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Half-year cement producers update
05 August 2020Building materials manufacturer Saint-Gobain summed up the situation large companies face due to coronavirus in its second quarter results when it said that it faced, “very different situations from one country and market to the next.” Financial results are in from many of the largest multinational cement producers outside of China and the basic picture is as Saint-Gobain describes.
Sales revenue for LafargeHolcim, HeidelbergCement and Cemex are all down by around 10% year-on-year for the first half of the year. The variation between different geographical regions is large with some reporting sales declines of up to 20% and others noting rising sales, with one above 5%. Generally, recoveries were reported in June 2020 or when governments relaxed their lockdowns. There’s more variation with earnings figures although this may be down partly to the different figures each company likes to use. Around this is plenty of talk about liquidity and cost cutting programmes to sooth investors.
Figure 1: Sales of selected major multinational cement producers in first half of 2020. Source: Company financial reports.
Figure 2: Cement sales volumes of selected major multinational cement producers in first half of 2020. Source: Company financial reports.
Where it starts to become more interesting is when the companies talk about what they think will happen next. As Robert McCaffrey picked up upon in last week’s Global Cement Live there was a divergence between LafargeHolcim’s optimism for the second half of the year and HeidelbergCement’s caution. LafargeHolcim said it expected a, “Fast demand recovery with an encouraging outlook for the second half of 2020.” Instead, HeidelbergCement said, “A further wave of infections may occur at any time, which would have an impact on construction projects already started or announced in the individual countries. Against this backdrop, it is still not possible to estimate the full effect of the corona crisis on the company results for 2020.” Cemex sat on the fence with, “We expect that Covid-19 will continue to challenge our operations in new ways over the next few quarters.” Contrast this with Buzzi Unicem’s prediction, “Visibility for the second half of the year continues to be very limited and our forecasts are based on a scenario of gradual mitigation of the infections and related restrictions on economic activity.”
This difference in outlook may be subjective. Both LafargeHolcim and HeidelbergCement only had one geographical region each that reported growing sales in the first half of 2020 but LafargeHolcim’s ‘positive’ region represented a larger share of the group’s revenue. Alternatively, it may just be that the companies have different characters and this is reflected in their forecasts. Humans can be either be pessimistic or optimistic and so too can companies.
Of the large regional players, most of the Chinese cement producers are yet to release results for the second quarter of 2020 so there is little to say. Data out this week from China’s Ministry of Industry and Information Technology shows that cement output fell by 4.8% year-on-year to 1Bnt in the first half of 2020. UltraTech Cement, India’s largest producer, saw its revenue fall by 22.5% year-on-year to US$2.34bn for the first half of 2020. The worst of this was in the first quarter of the Indian financial year to 30 June 2020 with revenue falling by 33% with consolidated sales volumes down by 22% year-on-year to 14.7Mt. This coincided with the country’s ‘total’ lockdown period from late-March 2020 to 1 May 2020. Dangote Cement, a large African producer, reported growth in both sales and earnings with full or partial lockdown implemented in South Africa, Congo and Ghana in April 2020 before reopening in May 2020.
This is just a snapshot of what’s been happening with mid-year results awaited from the likes of CRH, Votorantim and, as mentioned above, the Chinese producers. Blanket lockdowns clearly damage construction markets, so future government strategies in tackling the ongoing wave of the pandemic or future waves will have consequences for the financial performance of construction material companies. In the meantime, in Europe at least at the moment, targeted regional lockdowns seem to be the public health measure of choice when outbreaks get out of control. How this translates to balance sheets will be revealed later in the year. In the meantime, while the world works out how to cope with coronavirus, expect more uncertainty.
Khawaja Muhammad as chairman of Thatta Cement
05 August 2020Pakistan: Thatta Cement has appointed Khawaja Muhammad as its chairman. He succeeds Naheed Memon.
Mexico: Elementia has appointed María de Lourdes Barajas Flores as its chief financial officer (CFO). She succeeds Juan Francisco Sanchez Kramer who will leave the company to, “pursue new personal and professional opportunities.” Barajas Flores was the Director of Administration and Finance for the company’s cement division. Iris Josselin Fernandez Cruz, Elementia’s Head of Corporate Treasury will take over the responsibilities of the Investor Relations area.
US performance steadies Buzzi Unicem so far in 2020
05 August 2020Italy: Good performance in the US has helped Buzzi Unicem hold sales steady in the first half of 2020 despite falling sales volumes of cement, particularly in Italy and Eastern Europe, as the coronavirus pandemic spread. The group’s net sales remained stable at Euro1.52bn. Its cement sales volumes fell by 3.4% year-on-year to 13.4Mt from 13.9Mt in the same period in 2019. Concrete sales volumes decreased by 6.3% to 5.46Mm3 from 5.83Mm3. Its earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 8.8% to Euro314m from Euro289m. The company said that the decline in sales volumes was counteracted by growing prices and lowered production costs.
In its outlook the group said, “The outlines of the pandemic, which in some countries has not yet reached the phase of controlled circulation, as well as the intensity of global recession and the demand for building materials may be characterized by further sudden developments in the coming months. Visibility for the second half of the year continues to be very limited and our forecasts are based on a scenario of gradual mitigation of the infections and related restrictions on economic activity, in the geographical areas where the group operates.” It added that it expected its recurring EBTIDA to possibly fall by 5 – 10% year-on-year in 2020.
Namibia: The Namibian Competition Commission has blocked the sale of Ohorongo Cement to China-based West China Cement on the grounds that it would ‘substantially’ reduce competition in the cement market. It warned that it could lead to coordination between Ohorongo Cement and Whale Rock Cement. The commission added that, “no concrete benefit would outweigh the detrimental effects that will result from the implementation of the proposed merger”.
West China Cement agreed to buy a majority stake in the cement company for US$104m from Germany-based Schwenk Zement subsidiary Schwenk Namibia in January 2020. Previously, Singaporean authorities stopped the sale of Schwenk Namibia to Singaporean-based International Cement Group (ICG) in September 2019 due to the latter’s inability to cover the losses of the Namibian company.
Kao Cement to invest US$287m on plant in Niger
05 August 2020Niger: The government has approved a project by Kao Cement to spend US$287m on a plant in the Tahoua region. The scheme is expected to create over 300 jobs, according to Agence Ecofin. Kao Cement is based in Niamey. A previous government scheme in 2017 looked for investors to build a 0.95Mt/yr cement plant in Kao.
Egypt: Alexandria Portland Cement’s sales fell by 10% year-on-year to US$63.2m in the first half of 2020 from US$63.2m in the same period in 2019. Its net loss grew by 26% to US$13.2m from US$10.6m, according to Mubasher. The company is a subsidiary of Greece-based Titan Group.
Japan: A proposal by Mitsubishi Group on researching CO2 injection into concrete has been approved for a grant from the New Energy and Industrial Technology Development Organisation (NEDO). This joint project between Mitsubishi Group, Kajima Corporation, and Chugoku Electric Power aims to improve the existing technology so that it can be applied to the reinforced and cast-in-place concretes used in building construction. At present the group said that current carbon-recycling techniques are mainly used for unreinforced concretes, such as concrete blocks.
Mitsubishi Group has already been involved in the development of concrete projects that take advantage of carbon-recycling, including a zero-emission concrete called CO2-SUICOM. It added that carbon capture, utilisation and storage (CCUS) technologies, including carbon-recycling, are an excellent opportunity for the company to use its strengths between industries that both emit and use CO2.
JK Cement’s grey cement sales fall by 20% in first quarter
04 August 2020India: JK Cement’s grey cement sales fell by around 20% year-on-year in the first quarter of its financial year to 30 June 2020. They have recovered gradually since coronavirus-related lockdowns eased. White cement sales have recovered slower and dropped by 50% in the first quarter. The cement producer temporarily suspended operations at its plants in five states in late March 2020. Operations resumed in late April 2020 in a phased manner. The company added that its capital and financial resources remained “entirely protected in spite of adverse impact on its sales.”
Colombia: Cement production fell by 20.8% year-on-year to 4.88Mt in the first half of 2020 from 6.17Mt in the same period in 2019. Data from DANE, the Colombian statistics organisation, shows that local despatches fell at a similar rate. Production in June 2020 dropped by 4.7% year-on-year to 0.98Mt from 1.03Mt in June 2019. Local cement production hit a low in April 2020 when the government imposed coronavirus-related lockdowns.