Displaying items by tag: GCW74

Liu Ming of the National Development and Reform Commission (NDRC) once again stated the obvious this week: China is producing too much cement.

He made the same warning on overcapacity that has been made all year. Officials from the NDRC have recommended stricter controls on new capacity, faster mergers and acquisitions, elimination of out-dated capacity and faster industry upgrades. Unsurprisingly this is exactly the line that China's Ministry of Industry and Information Technology (MIIT) was hawking in its 12th Five-year Plan (2011-2015) for the country's building materials industry that it released back in 2011.

So what's actually happened since last time Liu Ming played Cassandra?

Back in July 2012, at the time of the half-year financial reports, it looked like Chinese cement producers were facing profit gaps of around 50%. Now it looks worse. Major producer China National Building Material Co (CNBM) has reported a drop in net profit of 40% to US$575m for the nine months to 30 September 2012. Anhui Conch has reported a drop in net profit of 57% to US$632m. China National Materials Co Ltd (Sinoma) has reported a 76% drop in net profit to US$48.8m for the same period. Jidong Cement reported a 83% drop in net profit to US$38.6m.

In 2010 Chinese cement production was 1.87Bt. In 2011 it was 2.06Bt, according to Chinese state-released statistics. From January to September 2012, the country produced 1.59Bt of cement, a year-on-year increase of 6.7%. For the full year of 2012 it is estimated that China will produce 2.8Bt/yr. However, according to the NDRC production growth have fallen to 6.7% in 2012 compared to 11.4% in 2011. Capacity is still rising whilst profits are plummeting.

At the start of 2012 the Chinese Vice Minister of Environment Protection, Zhang Lijun, announced that the ministry plans to introduce stricter rules on NOx emissions from cement plants. At the time it was reckoned that the move could wipe out a third of the industry's total net profits. Then in September 2012, industry reports suggested that the government was now going to set nitrogen oxide emissions to 300mg/m3, below the international standard of 400mg/m3. It was estimated that only about a third of producers would be able to afford the necessary upgraded equipment to meet the requirement. Then, also in September 2012, the Guangdong Emissions Trading Scheme (GETS) was launched, which might offer another way of restraining production.

In summary: profits are tumbling, production is probably slowing and new controls are as-yet unbinding. Yet, perhaps Liu Ming repeated his warning for one particular audience who can make a difference. On 8 November 2012 the Chinese Communist Party holds its 18th national congress to decide the new leadership. Producers like West China Cement are certainly hoping this shakes things up. It recently announced that it was waiting for new infrastructure projects to be approved to swallow up its growing surplus.

US: Vulcan Materials Company has announced four personnel changes as part its process to develop its new leadership team for the future. Danny R Shepherd, aged 61, has been appointed to the position of executive vice president and chief operating officer. He was formerly the executive vice president of construction materials.

Robert A Wason IV, aged 61 and senior vice president - general counsel, will retire from Vulcan at the end of October 2013. He will now assume the role of senior advisor to the executive management team until that time.

Michael R Mills, aged 52 currently senior vice president - east region, has been appointed to the position of senior vice president, general counsel. He will report to Donald M James, chairman and chief executive officer. Mills will also serve as the company's corporate compliance officer.

John R. McPherson, aged 44 and currently senior vice president - strategic planning and business development, has been appointed to the position of senior vice president - east region. He replaces Michael Mills and will report to Danny Shepherd in his new role as executive vice president and chief operating officer.

Switzerland: Holcim Ltd has released its financial results for the first nine months of 2012, which show a 4.8% increase in net sales and over 10% year-on-year improvement in net profit. The group says that its results show the 'advantage of a strong presence in emerging markets, where construction activity remains high.'

Holcim says that its 'unique' geographic diversification has helped support it through a difficult time in its native Europe, allowing it to achieve an increase in consolidated sales of cement, often at better prices. Holcim's group companies in India, the Philippines, Indonesia, Russia, Thailand, Mexico and the USA recorded significantly higher cement sales year-on-year in the period under review. Its consolidated cement sales increased by 3% in the first nine months of 2012 to 111.4Mt.

Despite the difficult market situation in Europe, Holcim's consolidated net sales for the nine months increased by 4.8% to Euro13.4bn and operating earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 5.9% to Euro2.57bn. Its operating profit increased by 7.2% to Euro1.57bn. Holcim said that these results reflected the solid performance in a number of emerging markets, stronger demand for building materials in North America, improvements in efficiency and the first successes of the Holcim Leadership Journey. Holcim increased its net income by 10.3% year-on-year to Euro910m.

Holcim expects demand for building materials to rise in emerging markets in the whole of 2012 in Asia and Latin America, as well as in Russia and Azerbaijan. In North America, it expects that its cement volumes will also increase. In Europe however, sales volumes are expected to decrease in all business segments.

Holcim reiterated its stance that cost management, including the Holcim Leadership Journey programme, will be paid very close attention. It said that it will continue to pass on inflation-induced cost increases. Its approach to new investments will remain cautious. Holcim expects to achieve organic growth in 2012 on the level of operating EBITDA and to reap the first positive effects of the Holcim Leadership Journey in 2012.

Pakistan: The Pakistan Railways, Custom authorities and All Pakistan Cement Manufactures Association (APCMA) have decided to tighten security arrangements at the border with India following reports that heroin has been smuggled into India disguised as cement exports from Pakistan. The decision was made during a meeting between the three organisations.

Indian custom authorities have caught heroin from Pakistan cement four times within the last few months, according to APCMA sources. Proposed measures to improve security have included deploying more custom officials at the loading stations, further checks by officials and special locks for railway bogies.

According to the APCMA, despite increased demand for cement in India, exports from Pakistan have declined by 15.7% so far in 2011. Pakistan Railways have commented that the decision to tighten security arrangements at the border have been taken to save the country from 'defamation'.

China: China National Building Material Co (CNBM), a major State-owned cement producer in China, has reported a net profit of US$575m for the first nine months 2012, a year-on-year decrease of 40%. Operating revenue during the period rose by 7% to US$9.58bn. Net profit for the third quarter fell by 29% to US$271m, while operating revenue rose by 2% to US$3.46bn.

France: Vicat has reported that its sales for the nine months ending 30 September 2012 remained flat year-on-year at Euro1.73bn. The French construction company reported sales of Euro879m for its cement business for the period, compared to Euro873m for the first nine months in 2011.

Consolidated sales for the third quarter of 2012 were Euro602m, a rise of 3.5% year-on-year. The breakdown of nine-month sales by business shows that the contribution of the cement business remained stable at 52.6% of total operational sales, as opposed to 52.5% in the first nine months of 2011.

"Vicat's performance in the first nine months of 2012 confirms the wisdom of the group's cautious development strategy. Investment under the 2010 performance plan and acquisitions in India and Kazakhstan enabled Vicat to achieve growth in business volumes in the third quarter, despite a macroeconomic environment that remains mixed," said Vicat's management board in a statement.

Vicat's cement business sales dropped in France, Egypt and West Africa. In France sales fell by 11.8% due to poor weather in early 2012, the end of some large projects and the weaker economic and industry environment. In Egypt consolidated sales fell by 30.3%. Operational performance in Egypt continued to be affected by problems with security and fuel supplies. Vicat's gas supply was cut off due to maintenance work on a pipeline, while the whole of Egypt experienced a serious shortage of fuel oil. Maintenance work completed in early October 2012. In West Africa consolidated sales fell by 6.7% and cement volume remained flat.

In the US the company's cement business posted an increase in its consolidated sales which were up by 21.1%. This increase was driven by strong growth in sales volumes in California and the Southeast region. In Turkey, India and Kazakhstan consolidated sales grew by 11.1%. This was the result of a sharp upturn in the market, which began in the second quarter and continued in the third.

In India, sales were Euro118m in the first nine months of 2012, a rise of 34.6%. Vicat maintained its strong performance in India, with the ongoing build-up of production at Bharathi Cement's modern plant. In the first nine months of 2011 cement volumes were almost 1.9Mt. In Kazakhstan, the build-up of operational and commercial activity at the Jambyl Cement plant continued. Revenue in the first nine months was Euro51m compared to Euro20m in 2011. This performance was driven by very strong volume growth, with more than 0.77Mt sold in the first nine months of 2012 as a result of major infrastructure and housing projects.

Brazil: Steel manufacturer CSN has announced plans to set up four cement assets in Minas Gerais state. The company wants to grow its current cement production capacity of 2.4Mt/yr to 5.4Mt/yr with an investment of US$491m.

CSN has proposed setting up three cement plants and a second clinker unit, adding to one at Arcos that began operations on May 2011. Currently the clinker unit at Arcos supplies 2500t/day the company's plant at Volta Redonda in Rio de Janeiro. The second clinker unit would expand this to 6500t/day, making it the largest clinker production site in Latin America.

Other cement companies investing in Minas Gerais state include Cimentos Liz's US$147m expansion to its capacity at plants in Vespasiano and Lagoa Santa. Holcim is growing the capacity of its plant in Barroso from 1.3Mt/yr to 3.5Mt.yr. Both Holcim and Cimentos Liz are receiving funding from the state development bank BDMG.

Nigeria: Dangote Cement has reported a pre-tax profit of US$674m for the nine months ending 30 September 2012, a rise of 13.5% compared to the same period in 2011. The company's sales revenue increased to US$1.33bn, a rise of 19.8%. The cessation of lower-margin imports and their replacement with locally-produced cement has helped to reduce the cost of sales, but the potential gains in margin were largely offset by increased use of furnace oil at higher-than expected levels during 2012.

In its unaudited results for the first nine months of 2012 Dangote reported that cement sales were 7.7Mt, with all cement sold produced locally. In spite of these achievements, the company said the third quarter sales were seriously affected by heavy rainfall and flooding but that margins were rising as gas supplies return to normal. Serious flooding affected Kogi and Benue states in the third quarter of 2012 where two Dangote plants are located.

"In spite of these problems we have increased sales by nearly 20% in the first nine months of 2012, with sales of locally produced cement rising by nearly 51%. Even in the difficult third quarter we increased shipments by nearly 8% during a period in which we estimate the industry increased volumes by less than 4%, so it is clear we are increasing our market share," said chief executive of Dangote Cement, Devakumar Edwin.

Dangote Cement is Nigeria's leading cement producer with three plants in Nigeria and plans to expand in 13 other African countries. The group is a fully integrated quarry-to-depot producer with an expected production capacity of 19Mt/yr in Nigeria by the end of 2012, increasing to as much as 35.25Mt/yr by 2015. The group plans to build a further 19Mt/yr of production and import capacity across Africa by 2015.

Germany: Dyckerhoff Group has released financial results for the first nine months of 2012 showing cement volume increases in Russia, Ukraine and the US, which have been balanced by volume declines in Germany and western Europe.

Cement sales volumes remained flat in the first nine months of 2012 at Euro1.24bn, compared to 1.22bn in 2011. By region, sales in Germany and western Europe fell by 7% to Euro588m from Euro633m. Sales in eastern Europe rose by 7% to Euro487m from Euro456m. Sales in the US rose by 24% to Euro160m from Euro129m. Group earnings before earnings before interest, taxes, depreciation and amortisation (EBITDA) were Euro232m in 2012, compared to Euro231m in 2011.

"For 2012 as a whole, we continue to expect the level of group sales and results to remain stable compared to 2011," said CEO of Dyckerhoff AG, Wolfgang Bauer.

Mexico: Cemex has been named by the Carbon Disclosure Project (CDP) as the best Latin American company in terms of climate change data disclosure and one of the top ten in overall carbon emissions performance.

The rankings were announced during the launching of the CDP's latest report, CDP Investor Latin America 2012, which comprises data on the emissions of greenhouse gases from 32 major companies in Argentina, Brazil, Chile, Mexico, and Peru. The CDP is a UK-based independent non-governmental organization that possesses the world's largest database of self reported climate change data.

According to data released by Cemex, the company achieved a 22.7% reduction on CO₂ net emissions per ton of cement produced in 2011 relative to its 1990 baseline. Cemex's rate of alternative fuel use rose to approximately 25% in 2011, an improvement from its rate of 20.3% in 2010. Cemex is on track to reach its 2015 target of 35% alternative fuels substitution rate.