Displaying items by tag: Holcim
The creation of Lafarge Africa, the clearance of the Cemex West acquisition by Holcim in Germany and the sale of Lafarge's assets in Ecuador all hint at the scale of business that LafargeHolcim will command when it comes into existence. Despite the media saturation of coverage on the merger the implications in developing markets are still worthwhile exploring, especially in Latin American and Africa.
In sub-Saharan Africa, Lafarge is merging its cement companies in Nigeria and South Africa to create Lafarge Africa. Analysts Exotix have described the move as, 'the birth of a leading player on a continental scale'. Indeed, if Lafarge wanted to grow Lafarge Africa to encompass its many other African cement producing subsidiaries it could hold at least 17 integrated cement plants (including plants in north Africa) with a cement production capacity of at least 40Mt/yr in 10 countries and infrastructure in others. That puts it head-to-head with Dangote's plans to meet 40Mt/yr by the end of 2014 through its many expansion projects. Following these two market leaders would come South African-based cement producer PPC with its expansion plans around the continent.
Meanwhile across the Atlantic in Latin America the Lafarge-Holcim merger threatens Cemex. Unlike in Africa where Lafarge has a ubiquitous but disparate presence, Lafarge and Holcim's cement assets are more evenly scattered around the Caribbean, Central and South America. In terms of cement production capacity Cemex and Lafarge-Holcim will both have around 30Mt/yr, with Cemex just in front. The next biggest cement producers in Latin America will be Votorantim (present mainly in Brazil) with just over 20Mt/yr and Cementos Argos (Columbia) with about the same. This includes some new acquisitions in the United States for the growing Columbian producer. In Ecuador Lafarge and Holcim held over 50% of the market share, hence the sale by Lafarge of its assets to Union Andina de Cementos for US$553m.
Depending on how well the merger integrates the two companies, corals the various subsidiaries and implements strategic thinking the merger could just create business as usual with little disruption to the existing order. Yet in both continents the merger has the opportunity to shake up and reinvigorate the cement markets as existing players suddenly discover serious new competition and react accordingly.
Africa has a population of 1.1bn and it had a Gross Domestic Product (GDP) of US$2320/capita in 2013. South America had a population of 359m in 2010 and a GDP of US$8929/capita. This compares to US$27,250/capita in Europe and US$54,152/capita in the US. The economic development potential for each continent is humongous. Post-merger, LafargeHolcim will be first or second in line for some of this potential in Latin America and Africa.
Mexico: Holcim will start a programme to use biomass as fuel in August 2014 at its Orizaba cement plant. Its subsidiary Ecoltec has installed a system to utilise biomass, using residual heat from the cement furnaces. The company will use coffee bagasse and biomass from the paper and beer industries, according to spokesman Gustavo Gastelum. Apart from limiting fossil fuel consumption, the project will also reduce methane gas emissions from organic waste. Since 1990 Holcim Mexico has cut its net carbon dioxide emissions by 19%.
US: Holcim US plans to invest US$100m to modernise its Ada cement plant in Oklahoma State, according to Robin DeCarlo, vice president of Holcim's corporate communications. The company submitted an application for a permit to the Oklahoma Department of Environmental Quality (DEQ) in June 2014 and expects to begin upgrading the plant between October and December 2014.
"We can't start without a permit from DEQ," DeCarlo said. She didn't release specific details about the modernisation but indicated that it would include upgrading the kiln line. DeCarlo noted that the modernisation of the kiln line will meet 'all known environmental regulations and reduce all major regulated emissions,' even with the increased plant capacity.
"We are expecting that there will be approximately 250 temporary jobs during the modernisation phase, which will have a direct and positive impact on the Ada economy," said DeCarlo. "The modernisation will increase our plant's capacity by about 20%." Holcim's plant in Ada currently employs about 120 people.
Germany: Holcim has received unconditional clearance by the European Commission (EC) for its proposed acquisition of Cemex West in Germany. The decision follows a detailed Phase II review by the EC. Closing of the transactions is expected for the second half of 2014.
The acquisition in Germany is part of Holcim's strategic portfolio optimisation in Europe that includes a series of transactions together with Cemex, which is separate from the intention to merge with Lafarge.
Holcim said that the decision marks a further milestone towards the optimisation of its strategic portfolio in Europe, which was announced in 2013. It will allow Holcim to create value through an optimised footprint in north-western Germany. It will also allow it to further improve the service and support of existing and new customers.
The transaction includes one cement plant and two grinding stations with a total cement production capacity of 2.5Mt/yr, one slag granulator, 22 aggregates locations and 79 ready-mix concrete plants. They would be combined with Holcim's existing Northern German operations.
Germany: The European Commission (EC) is expected to give the green light to Holcim's planned acquisition of Cemex's German operations without conditions, according to Reuters, which cited two knowledgeable sources.
The transaction is part of several interconnected deals between the companies that were agreed in August 2013. The EC is currently examining the agreement to determine whether it could threaten competition and prompt price hikes. Its decision is due by 8 July 2014.
Under the terms of the agreement, Cemex will combine its cement, ready-mix and aggregates operations in Spain with those of Holcim and will hold a 75% stake in the enlarged firm. In addition, Cemex will take over Holcim's operations in the Czech Republic. Holcim will spend a total of Euro70m in cash on the deals.
In April 2014 the EC started an in-depth probe into Cemex's deal with Holcim in Spain and is due to unveil its decision until 5 September 2014. The local anti-trust watchdog approved the transaction in the Czech Republic in March 2014.
Sri Lanka: Nearly 500 contract workers at two Holcim Lanka cement plants in the towns of Puttalam and Galle in Sri Lanka have been on strike since 19 May 2014 demanding job permanency, better wages and improved working conditions. The striking workers and their families are occupying the cement plant premises. The Inter Company Employees Union (ICEU) called the strike.
The protesters at the Puttalam plant have blocked the main gate, halting the transport of cement. The company and contractors are trying to break the picket with the help of Sri Lanka's president Mahinda Rajapaksa. The government is determined to end the strike and has deployed police and the riot squad. The police are threatening to arrest union leaders and activists.
On 1 June 2014 the striking contract workers and their families at the Puttalam and Galle plants were attacked by hired thugs with swords and clubs, allegedly organised by the local ruling party politicians. At the Puttalam plant nine people, including an eight year old girl, were injured and sent to hospital. Four are still hospitalised. Protestors asked for police protection, who were present during the attack, but their appeals were allegedly refused. At the Galle plant one protester was injured.
The mother of the eight year old girl who was injured said that her daughter had been thrown to the ground by the thugs. "I'm afraid for my husband, who has been working for eight years as a contract worker. That's why we joined the protest."
Holcim established its Sri Lankan operations after the privatisation of the state-owned Puttalam Cement Corporation in 1996 under former president Chandrika Kumaratunga. After Holcim took over, the workforce was cut from 1500 to less than 900, with only 370 permanent workers. Some of the contract workers have worked for the company for more than 20 years. Keeping workers on contract basis is a means employed to deny the rights they would have as permanent employees and to subject them to harsher working conditions.
Workers in the production and transport sections are employed on a 12 hour shift system. Their basic monthly wage is less than US$115. In the loading section, six workers have to load 4500 cement bags during a 12 hour shift with the assistance of a conveyor belt. The workers on 'general duties' work nine hour shifts and are on daily wages of US$16.02.
Holcim Lanka dominates has more than 40% of the local market. In the recent period, it has increased the price of a 50kg bag of cement several times and profits have soared, even after paying the government's increased taxes.
Big blow for Brazilian cement producers
04 June 2014The Brazilian cement industry took a knock last week when the competition watchdog Cade (Administrative Council for Economic Defence) confirmed its intention to issue the sector with fines worth a combined US$1.4bn.
Under the terms of the ruling, Votorantim will have to pay US$672m, Cimpor will pay US$133m, InterCement Brasil will pay US$108m, Itabira will pay US$184m, Holcim will pay US$227m and Itambé will have to pay US$39.4m. The companies involved will be forced on average to sell 24% of their assets. Votorantim, for example, will be compelled to divest 35% of its cement assets or 11Mt/yr of production capacity. In addition a fine of nearly US$2m is to be imposed on the cement associations ABCP and SNIC.
To give these figures some context, Votorantim reported a net profit of US$105m in 2013 across all its business lines including cement, metals, mining and pulp. The fine Cade wants to impose is over six times greater than this! A fine of this size will be a serious setback for Votorantim if it goes through. Votorantim's net revenue for its cement business in 2013 was about US$5.5bn. This places the fine at just over 10% of company annual turnover, a common upper limit for fines imposed by anti-competition authorities around the world. 10% of turnover, for example, is the maximum percentage fine that European Union competition regulators can impose.
Although hard to compare with the other Brazilian cement producers due to differences in financial reporting, the proposed fines seem equally tough on the other companies. Before the acquisition of Cimpor inflated its financial figures, InterCement reported a net revenue of US$1.2bn in 2011. This places its fine at 9% of annual turnover. Holcim's net sales in its Latin American region as a whole, including operations in Brazil, totalled US$3.73bn in 2013.
Both Holcim and Cimpor have issued corporate rebuttals to Cade insisting that they followed and still follow all the necessary competition laws. Both companies intend to fight the decision. Votorantim went further in its response saying that it considering the fine 'unjust and unprecedented' and it warned that the ruling would cripple any investments in the Brazilian cement sector. The ruling also forbids the company from opening new factories within the next five years, places limits on the company taking out new loans and prevents it from consolidating its market share.
Internationally, the Cade fine surpasses the US$1.1bn Competition Commission of India penalty imposed against 11 producers in India in 2013. Other recent anti-trust fines against the cement industry include a Euro80m fine in Poland that was upheld on appeal in 2013 and the US$19.3m Lafarge was charged in South Africa in 2012.
The prosecutors pointed out that work on public roads had been inflated by nearly US$8m. Overall they reckon that the cartel cost the Brazilian economy US$6.3bn. Examples likes this are unlikely to gain sympathy for the accused cement producers from a Brazilian public already angry about the amount of public money spent on building excessive sports stadiums and the like for the Football World Cup later in June 2014 and the Olympic Games in 2016. In the meantime though – over to the lawyers.
Holcim implicated in Cuban cement plant investment
04 June 2014US/Cuba: A lawsuit in Spain has revealed documents indicating that Holcim may have invested in a cement plant in Cuba despite warnings the deal might violate US law because the plant sits on land seized from US citizens. The deal took place in 2000, when Holcim was known as Holderbank, but allegedly the ownership went through a string of companies in Spain, the Netherlands and Panama, according to documents filed in a lawsuit reported upon by the Miami Herald.
"Holderbank's investment in the Cienfuegos property clearly would constitute 'trafficking' in confiscated property under Title IV of Helms-Burton," wrote US lawyers hired to advise Holcim. Holcim denies that it owns a business or a stake in a business in Cuba.
The court documents are part of a lawsuit involving three Spanish firms. Firebrick SA and Acedos Trading allege that Inversiones Ibersuizas owes them more than US$2m from an investment in Cuba in 2000. The documents suggest that Ibersuizas created a Spanish firm, Las Pailas de Cemento, in 2000 that paid US$70m to Cuba for 50% of the joint venture, Cementos Cienfuegos plant. Holcim allegedly controlled the project through a Panama company, Windward Overseas. The deal subsequently began to break down in 2004.
Since 2004, the US Treasury Department's Office of Foreign Assets Control, which enforces the US embargo on Cuba, has fined foreign companies more than US$1.25bn for violating US laws and regulations.
Brazil: Brazil's antitrust watchdog Cade has fined six cement makers a combined US$1.4bn for fixing prices for two decades and ordered the companies to dispose of many assets.
Votorantim Cimentos SA, Camargo Correa SA's Intercement Brasil, Itabira Agro Industrial SA and Cia de Cimentos Itambé SA, as well as Switzerland's Holcim Ltd and Cimpor Cimentos de Portugal SGPS SA agreed to set prices to force rivals from the market, according to councillors at Cade. Cade ignored the companies' claims that there was no evidence of price-rigging and ordered them to cut installed capacity in concrete-services by 20% in large markets. The ruling also requires the companies to do away with any cross shareholdings.
The ruling, which followed an eight-year inquiry, came as allegations of cost overruns have dogged preparations for the 2014 FIFA Football World Cup. Local cement sales have more than doubled over the past decade and prices have jumped by about 66% in that period following a commodities-based boom and government efforts to expand roads and other infrastructure.
"This cartel was so strong that it had clear strategic goals," said councillor Márcio de Oliveira Junior. The six companies named in the ruling control about 75% of the domestic market for cement and concrete. The decision was slightly milder than councillor Alessandro Octaviani's January 2014 proposal, which called for bigger asset disposals. Cade also imposed sanctions on Abesc (an industry group representing concrete producers), ABCP (Brazil's Portland cement group) and SNIC, which represents local cement factories.
Lawyers said that litigation could go on for years should the companies appeal. Cade had previously blocked any attempt for early settlements. One of the lawyers involved, who asked not to be named, told Reuters that the severity of the fines and the asset disposals are unheard of in similar antitrust cases around the world. Industry leaders allege that Cade has no legal power to impose any asset sales.
Under terms of the ruling, Votorantim will have to pay US$672m in fines, Cimpor will pay US$133m, Intercement Brasil will pay US$108m, Itabira will pay US$184m, Holcim will pay US$227 and Itambé will have to pay US$39.4m. Votorantim will challenge the decision, "Because it is unjustified, lacks legal basis and ignores market facts," said Votorantim. SNIC has also said that it plans to appeal Cade's decision.
JK Cement appoints new additional director
21 May 2014India: JK Cement has announced that the Board of Directors has appointed Paul Hugentobler as an additional director in the Board, to hold office until the conclusion of the next Annual General Meeting. Previous to the appointment, Hugentobler served as an advisor to Holcim between 1 January 2014 to February 2014. Between 1999 – 2000 he was the CEO at Siam City Cement and between 1980 – 1994 Hugentobler was a project manager at Holcim Group Support.