Displaying items by tag: HeidelbergCement

Egypt: HeidelbergCement subsidiary Suez Cement recorded a net loss of Euro38.0m in the first half of 2020, up by 99% year-on-year from 19.1m in the first half of 2019. The company made sales worth Euro145m over the period, down by 18% from Euro177m. The causes of the decline were market saturation and reduced demand in the short term due to the coronavirus lockdown from 19 March 2020 to 27 June 2020.

Egypt: HeidelbergCement subsidiary Egyptian Tourah Portland Cement recorded a second-quarter loss of Euro4.65m in 2020, down by 79% year-on-year from Euro21.9m in 2019. The company made sales worth Euro1.81m over the period, down by 81% Euro9.74m, according to Reuters. In line with its position regarding future losses at 31 December 2019, the company called a shareholder’s meeting to decide on its continuity.

Sweden: Cementa says that it has added a second biogas-powered Volvo FH460 LGB truck to its logistics fleet. Based at the 0.6Mt/yr Skövde cement plant in Västergötland, the company says that the truck will supply customers in western Sweden with cement. Finland-based Gasum will fuel the trucks with biogas, which it says emits 90% less nitrous oxides (NOx) than diesel.

Turkey: Sabancı Holding has appointed Umut Zenar as the general manager of Çimsa following the departure of Ülkü Özcan. Zenar’s previous role as the general manager of Akçansa, a joint venture between Sabancı and HeidelbergCement, will be filled by Mehmet Zeki Kanadıkırık. The changes will take effect from the start of September 2020.

Zenar holds a Master of Business Administration (MBA) from Boğaziçi University in Istanbul. He started his professional career in 2003 as a Business Development Specialist at Zorlu Holding before joining Akçansa in 2004. After working in sales, marketing and business development roles he moved to Oyak Cement Concrete Paper Group in 2016 as a general coordinator before returning to Akçansa as its general manager in 2018.

Kanadıkırık holds a degree in mechanical engineering from Middle East Technical University in Ankara. He started his career worked for Çukurova İthalat, Brisa, Lubrekip, Kordsa and Tekstil Servis. In 2006 he became the Production Manager at Kordsa Turkey and subsequently became the Manufacturing Director of Kordsa Turkey, the Operations Director of Thai Indo Kordsa and the Chief Operating Officer (CEO) of Asia Pacific for Kordsa in 2015.

There has been good news from the German Cement Works Association (VDZ) this week. Following a strong start to the year, the association expects cement consumption in 2020 to remain similar to the level, 28.7Mt, reported in 2019. VDZ president Christian Knell acknowledged the difficulty in making forecasts, this year of all years, but said that the association remained positive since demand had held up so well. He noted the continued operation of construction sites, despite the local coronavirus-related lockdown from March 2020, and the ‘quick action’ of politicians.

Graph 1: German cement deliveries, 2015 – 2019: Source: German Cement Works Association (VDZ).

The year certainly started well, with a 33% year-on-year increase in domestic cement deliveries to 1.43Mt in January 2020 from 1.07Mt in January 2019. This was due in part to good weather, although it also looks good because 2019 started badly compared to 2018. Yet, the VDZ’s assessment has been supported by the results of the main producers operating in the country. HeidelbergCement reported that Germany bucked the trend of its Western and Southern Europe Group area in the first half of 2020 with a ‘positive market development’ whereas deliveries declined significantly everywhere else. Similarly, LafargeHolcim noted a ‘resilient’ performance in Germany. Buzzi Unicem released a more detailed assessment, with shipments of hydraulic binders down in April and May 2020 but then back up with a recovery in June 2020. Overall its cement plants reported a slight decline in sales for the first half of the year. Concrete production grew however, by 6% year-on-year, possibly aided by the plants that the group purchased in 2019.

Germany’s success appears to be down to two factors. The first, as Knell mentioned above, is that it was able to keep much of its construction industry open through its lockdown. Dieter Babiel, the head of Hauptverband der Deutschen Bauindustrie – the main German construction industry association - reckoned that the industry was operating at about 80% capacity in May 2020 compared to the situation in other large European countries like France, the UK, Spain and Italy where building sites totally closed at the height of local lockdowns before gradual reopening. Bauindustrie has since reported falling monthly order intake as coronavirus-effects on the general economy filter through to construction. The other reason is that the country has managed to control its outbreak better compared to other European countries. It has reported the third most cases in Europe but its fatality rate is only 4% compared to 14% in the UK, Italy and France. This has been attributed to strong public health measures and high levels of testing, particularly with respect to elderly residential care.

It’s not all plain sailing though since the International Monetary Fund (IMF) has projected a 7.8% decline in Germany’s gross domestic product (GDP) in 2020. Likewise, the VDZ is predicting weakening construction markets and cement demand in the fourth quarter of 2020. It cited falling orders and requests for building permits as mounting evidence for this trend. From here a gloomier outlook is foreseen for 2021 as construction budgets for commercial and government projects are cut. At the same time uncertainty in the labour market is expected to drag down the residential market. With this in mind the VDZ is predicting cement demand to drop by 3 – 5% in 2021.

To end on an upbeat note, if the VDZ’s forecasts are accurate, then the German cement sector looks like it might weather the coronavirus-downturn better than other industries. It knows a downturn in construction is coming and it can prepare for it.

Indonesia: Indocement celebrated its 45th anniversary on 4 August 2020. To mark the occasion the company held tumpeng cutting ceremonies at four of its sites, issued new staff identification cards with updated logos and organised social media dance and singing competitions between different plants and divisions. The company’s President Director Christian Kartawijaya also inaugurated an expansion to the research and training centre at the integrated Cieureup plant in West Java. The cement producer became a subsidiary of Germany-based HeidelbergCement in 2001.

Building 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.

Italy: Italcementi and Calcestruzzi have supplied specialists and products, including 67,000m³ of concrete, for the Genoa-San Giorgio Bridge. The new structure has been built to replace the Morandi Bridge that collapsed in mid-2018. Products from the integrated Calusco d'Adda cement plant, the Novi Ligure grinding plant and Calcestruzzi’s concrete plants in Genoa supported the project.

Germany: HeidelbergCement’s revenue fell by 10% year-on-year to Euro8.25bn in the first half of 2020 from Euro9.21bn in the same period in 2019. Its result from current operations before depreciation and amortisation (RCOBD) decreased by 2% to Euro1.40bn from Euro1.44bn. Sales volumes of cement dropped by 8% to 56.3Mt, aggregates by 7% to 135Mt and ready-mixed concrete (RMX) by 11% to 21.7Mm³. Its net debt decreased by 1.4% to Euro8.99bn.

“In the second quarter, revenue dropped in many countries, in some cases by double-digit percentages. Nevertheless, we achieved a good result, which was almost at the previous year’s level. The successful implementation of our COPE action plan played a large part in this,” said Dominik von Achten, chairman of the managing board of HeidelbergCement.

By region the group noted major falls in sales volumes, revenues and RCOBD in Western and Southern Europe and Asia-Pacific. Although it said that the construction industry in Germany had ‘hardly been affected by the corona crisis’ despite significant negative effects elsewhere in Europe.

Germany: HeidelbergCement has estimated sales of Euro4.32bn in the second quarter of 2020, down by 13% year-on-year from Euro4.97bn in the corresponding quarter of 2019. The figure is 11% higher than the average market expectation of Euro3.91bn.

The company said, “With the COPE action plan, the company has already launched a comprehensive bundle of measures in February 2020 that focuses on cost savings and maintaining liquidity. These measures took effect especially in the second quarter of 2020 and made a significant contribution to the fact that cost savings largely offset the burden on earnings caused by the Covid-19-related decline in revenue.”