Displaying items by tag: Holcim
Bernard Terver appointed area manager of India
14 May 2014Switzerland: Onne van der Weijde, Area Manager for India until 25 April 2014, and member of Holcim Senior Management, will leaves Holcim effective from 1 June 2014. The member of the Holcim Executive Committee, Bernard Terver, responsible for the Indian Subcontinent, will take over direct responsibility for the country.
Holcim Indonesia delays subsidiary merger deal
08 May 2014Indonesia: Holcim Indonesia has delayed the planned merger between two of its units as it is yet to get the go ahead from the stakeholders and the Financial Services Authority. The stakeholders were expected to approve the merger during their annual meeting on 6 May 2014. However, the decision has been postponed until 2 June 2014.
In April 2014 Holcim announced the plan to merge two of its fully-owned cement manufacturing subsidiaries, Bintang Polindo Perkasa and Wahana Transtama, in a bid to improve efficiency. Bintang Polindo Perkasa operates a cement plant with a production capacity of 0.60Mt/yr in Ciwandan, Banten Province, while Wahana Transtama has been inactive since 2006.
Lafarge-Holcim merger - any impact on Africa?
30 April 2014Holcim released its first quarter results for 2014 this week and benefits of a merger seemed clear: both sales and profit were down. Net sales fell by 5.4% to Euro3.35bn and net income fell by 57.5% to Euro65.6m. However, Chief Financial Officer Thomas Aebischer was upbeat on meeting the regulatory requirements of any merger and the prospect of divestment opportunities.
This week we have a guest contributor - Andy Gboka, an analyst at Exotix LLP, a London-based broker specialised in Frontier markets – writing about the impact in Africa from the Lafarge-Holcim merger:
No change in Sub-Saharan Africa cement markets
Looking at (1) the location and size of the assets that both groups operate across the region but also (2) the expansion projects recently announced, we do not anticipate any upheaval in the competitive landscape, at least in the medium term.
Potential reshuffle of African assets
We identify Nigeria and Morocco as the main countries where the two companies are likely to reorganise their operations post-deal.
After the market excitement Lafarge / Holcim's price gains have averaged 9% since the announcement versus +8% the same day (04/04/14). We think it timely to discuss, from a competition angle, the likely impact on sector dynamics in Africa.
Starting with Sub-Saharan Africa where Lafarge and Holcim have been present for decades, the two groups have grown their output capability over time to reach a combined ~20.7Mt/yr. Holcim is a much smaller cement producer through its ~2.6Mt/yr in Ivory Coast, Guinea and Nigeria, whereas the French manufacturer is a regional leader with ~18.1Mt/yr capacity across 10 different countries. North African exposure paints a similar picture, as the Swiss company's installed capacity is ~9.6Mt/yr versus ~21.6Mt/yr for Lafarge (including their respective shareholdings in Lafarge Cement Egypt).
Although we do not believe the proposed merger will significantly alter Africa's competitive environment, business reorganisation is likely in:
(1) Nigeria. LafargeHolcim would control more than ~70% of the United Cement Company of Nigeria Ltd (UNICEM, 2.5Mt/yr in Calabar) which, in our view, is a suitable context for minorities' buyout.
(2) Morocco. More than ~50% of the industry's production capacity is controlled by the two players, a situation that may lead to asset disposals after review by the local competition commission.
Beyond the corporate implications, this announcement also puts into perspective the multiples investors are willing to pay for companies operating in Africa. Indeed, for 2014/2015 financial year the enterprise multiple (enterprise value / earnings before depreciation and amortisation) and price-to-book ratio for the main stocks listed in Nigeria and Kenya average 10.3x and 2.9x respectively, vs. 8.4x and 1.3x for LafargeHolcim (Bloomberg). While demand growth prospects in the teen digits or margins above ~25% (especially in Nigeria) would support a premium for the former names, we think the extent of that premium is questionable.
The best illustration is Dangote Cement, whose market capitalisation stands at ~US$25bn for total capacity estimated at 50 – 55Mt/yr by the 2016 financial year, relatively high when compared to the expected ~US$55bn market capitalisation for LafargeHolcim with (1) 427Mt/yr cement capacity globally and (2) ~60% of its revenue from emerging markets. This underpins our cautious stance on the sector.
Source: Andy Gboka, analyst at Exotix LLP (London-Based broker specialised in Frontier markets).
Andy Gboka will be speaking at the forthcoming Global CemTrader Conference, taking place in London on 2 -3 June 2014.
Holcim Belgium to cut 48 jobs at Obourg cement plant
30 April 2014Belgium: Holcim Belgium has announced plans to cut 48 out of 200 jobs at its cement plant in Obourg to restore profitability. By enhancing efficiency the management hopes to attract important investments.
Although cement demand in Belgium has remained stable in France and the Netherlands, which are supplied by the factory in Obourg, demand fell by 30%. In addition the plant at Obourg faces high fixed costs from taxes and an old production fleet.
The management believes the factory in Obourg may continue operating with 152 workers by improving flexibility and simplifying the organisation. Talks with trade unions will be started as soon as possible, the company added.
Switzerland: Holcim has reported its first quarter of 2014 operating results, citing increased like-for-like sales and sales volumes in all of its business segments.
"Holcim reported a significant increase in operating profit during the first quarter of 2014, mainly driven by higher like-for-like cement volumes in all group regions and the continued strong momentum of the Holcim Leadership Journey coupled with strict cost management across the group," said Bernard Fontana, CEO of Holcim. "Margins continued to increase and cash flow from operating activities was also better than in the first quarter of 2013."
Consolidated cement sales increased by 2.9% to 33.0Mt in the first quarter of 2014. This positive development was mainly attributable to Europe, where France, Germany and Russia reported the strongest increases. Net sales reached Euro3.35bn, a fall of 5.4% that was mainly influenced by negative currency effects. On a like-for-like basis net sales were up by 7.8%. Consolidated operating earnings before interest, taxes, depreciation, and amortisation (EBITDA) decreased by 5.1% to Euro507m but grew by 10.1% when adjusted for foreign exchange effects and changes in consolidation. Driven by higher sales, most European group companies reported higher operating EBITDA, while North America, the Middle East and Africa recorded better operating results.
Operating profit was Euro242m, an increase of 9.3%. On a like-for-like basis the growth in operating profit reached 28.4%. Net income, which in the first quarter of 2013 benefited from the sale of a 25% stake in Cement Australia, decreased by 39.5% year-on-year and reached Euro147m. Adjusted for this transaction in 2013 net income was up by 19.6%. Net income attributable to shareholders of Holcim Ltd was down by 57.5% to Euro65.6m. Cash flow from operating activities, which is traditionally negative in the first quarter, improved by 24.9% and reached negative Euro199m. Over the last 12 months Holcim reduced its net financial debt by Euro589m from Euro8.86bn to Euro8.20bn.
As part of the Holcim Leadership Journey, the company continued to optimise its portfolio in the first quarter of 2014 and sold its activities in French Guyana and acquired a port facility in the Philippines. Holcim has made progress with its plans to further optimise its strategic portfolio in Europe, having secured approval for the transaction with Cemex in the Czech Republic and is awaiting the decision on the other parts of the transaction. For the planned streamlining of the ownership structure of its Indian operations, Holcim has received approvals from the High Courts in Delhi and Gujarat and is now awaiting final approval from the Foreign Investment Promotion Board.
On 7 April 2014, Holcim and Lafarge announced their intention to combine the two companies through a merger of equals, which was unanimously approved by their respective board of directors and fully supported by the core shareholders of both companies. After a strategic optimisation of the portfolio through a proactive divestment process in anticipation of regulatory requirements, LafargeHolcim would occupy complementary positions. The proposed combination would be structured as a public offer filed by Holcim for all outstanding shares of Lafarge on the basis of a 1 for 1 exchange ratio and closing is expected in the first half of 2015.
For 2014 Holcim expects global economies to show another year of uneven performance. Construction markets in Europe are expected to have reached the bottom with slow recovery in sight. North American markets are expected to continue to benefit from a further recovery, especially in the United States. Latin America could continue to face uncertainties in Mexico but should overall show slight growth in 2014. The Asia Pacific region is expected to grow, although at a comparatively slower pace than experienced in recent years. Africa and the Middle East are expected to gradually improve. Holcim expects cement sales volumes to increase in all regions in 2014.
Spain: The European Commission (EC) has launched an in-depth probe into Cemex's plan to buy the Holcim's Spanish cement business. The regulator is due to make a decision on 5 September 2014.
The move follows an initial investigation, which revealed that the transaction could substantially harm competition in the Portland cement market in some areas of Spain. According to the regulator, the reduction in the number of rivals could prompt coordination between the remaining competitors, while the merged firm might control price levels in certain areas. The in-depth probe is intended to either confirm or reject the EC's initial concerns.
Under the deal, which was agreed in August 2013, 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. The transaction is part of several interconnected deals, under which Cemex will take over Holcim's operations in the Czech Republic, while offloading its western German operations to Holcim.
In October 2013 the EC also opened an in-depth probe into the deal in Germany, which remains unresolved. The transaction in the Czech Republic was approved by the local anti-trust watchdog in March 2014.
Spain: Workers at Holcim Spain have approved a preliminary agreement for a downsizing plan for 122 employees. With the agreement, the trade unions managed to reduce the number of employees included in the downsizing plan by 13.4% from the 141 workers originally intended.
US: Gebr. Pfeiffer Inc., the US subsidiary of Germany's Gebr. Pfeiffer SE, has been contracted to supply a new raw material vertical roller mill for the Holcim (US) Hagerstown plant as part of a wider renovation project. The order was placed through KHD Humboldt Wedag, which is the engineering and equipment supplier for the Hagerstown plant modernisation. KHD has been contracted to modify the existing production line to increase the plant's potential production rate to approximately 2400t/day and to comply with the new NESHAP environmental regulations.
KHD's scope of supply begins with modifying the raw material feed system and continues through to the clinker handling system and storage hall. As part of the solution, a new raw material grinding mill, the MPS 3750 B, along with all related engineering services will be supplied by Gebr. Pfeiffer, Inc. The raw material grinding mill includes a rotary air lock with drive, MPS 3750 B mill, an SLS 3150 B high efficiency classifier and includes Gebr. Pfeiffer's patented 'Lift and Swing' technology.
Commissioning for this project is planned for mid-2016.
LafargeHolcim: everyone expects the Spanish acquisition
16 April 2014A lot has happened since the 4 April 2014 announcement that Lafarge and Holcim intend to become LafargeHolcim. There have been several related announcements from around the global cement industry this week, prompting some interesting discussion with respect to the future look of the industry.
Oyak Group, which operates a number of plants in Turkey, appears to be limbering up for LafargeHolcim-based acquisitions in the UK, the EU or Africa, with aims to become a regional player. Meanwhile, Lafarge has pulled out of talks regarding its proposed acquisition of the Cementos Portland Valderrivas (CPV) plant in Vallcarca, Spain, directly citing the merger as the reason for this. We have also seen Colombia's Cementos Argos purchase a grinding plant in French Guiana, which was jointly-owned by Lafarge and Holcim. Announced just a few days after the merger, this asset was presumably jettisoned in order to avoid future issues with local anti-monopoly authorities. Finally, ACC and Ambuja have announced that they would retain their separate identities in India after the merger.
This flurry of announcements is likely to be just the start of frenzied speculation as the competitors of Lafarge and Holcim work out what assets are most likely to be sold. So what about the multinationals, Cemex and HeidelbergCement?
Cemex certainly has cause for concern, weighed down by the debt that it took on in 2007 with the acquisition of Australia's Rinker. It is in a relatively weak position with respect to acquiring any LafargeHolcim divestments. Could it lose market share? HeidelbergCement, by contrast, has long extoled the virtues of its financial efficiency policies and its diverse and forward-looking geographical spread. It could snap up more strategic assets after the merger. While both of these multinationals will be wary of dealing with an enlarged competitor in LafargeHolcim, they have the opportunity to increase their market shares and both will move up one position in the global cement producer rankings.
It is likely to be the smaller players that have the most to gain from the shedding of LafargeHolcim's various assets, especially those that enjoy strong domestic markets and have cash at the ready. Oyak Group has already entered the ring but what if Nigeria's Dangote, Brazil's Votorantim, Colombia's Cementos Argos or Thailand's SCG go on a spending spree? Could one of these rise to become a new global cement multinational?
However, if we can expect a change anywhere it will be in Spain. Following reports in 2012 that Spanish cement production had crashed to its lowest levels since the 1960s jobs have been shed and profits have evaporated. In 2013 Holcim and Cemex agreed to combine all of their operations in Spain. Roughly, according to the Global Cement Directory 2014, cement production capacity in Spain breaks down as follows: CPV (23%), Cemex (18%), Lafarge (11%) and Holcim (10%). Letting the Cemex-Holcim deal happen, followed by the Lafarge-Holcim merger and the CPV Vallcarca purchase, would have led to a major headache for Spain's competition authorities, creating an entity with 43% production market share! Unsurprisingly the first casualty has been the CPV Vallcarca deal. Whatever happens, the next 18 months will be an interesting period for the global cement industry.
India: Switzerland-based Holcim, the parent company of ACC and Ambuja Cements, will continue to retain its separate brands in India after its merger with Lafarge.
The management of ACC announced that there would be no impact to the existing brands post-merger. "The merger will be beneficial for the Indian cement industry and is expected to bring positive changes for the company," said the chairman of ACC, N S Sekhsaria. "ACC brand will remain intact after the merger of Holcim and Lafarge."
The merger is expected to take up to 18 months and Holcim's future plans in India will be known only after the merger is completed. Sekhsaria added that while the brands will be retained, there may be some rationalisation of operations.