stable in 2013. However, smaller companies, with unfavourable cost structures and regional concentrations, are likely to be under pressure.
With growth of the housing sector at 13% and that of the commercial real estate sector (CRE) at 4% until November 2012, India Ratings expects cement demand to grow by 5-8% year-on-year in 2013. Cement production volume in 2012 was mainly driven by a relatively robust activity in housing and commercial real estate. From September 2010 to March 2012, the average growth in credit to the housing sector was around 15-16% in commercial real estate.
Large integrated players, those that are among the top five in the country in terms of production capacity, are likely to have median earnings before interest, taxes, depreciation and amortization (EBITDA) margins in the range of 23-24% in 2013, comparable to the levels seen in the 2012 financial year. However, smaller or partially-integrated players are likely to exhibit margins ranging from 17-19%, lower than the median margins observed for such companies in 2012 financial year, the report said.
With regards to consolidation the report says that the top five companies, constituting around 50% of the industry capacity, enjoy a better cost-structure driven by significant vertical integration and locational advantage with respect to sourcing of raw materials and market access.
"Most other companies, because of lack of one or more of these factors, have a weaker competitive position. The industry economics and the regulatory actions exhibited by the Competition Commission of India (CCI) may push marginal players to consolidate", the ratings agency said.
Eurocement forecasts 10% rise in Russian cement consumption in 2013
05 December 2012Russia: Eurocement Group expects cement product consumption to grow by 12% in Russia in 2012 and by 8% - 10% in 2013, according to its president Mikhail Skorokhod.
"We expect cement product consumption to reach 64Mt this year, compared to 56Mt in 2011. There will be growth of over 12%. This is very significant growth and all construction complex needs in Russia are covered by high quality cement from Russian manufacturers," he said. The forecast for the rise in cement consumption in 2013 is 8%-10%, to around 70Mt, this highest output in the post-Soviet period, according to Skorokhod. The production capacity of cement plants in Russia has grown by around 20Mt/yr since 2009.
Skorokhod estimated that the rise in cement prices over the 'past few years' was comparable to the rise in the cost of natural monopoly services and tariffs, from 7% to 15% per year. He predicted that the price of cement would also fall by this range as new capacity comes on line.
Eurocement announced its plans to invest US$388m in a 1.3Mt/yr plant Sverdlovsk plant on 3 December 2012. The Russian construction materials group has 16 cement plants in Russia, Ukraine and Uzbekistan with a combined production capacity of 39.2Mt/yr of cement.
US cement consumption recovery threatened by fiscal cliff
21 November 2012US: A forecast from the Portland Cement Association (PCA) expects a 7.5% rise in cement consumption in 2012. However, the association says that these gains could be immediately erased in 2013 if the so-called US 'fiscal cliff' is not resolved. The fiscal cliff refers to tax increases of US$400bn and federal spending cuts of US$200m currently scheduled to come into effect on 1 January 2013.
If the US House of Congress resolves the fiscal cliff during its session in 2012, the PCA expects the economy to continue to grow and cement consumption in 2013 to increase by 6%. Adversely, even if Congress addresses the policies by the first quarter of 2013, this delay will cause significant economic harm and cause a 2.7% drop in cement consumption.
"Because we believe the odds for either outcome are even, we have adopted a forecasting approach that minimises up and downside risk," said Ed Sullivan, the chief economist at the PCA. "Our baseline scenario blends the two possible outcomes and projects a 1.8% increase in cement consumption in 2013."
Sullivan also reported that the longer the US Congress delays in addressing the fiscal cliff, the greater the adverse effect on economic growth and construction activity in particular. "If no action is taken by mid-2013, the country could be headed into a severe recession," said Sullivan.
According to the PCA report, cement consumption from 1 January 2012 to 30 September 2012 had increased by 10% compared to 2011, with 16 consecutive months of growth. Sullivan attributed this growth to the return of consumer confidence, a strong housing market and, most importantly, growth in employment.
PCA forecasts growth in 2012 but fears slide in 2013
08 August 2012US: Growth in home construction and favourable weather conditions have helped to boost the consumption of cement in the first half 2012, according to a report released on 3 August 2012 by the Portland Cement Association (PCA).
In its report the PCA forecasts that cement consumption will be 6.9% higher by the end of 2012 compared with the end of 2011. The association, however, warned that there is some uncertainty about the state of the industry going beyond 2012. In a news release, it put much of the blame for the uncertainty on the US Congress.
Economists worry that the inability of Congress to find common ground on tax cuts expiring and the automatic spending cuts set to kick in at the end of 2012 could force the nation over a 'fiscal cliff', driving the economy back into recession.
"If Congress fails to address the fiscal cliff issue during the first or second quarter of 2013 there is the potential for severe adverse economic consequences that could slow the recovery process, potentially leading to a severe decline in 2013 cement consumption," said Ed Sullivan, the PCA's chief economist.
Chinese halftime profit warning
04 July 2012Cement industry results from China have all told an alarming story this week: profits for the first half of 2012 look set to fall by more than 50% year-on-year.
China Resources Cement Holdings warned that its first-half earnings were down sharply. China National Materials Co. Ltd. (Sinoma), the cement equipment and engineering services provider, and Gansu Qilianshan Cement, a small Shanghai-listed cement producer, have both forecast similar drops. Sinoma blamed its drop in profit partly on an overseas project but 'interestingly' no further information was released detailing which project.
Previous to this in June 2012 Anhui Conch Cement warned that its net profit would fall by more than 50% due to weak demand and falling product prices. In May 2012 China National Building Material Co Ltd (CNBM) reported that its net profit for the first quarter of 2012 was down by 45% year-on-year. In April 2012 Jidong Cement reported an increase in its net loss for the first quarter and a year-on-year revenue drop of 14%.
Each of the Chinese big players in the cement industry have issued profit warnings of a similar scale suggesting that the Chinese market faces a uniform downturn or that a slowdown is being centrally managed. Official signs that the Chinese industry faced a slowdown emerged in March 2012 when the national growth target was lowered, analysts' predictions were released forecasting weakened profits for the nation's main producers and government officials admitted that overcapacity loomed within five years.
According to OneStone Research data on the Chinese market in 2010 CNBM, Anhui Conch, Jidong and Sinoma represented over 20% of Chinese capacity. To give these figures some perspective, in 2011 CNBM's profit was US$1.7bn. Holcim's operating profit for the same period was US$2bn and Lafarge's operating income was US$2.74bn. Even halved, CNBM's profit is a massive figure for a company with less of an international presence than the European multinationals.
Sinoma forecasts massive drop in net profit
04 July 2012Boral downgrades profit forecast for a second time
27 June 2012Australia: Boral, Australia's leading building materials supplier, has downgraded its overall profit forecast for the second time in two months, saying earnings could be as much as US$75.5m lower than it expected in February 2012. The downgrade comes with predictions that the group will announce asset writedowns when it delivers its full-year result in August 2012.
It is now expected that Boral will post a net profit before significant items for the current financial year in the range of US$100-110m. The company has continued to blame the profit downgrades on bad weather and weak conditions in the property and construction market and said that an early maintenance shutdown at Waurn Ponds Cement Works in Victoria was also weighing on earnings.
UltraTech and Ambuja prop up Indian market's hopes
06 June 2012India: Strong sales from India's two largest cement makers, Aditya Birla Group's UltraTech and Swiss major Holcim's Ambuja Cements, in May 2012 are likely to return the industry to growth figures above 10% after a gap of two months.
Following India's 'disappointing' GDP growth of 5.3% for the first quarter of 2012, strong dispatches just before the start of the monsoon season has given hope to cement industry experts for better growth in 2012-13.
Ambuja Cements sold 1.93Mt in May 2012 against 1.73Mt in May 2011, a rise of 11.9%. UltraTech Cement, registered sales growth of 10.6%. However, Ambuja's sister concern, ACC, could not match up with the other key producers and reported a growth of 3%. It sold 2.05Mt compared to 1.99Mt in May 2011.
"With 10-12% growth from country's two top cement makers, it seems the industry will hit growth of 11-13% in May 2012," said the research head of a Mumbai-based brokerage firm.
The Indian Cement Manufacturers' Association (CMA) will be releasing the sector's overall statistics in June 2012. UltraTech Cement, ACC and Amubja Cements collectively control close to one-third of the country's cement market, which has an overall capacity of 330Mt/yr.
Lafarge Zimbabwe raises revenue target
01 June 2012Zimbabwe: Increased cement demand in the local market has lead to Lafarge Cement Zimbabwe upgrading its revenue forecast for the year to 31 December 2012 to US$62m from an initial forecast of US$60m. At the company's annual general meeting managing director Jonathan Shoniwa said that increased capacity utilisation and cement demand had resulted in the revenue forecast adjustment.
In 2011 the company recorded a revenue of US$50m following a refurbishment exercise that increased capacity utilisation from 75% to 90% against a 19% decline in exports culminating from an increased focus on local demand. Shoniwa said that turnover in the four months to 30 April 2012 had risen by 35.2% to US$21.9m, with the operating margin having improved to 14% from 10% year-on-year.
Since Zimbabwe's economy 'dollarised' in January 2009, when US dollars were permitted to be used in parallel to the existing currency, cement demand for individual home projects increased as people focused on improving and building residential houses. According to Shoniwa, cement demand in the country is currently up by 28% predominantly due to retail construction. With the construction industry currently operating at below 40% capacity, the focus by the company will continue to be on the domestic market and increasing market share.
Lafarge Cement Zimbabwe has a capacity of 0.45Mt/yr. US$4.5m is expected to be spent on upgrades by the company in 2012.
Massive cement growth ahead for Qatar
23 May 2012Qatar: A new report by Commerical bank Capital has forecast massive compound annual growth rate (CAGR) for cement consumption in Qatar, one of the wealthiest countries in the Middle East. Investment in Qatar's construction sector on the back of what the report termed 'strong economic fundamentals' will trigger demand for cement, with a forecast CAGR of 12% to 2015.
Qatar's current production capacity stands at 6.2Mt/yr, which meets the country's existing demand. However, Commercial bank Capital expects consumption to peak in 2013 and 2014. The majority of Qatar's large-scale projects that are planned or under construction will be completed by 2015.
The report said that Qatari companies would be 'unlikely' to be able to match the impending demand, meaning that it will have to seek cement imports, likely to come from Saudi Arabia and the UAE.
Cement producers in Qatar are planning to further expand their capacity in preparation for anticipated massive investment in the country's construction sector. The majority of construction activities will be in relation to infrastructure upgrade and real estate developments. Qatar National Cement Company (QNCC), already the country's largest cement producer with a market share of around 70%, is going to add 0.93Mt/yr to take its capacity to 5.36Mt/yr in the coming years.
"The Cement price in Qatar has been stable as it is controlled by the government," the report said. "Going forward, we do not expect any volatility in the cement price and believe that it will continue to remain stable at current levels."