Displaying items by tag: HeidelbergCement
Half-year roundup for European cement multinationals
10 August 2016LafargeHolcim was the last major European cement producer to release its second quarter financial results last week. The collective picture is confused. Cement sales volumes have risen but sales revenue have fallen.
Most of the producers have blamed negative currency effects for their falls in revenue during the first half of 2016. Holding a mixed geographical portfolio of building materials production assets has kept these companies afloat over the last decade but this has come with a price. The recent appreciation of the Euro versus currencies in various key markets, such as in Egypt, has hit balance sheets, since the majority of these firms are based in Europe and mostly use the Euro for their accounting. Meanwhile, sales volumes of cement have mostly risen for the companies we have examined making currency effects a major contributor.
Graph 1 - Changes in cement sales volumes for major non-Chinese cement producers in the first half of 2016 compared to the first half of 2015 (%). Data labels are the volumes reported in 2016. Source: Company reports.
As can be seen in Graph 1, sales volumes have risen for most of the producers, with the exception of LafargeHolcim. Despite blaming shortages of gas in Nigeria for hitting its operating income, LafargeHolcim actually saw its biggest drop in sales volumes in Latin America by 13.2% year-on-year to 11.8Mt. The other surprise here was that its North American region reported a 2.7% fall to 8.8Mt with Canada the likely cause. Vicat deserves mention here for its giant boost in sales volumes due to recovery in France and good performance in Egypt and the US, amongst other territories.
Graph 2 - Changes in sales revenue for major non-Chinese cement producers in the first half of 2016 compared to the first half of 2015 (%). Data labels are the sales reported in 2016. Source: Company reports.
Overall sales revenue for these companies presents a gloomier scenario with the majority of them losing revenue in the first half of the year, with most of them blaming negative currency effects for this. Titan is included in this graph to show that it’s not all bad news. Its growth in revenue was supported by good performance in the US and Egypt. Likewise, good performance in Eastern Europe and the US helped Buzzi Unicem turn in a positive increase in its sales revenue. They remain, however, the exception.
Looking at sales revenue generated from cement offers one way to disentangle currency effects from performance. Unfortunately, only about half of the companies looked at here actually published this for the reporting period. Of these, LafargeHolcim reported a massive rise that was probably due to the accounting coping with the merger process that finalised in 2015. Of the rest - HeidelbergCement, Italcementi and Vicat – the sales revenue from each company’s cement businesses fell at a faster rate than overall sales. Like-for-like figures here would help clarify this situation.
Meanwhile, a mixed global patchwork of cement demand is focusing multinational attention on key countries with growing economies like Egypt and Nigeria. Both of these countries have undergone currency devaluation versus the Euro and are facing energy shortages for various reasons. The exposure of the multinational cement producers to such places may become clearer in the second half of the year.
Italcementi’s revenue falls slightly before takeover
03 August 2016Italy: Italcementi’s sales revenue has fallen by 2.1% year-on-year to Euro2.12bn in the first half of 2016 from Euro2.17bn in the same period in 2015. Its sales volumes of cement rose by 2.8% to 22.3Mt from 21.7Mt. Earnings before interest, tax, depreciation and amortisation (EBITDA) fell by 44% to Euro177m from Euro316m. The cement producer blamed the revenue drop on negative currency effects, although sales volumes rose notably in North America. Its fall in EBITDA was attributed to group restructuring costs and an impairment on operations in Belgium for approximately Euro320m.
HeidelbergCement’s acquisition of Italcementi is expected to complete in the second half of 2016.
Germany: HeidelbergCement’s sales revenue has fallen slightly by 1% year-on-year to Euro6.41bn in the first half of 2016 from Euro6.47bn in the same period of 2015. This was blamed on consolidation and exchange rate effects. Otherwise, profit rose by 46% to Euro354m from Euro242m. Clinker and cement sales volumes rose by 2.9% to 39.9Mt from 38.8Mt.
“In operational terms, the second quarter of 2016 was the best since the financial crisis and thus continued the positive trend of the previous year,” said Bernd Scheifele, Chairman of the Managing Board of the company. “The positive market environment in our mature markets and the recovery of demand in Eastern Europe made a significant contribution. We were able to raise the margins in operational terms in all business lines thanks to our margin improvement programmes and price increases in core markets. Furthermore, we have benefited from declining fuel costs.”
The group’s cement sales revenue fell by 3% to Euro2.92bn from Euro3.01bn. Its Northern and Eastern Europe-Central Asia and Africa-Eastern Mediterranean Basin areas both reported falling revenue from cement sales. However, the Asia-Pacific area saw its cement sales fall by 11% to Euro675m. Sales in North America partially offset this, with cement sales volumes growing by 4.7% to 5.9Mt from 5.6Mt.
HeidelbergCement reported that its acquisition of Italcementi is well on track with the subscription period for a mandatory tender offer to the remaining shareholders of Italcementi set to end on 30 September 2016. The entire takeover transaction is expected to be completed in the second half of 2016. HeidelbergCement also said that it had received ‘high’ interest for its assets on sale in the US. Binding offers are expected in the first half of August 2016.
Cementir quietly grows its business
27 July 2016And the winner of the Italcementi assets in Belgium is… Cementir. The Italian multinational cement producer picked up Compagnie des Ciments Belges for Euro312m this week. The deal included all of Italcementi's cement, ready-mix and aggregates assets in Belgium, Italcementi's stake in an existing limestone joint-venture with LafargeHolcim and a portion of HeidelbergCement's limestone quarry in Antoing. It was offered by HeidelbergCement to the European Commission to ensure approval of its acquisition of Italcementi.
The assets from Compagnie des Ciments Belges comprise one 2.5Mt/yr integrated cement plant, three terminals and 10 ready-mix concrete plants. As ever, the add-ons confuse the final price but the deal values the cement production capacity at Euro125/t or US$138/t. This figures seems low compared to the other big sale this week of Holcim Lanka to Siam City Cement. There, the Thai producer picked up an integrated cement plant and a grinding plant with a combined cement production capacity of 1.6Mt/yr for US$400m. That values the cement production capacity at US$250/t.
Increasing its presence in western Europe makes a lot of sense for Cementir. It’s one of the smaller European multinational cement producers with 14 cement plants, often white cement producers, in Italy, Turkey, Denmark, Egypt, the US, China and Malaysia. Altogether this comes to 15.1Mt/yr in cement production capacity. In its press release, Cementir described Gaurain-Ramecroix, the cement plant it is buying, as the largest integrated cement plant in France-Benelux, region with ‘state-of-the-art’ technology and long-life mineral reserves.
Italcementi reported a 2.9% year-on-year fall in cement and clinker sales volumes in Belgium in 2015, noting a general reduction in cement consumption in all areas of the construction industry. The mineral reserves were confirmed at least as environmental clearance as granted and work began at the new Barry quarry at Gaurain-Ramecroix.
Cementir has rebuilt its revenue since hitting a high of Euro1.15bn in 2007 although it dipped again in 2014. Despite this ordinary portland and white cement sales volumes have been slowly falling from a high of 10.5Mt in 2011 to 9.37Mt in 2015. That said though its businesses in Scandinavia generated just under half of its operating revenue in 2015. So far in 2016, total group revenue rose by 2.8% to Euro210m in the first quarter of the year, with a fair portion of that attributable to Scandinavia. Bolting on a cement and concrete business in (relatively) nearby Belgium makes sense in this context provided the construction market eventually rallies.
Yet, another on-going Cementir acquisition back home in Italy may make the company reflect on the risks of buying assets in Belgium. Cementir is drawing closer to purchasing the cement and concrete arm of Sacci as it plans to pick up five cement plants and assorted ready-mix concrete assets for the bargain price of Euro125m, following a protracted bankruptcy. Cementir may remember that Lafarge sold some of these assets to Sacci for Euro290m in 2008 before the situation deteriorated. The top brass at Cementir must be praying that the Sacci’s fate doesn’t await them in Belgium.
Cementir Holding buys Compagnie des Ciments Belges
25 July 2016Belgium: HeidelbergCement, through its subsidiary Ciments Français, has agreed to sell its operations in Belgium, primarily consisting of Italcementi’s Belgian subsidiary Compagnie des Ciments Belges (CCB), to Aalborg Portland Holding, a subsidiary indirectly 100% controlled by Cementir Holding. The transaction has been valued at Euro312m on a cash and debt-free basis. The transaction is expected to close in the second half of 2016.
“With the disposal of the Belgium assets we fulfil the obligation of the European Commission and improve the net financial position of HeidelbergCement after the acquisition of the 45% share in Italcementi,” said Bernd Scheifele, Chairman of the Managing Board of HeidelbergCement. “We are well on track to reach our target of at least Euro1bn of proceeds from disposals.”
The divestment of operations in Belgium was offered to the European Commission in order to address competition concerns caused by the group’s acquisition of Italcementi. The sale to Cementir Holding is subject to the approval of the European Commission.
HeidelbergCement releases Sustainability Report 2015
21 July 2016Germany: HeidelbergCement has released its seventh Sustainability Report so far. Highlights from the report include a reduction of specific net CO2 emissions by 22% to 606kg/t of cement (compared to 1990 levels) and a decreased clinker factor of 75%. However, specific emissions for NOx, SO2 and mercury all rose slightly from 2014.
“The numbers show what kind of progress HeidelbergCement made in 2015,” said Bernd Scheifele, CEO of HeidelbergCement. “We have also substantially intensified our commitment to the development of technologies to use CO2 as a resource, and we have entered into very promising cooperative research projects. This puts us at the forefront of the movement in the cement industry.”
The 2015 report is also the first to present data on water management, following the implementation of industry indicators for water reporting at all cement plants in 2013 and 2014.
Norway: The Ministry of oil and energy of Norway has announced that it expects to complete every step in the development of carbon capture and storage (CCS), i.e. capturing CO2 emissions from an industrial plant, transporting it by ship and injecting it into a depleted oil and gas reservoir in the North Sea, by 2022. Investment would range between Euro460m and Euro815m.
The source of the CO2 could be one or more of three companies currently developing CO2 capture technology. These are the HeidelbergCement-owned Norcem Brevik plant near Oslo, fertiliser maker Yara International and a waste incinerator operated by the Oslo city council.
Planning and investment for the whole chain could reach Euro0.77-1.35bn, with a 40% cost uncertainty. The government plans to present further CCS plans in the state budget in October 2016.
Italy: HeidelbergCement has completed its acquisition of a 45% share in Italcementi from Italmobiliare. All conditions for the closing of the transaction have been fulfilled following the approval by the relevant competition authorities. The purchase triggers a mandatory tender offer to the remaining shareholders of Italcementi. HeidelbergCement expects the entire transaction to be completed in the second half of 2016.
“By adding Italcementi to our group, we are considerably strengthening our global footprint and innovation capabilities. We see significant potential for value creation with the realisation of synergies and by learning from each other’s best practices. From now on, we will focus all our efforts on the integration of Italcementi into our group,” said Bernd Scheifele, chairman of the management board of HeidelbergCement.
On 28 July 2015, HeidelbergCement and Italmobiliare entered into a share purchase agreement about the acquisition of a 45% shareholding in Italcementi. On 1 July 2016 HeidelbergCement acquired 157.17 million ordinary shares, representing 45% of the share capital of Italcementi for a total consideration of Euro1.67bn. 82.82 million ordinary shares were acquired against cash. The remaining 74.35 million ordinary shares were acquired against the assignment of 10.5 million newly issued shares of HeidelbergCement. Following this, Italmobiliare has become the second largest industrial shareholder of HeidelbergCement, with a stake of 5.3%.
In the share purchase agreement, Italmobiliare agreed to purchase certain non-core assets of Italcementi, including Italgen, Bravosolution, and certain non-core real estate. Italcementi had sold these assets to Italmobiliare on 30 June 2016 for total proceeds of Euro237m.
The acquisition of the 45% stake in Italcementi triggers the obligation to execute a mandatory tender offer to the remaining shareholders of Italcementi. The offering document will be filed with the Italian Securities and Exchange Commission (CONSOB), within 20 days after the closing, and will be published upon completion of CONSOB’s review period. The acceptance period will be agreed with Borsa Italiana. The acceptance period is expected to commence at the end of August 2016.
Belgium/US: HeidelbergCement has made a shortlist of potential bidders for assets in Belgium and the US that should be divested as part of its acquisition of Italcementi, according to Bloomberg. Bidders for Italcementi’s Belgian business include Turkey’s Çimsa Çimento and Italy’s Cementir Holding. The business are valued at around US$400m. Bidders for Italcementi’s US assets include Summit Materials and CRH. This business are valued at around US$600m according to sources quoted by Bloomberg. All shortlisted bidders will face a due diligence process.
HeidelbergCement set for acquisition of Italcementi
22 June 2016The Federal Trade Commission (FTC) gave HeidelbergCement permission to complete its acquisition of Italcementi assets in the US on 17 June 2016. This was the second and final major competition body that could have challenged the purchase, following approval by the European Commission in late May 2016. Although the FTC consent now faces a month for comment the deal is looking likely to complete towards the end of the summer.
HeidelbergCement and Italcementi have gotten away with having to sell just one cement plant and 11 terminals in the US. The Lafarge-Holcim merger in 2015 had it tougher. Those companies were forced to sell two cement plants, two slag grinding plant and a host of terminals. Admittedly LafargeHolcim is now the biggest cement producer in the US (and the world) but HeidelbergCement will hold more integrated cement plants in the US following its acquisition.
As predicted the FTC took exception with the proximity of the company’s assets in West Virginia and Pennsylvania following the acquisition. So the parties have agreed to sell the Essroc Martinsburg integrated cement plant in West Virginia. When Global Cement visited the plant in late 2013 the staff told us that cement from the plant was distributed from central Ohio eastwards to western Pennsylvania and south to southern Virginia. The plant also switched over to a FLSmidth dry production line in 2010 giving it a clinker production capacity of 1.6Mt/yr, making it one of the newer plants in the Essroc stable.
The FTC also flagged up competition concerns in five metropolitan areas: Baltimore-Washington, DC; Richmond, Virginia; Virginia Beach-Norfolk-Newport News, Virginia; Syracuse, New York; and Indianapolis, Indiana. In light of this the proposed consent agreement requires the merged company to divest seven Essroc terminals in Maryland, Virginia and Pennsylvania and a Lehigh terminal in Solvay, New York. Two additional Essroc terminals in Columbus and Middlebranch, Ohio are to be sold at the option of the buyer and subject to FTC approval. Finally, Essroc’s terminal in Indianapolis is to be sold to Cemex.
Funnily enough, the FTC took about a year to approve both the merger of Lafarge and Holcim and HeidelbergCement’s purchase of Italcementi. This compares to the European Commission which took nine months to approve the Lafarge-Holcim deal but which took 11 months to clear the HeidelbergCement-Italcementi one. Given the greater overlap of assets of the Lafarge-Holcim merger in both Europe and the US one might have thought that the approval process would have taken longer. Or maybe bureaucracy moves at a speed all of its own. Read into this what you will. The creation of the world’s second largest multinational cement producer draws closer.