Displaying items by tag: Holcim

Minority shareholders have bowled a googly at Holcim's attempt to simplify its business structure in India.

Or for readers unacquainted with cricket terminology, domestic institutions which hold about 9% in Ambuja Cements have been widely reported in the Indian media as having voted against a move to merge the cement producer with its parent company, Holcim India. The final results of the shareholders vote will be publicly announced on 21 November 2013. The shareholders actions follow Holcim's recent approval by the Indian Foreign Investment Promotion Board for the merger.

That this is bad news for Holcim is not in doubt given that the multinational cement producer has taken a hit in its Asia-Pacific region, particularly in India. Overall for the region its operating profit fell by 32.5% year-on-year to US$333m for the quarter to 30 September 2013.

Specifically, Ambuja Cements managed to maintain its sales volume of cement and clinker year-on-year at 4.89Mt for the third quarter. However, its net profit after tax fell by 45.4% to US$27m. It blamed the decline on subdued demand due to overall economic slowdown combined with higher input costs. Meanwhile, ACC saw its sales revenue from cement fall slightly to US$388m for the third quarter while its profit for cement before costs and tax fell by 57% year-on-year to US$22m.

As mentioned in August 2013 when this column last looked at India, the parallels to cement industry consolidation in China are telling. In China guidelines have been issued to cut overcapacity in the cement industry, with the Ministry of Industry and Information Technology releasing lists of companies that should cut excess production. Alongside this, the country's leading cement producers have reported a return to profit so far in 2013. Who exactly is taking the loss from this production retraction in China, if it is happening, remains unreported and unclear.

In India, much more light has been shone upon an over-producing cement industry. Holcim and its subsidiaries are just some of the companies reporting falling profits at present. Ambuja's minor shareholders look like they have made a decision that is counter to the best interests of the Indian cement industry.

In a recent UK newspaper article, political theorist David Runciman compared the respective merits of democratic and more autocratic modes of government. Unsurprisingly for a British academic Runciman came out in favour of democracies, yet the advantages of more centralised governments were noted, such as the ability to make wide-reaching decisions faster and more comprehensively.

In light of this, comparing the Indian and Chinese cement industries in 2040 will be fascinating. Minor shareholder tussles will likely be forgotten but cement (and hopefully cricket) will be as vital then as they are now.

The third quarter results are in and signs of a recovery in the construction industry are present. Generally for the European producers, volumes of cement sold in the third quarter of 2013 have improved year-on-year compared to the figures for the first nine months of 2013. Although many of these third quarter sales changes are still negative it seems like the industry has turned a corner.

Lafarge reported that cement sales fell by 4% year-on-year to 102Mt for the first nine months in 2013. In the third quarter of 2013 sales remained stable year–on-year at 36.7Mt. Holcim saw its nine month sales fall by 3% to 104Mt while its third quarter sales remained stable at 36Mt. HeidelbergCement saw its nine month sales rise by 1% to 67.7Mt while its third quarter sales rose by 4% to 25.3Mt. Italcementi saw its nine month sales fall by 6% to 32.6Mt while its third quarter sales fell by 2% to 10.8Mt.

By region some of the differences between the European-based multinational cement producers have been telling. Lafarge, for example, is still down year-on-year on cement volumes sold in North America, denting the perceived wisdom of a strong North American recovery. However, profit indicators such as earnings before interest, taxes, depreciation and amortisation (EBITDA) have risen in that region, increasingly in the third quarter. Cemex and Holcim have done better in this region.

Notably, the unstable political situation in Egypt has also impacted the balance sheets for Lafarge and Italcementi. Lafarge reported that cement sales volumes fell by 27% for the first nine months of 2013, principally due to gas shortages, and 19% for the third quarter as the company started to substitute other fuels. Similarly, Italcementi saw overall cement and clinker sales drop by 11.2% in the nine months and 14% in the third quarter.

Meanwhile in China, Anhui Conch produced 86.2Mt for the nine months, a year-on-year increase of 12.1%. Overall revenues in China seem to have risen after decreases in 2012. Anhui Conch reported that its operating revenue rose by 15% to US$6.08bn for the first nine months and US$2.20bn for the third quarter of 2013. Analysts have pinned the return to profit to building in the country's eastern and southern provinces and the effects of government-led industry consolidation. Bucking this trend though, China National Building Materials (CNBM) saw its revenue rise by 37% to US$13.5bn for the first nine months of 2013 but its profit fell by 8.1% to US$542m.

Anhui Conch, Lafarge, Holcim, CNBM, Italcementi and HeidelbergCement all feature at the top of Global Cement's list of the 'Top 75 global cement companies' to be published in the December 2013 issue of Global Cement Magazine. Ahead of final publication we want to know whether readers agree with the rankings. Download our list (registration required) and let us know your comments by 1 December 2013.

Switzerland: Bernard Terver, Member of the Holcim Executive Committee, has been appointed head of a company region encompassing Africa, Middle East and the Indian subcontinent. The appointment caps a series of changes in the company's senior management. All changes become effective on 1 January 2014.

Onne van der Weijde will remain Area Manager for India and will assist in the restructuring of Holcim's subsidiaries, ACC and Ambuja Cements. Javier de Benito will remain Area Manager for Africa and the Middle East, reporting directly to Terver. Member of the Holcim Executive Committee, Ian Thackwray will become responsible for East Asia, South East Asia, Oceania and Holcim Trading.

Daniel Bach, currently CEO of Holcim Romania, will be appointed Area Manager for South East Asia and member of senior management of Holcim. Alain Bourguignon, currently CEO of Aggregate Industries UK, will be appointed Area Manager for North America / UK and member of senior management of Holcim. He will report directly to the CEO of Holcim. Investor Relations and Risk Management will now report to CFO Thomas Aebischer.

Member of the Holcim Executive Committee Paul Hugentobler, currently responsible for South Asia and the ASEAN nations (Association of Southeast Asian Nations excluding the Philippines), will be retiring upon reaching the statutory age limit in February 2014. He will act as an advisor to the CEO of Holcim starting from 1 January 2014.

The area of responsibility of Holcim Executive Committee members Roland Köhler, in charge of Europe excluding the UK, and Andreas Leu, responsible for Latin America, will remain unchanged.

Romaina: Holcim Romania has announced the addition of three members to its management team. Anca Alexandru is the new Ready-mixed Concrete and Aggregates Director of Holcim Romania, Mădălina Craciunescu has been appointed as Human Resources Director and Ioana Borangic is the new Communication Manager.

"We take pride in the fact that Holcim Romania, a company from the building materials industry, where most employees are men, now has an executive team formed of 50% ladies", said Daniel Bach, General Director of Holcim Romania.

Alexandru, aged 46, joined Holcim in 2002 and has held various managerial positions in the RMX segment. She succeeds Bogdan Dobre who has become the Marketing and Sales Director for Holcim Romania. She has been in post since 1 September 2013.

Craciunescu, aged 32, has held various positions with Holcim Romania since January 2005. She replaces Nicoleta Sălăjan, who has become the HR Director of Holcim Group for the Africa and Middle East Region

Borangic, aged 30, joined Holcim in 2010 as Internal Communication Specialist. Before joining Holcim Ioana gained over 10 years of experience in corporate communications in several multinational companies. Borangic succeeds Andreea Nicolae who have become the Marketing Manager for Holcim Romania.

Holcim Romania runs two cement plants, one grinding plant, 13 eco-friendly concrete stations, three aggregates stations, two special binders stations and one cement terminal.

US cement consumption may have disappointed some in the first quarter of 2013 but solid growth lies ahead, according to the Portland Cement Association (PCA). Just how solid that growth will be remains open to interpretation.

PCA chief economist Ed Sullivan forecast 8% growth in cement consumption at the start of 2013. Now's its been halved to just 4%. Yet he's standing by the hint of good news ahead, upping the growth from 2014 to 9.7%.

Figures from the major US cement producers present a mixed picture. The major multinational cement producers mostly suffered from the weather in early 2013. Lafarge saw its cement sales in North America drop by 23% year-on-year for the first half of 2013 to 4.4Mt from 5.7Mt in the same period of 2012. Cemex's cement sales in the US rose by 3% but no specific figures were released. Holcim's cement sales in North America fell by 7% to 5Mt from 5.4Mt. HeidelbergCement's cement sales in the North America grew by 5% to 5.7Mt from 5.4Mt.

Of the rest, Texas Industries reported a rise in cement shipments of 29% to 2.23Mt from 1.73Mt for the six months to the 31 May 2013. Titan saw sales in the US rise by 10% to US$258m.

Preliminary United States Geological Survey data for June 2013 suggests that the increase in portland and blended cement shipments in the US slowed in the first half of 2013. In 2011 32.1Mt were shipped, in 2012 37.0Mt were shipped and in 2013 37.2Mt were shipped.

Meanwhile the construction figures US Department of Commerce mostly suggested growth but not without the odd jitter. Construction spending fell slightly in June 2013. Total construction spending adjusted seasonally fell by 0.4% to US$869bn due to a fall in non-residential construction. Since then though the July 2013 figure hit US$901bn, the highest since June 2009.

Accordingly, in his forecast Sullivan pins his hopes on the residential sector in the near term. It has seen consistent growth since October 2012. However other industry commentators, like the American Institue of Architects, have focused on poor growth in non-residential construction.

Let's hope Sullivan's got it right.

Austria: Ghassan Broummana has been appointed managing director of A TEC Group from 1 October 2013. As managing director Broummana will be responsible for sales and marketing within the A TEC and A TEC GRECO group.

Broummana started his career in 1987 designing and starting-up cement plants. In 1996 he joined Holcim Group Support in Switzerland where he developed and implemented various corporate initiatives. In 2004, he moved to Holcim's subsidiary in Thailand, Siam City Cement, to start up a new business unit preparing alternative fuels and raw materials from industrial and household waste.

In 2009 Broummana joined the managing committee and executive committee respectively of Holcim's subsidiaries in India, ACC and Ambuja Cements. Here he restructured Techport, the unified technical support service centre that provides expertise to both ACC and Ambuja Cements with the aim of improving the efficiency and effectiveness of over 25 integrated cement plants and grinding stations and managing all the major capital expenditure projects for both companies.

Broummana holds a Diploma in Electrical Engineering and a Diploma in Wirtschafts-Ingenieur (MBA) from the University of Dortmund. He has also completed a 'Program for Executive Development' at IMD-Lausanne and 'Advanced Management Program' at Harvard Business School, US.

Cemex's decision to head deeper into eastern Europe as part of the Cemex-Holcim asset swap announced this week suggests some nerve. Cement production levels started to fall in the region from 2012, according to Cembureau figures, with continued problems reported so far by the multinational cement producers in 2013. Cemex seems likely to lose money from the start with its new assets in the Czech Republic.

In more detail, Cemex will acquire all of Holcim's assets in the Czech Republic, which include a 1.1Mt/yr cement plant, four aggregates quarries and 17 ready-mix plants. In return Holcim will give Cemex Euro70m and Cemex will give Holcim its assets in western Germany including one cement plant and two grinding mills that encompass a total capacity of 2.5Mt/yr, one slag granulator, 22 aggregates quarries and 79 ready-mix plants.

Cemex must believe that it can wait out the recovery of the construction sector in eastern Europe or make savings from having a more easterly spread of assets. Certainly Cemex said in its press release on the asset swap that its earnings before interest, tax, depreciation and amortisation (EBITDA) would start to rise from US$20m to US$30m from 2014.

The question for the buyers at Cemex who considered this deal is whether the construction market has bottomed out in the Czech Republic yet. According to World Bank figures, following the 2008 financial crisis Czech Gross Domestic Product (GDP) fell to a low of US$197bn in 2009, rose again until 2011 but then fell to US$196bn in 2012. Currently the Czech National Bank is anticipating a further fall in growth in 2013. Meanwhile, data from a third quarter 2013 Czech construction sector analysis by CEEC Research reported that a drop of at least 4.7% was expected in 2013 with a follow-on decline of 2.7% in 2014.

Possibly one deal-maker for Cemex was the prospect of combined operations with Holcim in Spain across cement, aggregates and ready-mix. Similar to the Lafarge-Tarmac joint-venture in the UK, the move offers reduced risk in a declining western European market. How the Spanish competition authorities will respond remains to be seen. Elsewhere on the continent this week the decision by the Belgian Competition Council to fine the Belgian cement sector shows an example of behaviour the Spanish authorities will want to avoid.

This week's news that Boral's operations have been disrupted by the Construction, Forestry, Mining and Energy Union (CFMEU) in the Australian state of Victoria highlights an increasingly difficult situation for the company and the Australian cement industry in general.

Boral's worksite at Footscray, near Melbourne, was allegedly blockaded by the CFMEU last week over the union's separate and long-running dispute with site contractor Grocon. The CFMEU wants Boral to stop supplying Grocon sites. Boral says that it has been forced to address the issue at Footscray and two other sites by issuing injunctions against the union. After its first half results announcement last week, which showed a loss of US$192m for the year ending 30 June 2013, this is clearly the last thing that Boral needs to be dealing with.

So far, 2013 has seen mainly trouble for Boral. In January it announced that it would shed 1000 jobs across its global operations, including 885 in its native Australia. In February it announced that the company made a US$25m loss in the half year to 31 December 2012. In March, it restructured by merging production divisions to save additional cash. It also had to suspend production at its Waurn Ponds plant. However, revenues have been rising. Boral is not Titan.

Elsewhere in Australia, Adelaide Brighton announced that its first half 2013 profit fell by 9% year-on-year. It expects no improvement over 2012 in the rest of the year.

With the onset of the carbon tax, cement manufacturing is increasingly expensive in Australia, a fact that is especially difficult when combined with lower demand. China, Indonesia and Vietnam all produce similar quality cement 'nearby' at considerably lower cost, making the long-term future of cement manufacturing in Australia look fragile. Indeed, this is a trend that Australia shares with its antipodean neighbour. In New Zealand, after years of indecision, Holcim recently decided to not build a new cement plant at Weston. A new import terminal is its new preferred strategy. Could Australia, a country with such vast reserves of fuels and minerals, also be gradually heading towards cement import dependency?

'Below expectations' was the headline message from Holcim's half-year results this week. Canada, Mexico and Morocco were all singled out as problem areas for Holcim but surely India represents the biggest headache for the debt-reducing multinational.

How badly its bottom line was hit by India in particular, Holcim declined to say. Overall its entire Asia Pacific region saw sales volumes of cement fall by 3.7% to 37.8Mt to 36.4Mt for the first six months of 2013. In 2012, India represented over half of the group's Asia Pacific installed cement production capacity. This suggests that the actual drop in sales in India was probably at least 6%, more if the other countries in the territory did better than in 2012. Overall profits for the Asia Pacific region fell by 14% to US$650m. What we do know is that Holcim announced major restructuring to its businesses in India in late July 2013 to cut costs.

The other major cement producers in India have fared similarly badly. UltraTech's first quarter profit, for the period ending on 30 June 2013, fell by 13.5% to US$111m. Its revenue fell by 2% to US$820m. Jaiprakash Associates also reported a 2% dip in its cement sector revenue to US$247m in the quarter ending on 30 June 2013. Profits fell by 24% to US$27m. India Cements' sales revenue rose by 3% to US$196m. Yet its operating profit fell too, by 41% to US$19.8m.

Both Holcim and India Cements blamed falling cement prices in the south of India. India Cements directly mentioned overcapacity. The only explanation UltraTech offered for its poor performance was rising input and logistics costs.

Problems in India are not unexpected. Overcapacity has loomed over the Indian cement industry for some time as the race for growth far overtook the increase in demand. In the wider economy, India hit its lowest gross domestic product increase in a decade, 'just 5%', for the financial year ending on 31 March 2013. Meanwhile the Indian Rupee fell to a record low of 61 against the US Dollar in late June 2013. Not good news at all for any cement producers looking to offset energy or raw materials costs from abroad.

As predicted in our overview of the Indian cement industry back in February 2013, the smaller cement producers are now likely to get picked off by the larger firms as capacity utilisation falls and fuel costs rise. It is interesting to compare this free-market led cement industry consolidation to the state-directed one happening in China.

The Indian media are certainly wise to this with reports and speculation on endless takeover rumours. One example of this is the Irish building materials conglomerate Cement Roadstone Holdings's (CRH) decision to purchase Sree Jayajothi Cements that was announced in early August 2013. However with CRH itself having just reported that it made a loss in the first half of 2013 it may be regretting that it finally has a presence in the south of India.

Weston is off. The 'will-they, won't they' of the New Zealand cement industry took a more decisive turn this week with the announcement that Holcim New Zealand intends to import cement instead.

Once Holcim's existing cement plant at Westport winds down there will be no more indigenous cement production on New Zealand's South Island. Golden Bay Cement on North Island will be left as the nation's sole cement producer. Instead Holcim now plans to build US$80m on an import terminal and related infrastructure.

Given a previous price tag of US$400m for the Weston project, switching to an import strategy makes sense for Holcim which has had a hard time of late with a poor first quarter following a tough year in 2012. Despite the benefits that the construction sector in New Zealand has seen with the rebuilding following the 2011 Christchurch earthquake, Holcim is thinking of its wider strategy. Although, as one of the largest multinational cement producers, Holcim has a wide supply chain for clinker, Australia reported poor sales in 2012 and it would be an obvious hub to keep New Zealand topped up with sufficient product.

Last week's doubts about the Indian cement market – when Holcim announced major business restructuring in India – may also have an effect as Vicat too has reported problems in the country this week. The question to ask when Holcim releases its half-year results in mid-August 2013 is how much excess capacity does the company have?

Coincidentally, importing cement is one issue that has come up in the UK Competition Commission's on-going investigation into the UK cement industry. An Irish cement importer has alleged that unnamed European cement producers have blocked his attempts to import cement to Ireland. The UK Competition Commission will continue its investigation until late 2013. Whilst we are not suggesting that the New Zealand cement industry has any problems of this kind, as the market adjusts to a higher level of imports it will encounter new challenges.