Displaying items by tag: Investment

Russia: Eurocement Group plans to use part of the funds raised from China National Building Materials Group Corporation (CNBM) to reduce its debts. The cement producer told Interfax that, although negotiations are on going, it wants to use some of the funds raised through the Chinese company’s participation in its capital to restructure current debt. It will also use the funding to invest in new ‘high-return’ areas.

Eurocement signed a partnership agreement with CNBM on 25 June 2016 during Russian president Vladimir Putin's visit to China. CNBM plans to develop its business in the construction materials market in Russia and the CIS, including by acquiring an equity stake in Eurocement Group. The total investment could be as high as US$5bn.

Kazakhstan: Chinese investors have proposed to build a 075Mt/yr cement plant in the Kyzylorda region of Kazakhstan. The proposal was revealed as part of 13 memoranda of cooperation worth US$451m signed between the Governor’s Office of Kyzylorda region and the People's Government of Jiangxi Province, China.

India: Piramal Enterprises has invested US$38m in Sanghi Industries. The investment has been made through non-convertible debentures to enable Sanghi to repay some of its debts ahead of schedule and reduce interest repayments.

Piramal Enterprises is a diversified international conglomerate that operates in the pharmaceutical, financial services and information management sectors. Sanghi Industries runs a 2.9Mt/yr integrated cement plant in Kutch, Gujarat.

Ireland: Irish building materials group CRH spent Euro8bn on acquisitions and disposed of Euro1bn worth of assets in 2015.

In a development strategy update, the company said that it made Euro430m from the sale of its clay and concrete products operations in the UK and its clay business in the US in 2015. It also gained about Euro530m through several additional divestments across Europe and the Americas. These included the sale of its 45% stake in French builders' merchant Doras and its 25% stake in Israeli cement producer Mashav. CRH had come under fire from some shareholders for retaining its stake in Mashav, as the company's cement has been used for a widely condemned security wall that divides Palestine and Israel.

During 2015, CRH completed 20 bolt-on acquisition and investment transactions. The company said that these deals, along with the acquisition of assets from Lafarge and Holcim, the CR Laurence acquisition and net deferred consideration payments, brought its development spend for 2015 to about Euro8bn.

"We are pleased with our progress in 2015, which brought cumulative proceeds from our multiyear divestment programme to almost Euro1.4bn, while our targeted bolt-on investments strengthened our existing businesses and complemented the major acquisition activity, which saw total acquisition spend of approximately Euro8bn in 2015," said CRH Chief Executive Albert Manifold. "Portfolio management, and in particular the reallocation of capital from lower growth areas into core businesses for growth, is a cornerstone of our value creation model."

India: Overseas investments or the outward foreign direct investment by Indian companies more than halved to US$1.24bn in September 2015, according to media reports. This compared to US$3.12bn in September 2014. In August 2015, the outward foreign direct investment by Indian companies stood at US$2.19bn.

Out of the total US$1.24bn invested abroad, some US$137m was invested in equity, US$366m through loans and US$738m in the form of issue of guarantee. Major investors overseas during the month included Ultratech Cement in the Middle East (US$234m), Tata Power in Singapore (US$90m) and Tata Communications in Singapore (US$67.9m).

Ireland's CRH this week submitted a binding bid for various Indian assets of LafargeHolcim that will be sold by the newly-formed group as a condition of its formation. CRH will compete for the assets with HeidelbergCement and Barings Private Equity, which sold its stake in the same assets to Lafarge India prior to the merger. According to the Irish Examiner, the scale of the bids is in the region of US$600 - 800m. On the back-burner is another deal that could see CRH snap up a 74% stake in Tongyang Cement and Energy in South Korea.

These moves are consistent with CRH's new-found commitment to rapid expansion into new markets and an apparent desire to become a far bigger player in the global cement industry. It is in line with the sentiment expressed by its CEO Albert Manifold back in February 2015, when he stated in a letter to shareholders that CRH had given 'hell or high water commitments to Lafarge and Holcim' regarding its earlier Euro6.5bn purchase of assets as part of the LafargeHolcim merger. At that point CRH appeared almost 'over committed' to the huge deal, with some analysts asking whether or not CRH had paid too much.

Let's stop a minute to look at where CRH finds itself. Europe, its main cement market, is still under siege from a general lack of investment, both private and public. The UK is likely to perform well, although an ongoing Competition Enquiry at Irish Cement is an unwelcome distraction. CRH's new eastern European ventures are all in fairly small markets. Poland, in which CRH operates Grupa Ozarow, appears to act as the model for these acquisitions, but they remain at risk from the prolonged Eurozone crisis.

In Brazil, another new market, CRH is 'up against it,' with massive competition from Votorantim and InterCement, smaller local players and LafargeHolcim. A decline in cement demand here so far in 2015 year-on-year is not a good omen. Neither is Votorantim's decision this week to turn one of its plants into a distribution centre due to continued low demand.

In Canada CRH will gain 3.1Mt/yr of former Holcim capacity, around 20% of that market's capacity. This, along with its 2.7Mt/yr acquisition in the Philippines, probably represents CRH's best opportunities out of its newly-acquired assets.

However, with the confirmation that it intends to invest in 5Mt/yr of former Lafarge assets in India, a market not exactly enjoying buoyant conditions at present, CRH appears to be further exposing itself to another 'sub-optimal' market. We recently reported on the 100Mt/yr of capacity that is sitting idle in India at present , hardly a situation to instil confidence in a new entrant.

Whether CRH will be forced to leave some of these markets, buy into others or otherwise shuffle its cement assets to better suit the world economy remains to be seen.

Meanwhile, on the other side of the aforementioned mega-deal, LafargeHolcim gave the first indications of how it will go about re-branding in various markets this week. While a new brand will be introduced in markets with 'a balanced overlap' of former Lafarge and Holcim assets, countries without overlap will see existing Lafarge or Holcim 'brands' become 'endorsed' by LafargeHolcim. In countries with unbalanced overlap, either Lafarge or Holcim will be the endorsed brand.

Of course, in every market that it has bought a LafargeHolcim asset, CRH will also have to re-brand. So far it has announced that its operations in France will be branded as 'Orsima' from 1 August 2015. No elaboration on how this name was derived has been provided, but let's hope that there are not too many other new names to remember!

Russia: According to Prime News, Mikhail Skorokhod, president of Eurocement Group, has said that the cement industry of the Eurasian Economic Union (EEU), which comprises Russia, Belarus, Kazakhstan, Armenia and Kyrgyzstan, may receive about Euro4.42bn of private investment until 2020.

"Speaking of plans until 2020, we expect to see launches of about 40Mt/yr of capacities and about Euro4.42bn of private investment will be needed for that," said Skorokhod, adding that investments in Russia will account for about 80% of the total sum. Investment in the sector amounted to Euro13.3bn until 2014 and production capacities totalling 45Mt/yr cement were launched.

Afghanistan: According to the BBC, following a meeting with the first vice president of the Islamic Republic of Afghanistan Gen Abdorrashid Dostum, several Canadian businessmen said that they would invest US$8bn dollars in Afghanistan and later increase that amount.

The funds will be invested in the construction of a hydropower dam in Fariab Province and the extraction of gas and petroleum in Sheberghan City. Work to build a cement plant in Samangan Province, the extraction of coal in Takhar Province and gemstones in Badakhshan Province and an iron plant will also be part of their programmes. All the activities will be under control of the Afghan government, the World Bank and other Afghan government institutions.

Philippines: Holcim Philippines has targeted an investment of US$40m over a three-year period to increase cement production capacity. Despite strong domestic demand for cement, revenue fell by 10% in the first quarter of 2015 due to rising costs.

The investment will mainly finance the 'debottlenecking' of existing facilities by bringing production capacity up to 10Mt/yr by 2017, according to Eduardo A Sahagun, president and chief executive officer of Holcim Philippines, in a briefing to local press. At present the cement producer has a production capacity of 8.2Mt/yr. Around 65% of the investment will go towards maintenance of existing facilities. Holcim Philippines remains committed to developing a brownfield cement plant in Norzagaray, Bulacan subject to the approval of the company's head office in Switzerland.

Sahagun blamed the fall in revenue on expensive clinker imports from Vietnam intended to support the market. Despite this the company expects annual profits for 2015 to exceed those in 2014.

Kazakhstan: Yug Cement Stroi LLP has emerged as a new investor to help finish the previously mothballed 0.5Mt/yr Khantau cement plant in Zhambyl Region. The company, acting as a strategic partner, has borrowed US$29m for seven years from Bank RBK to finance the completion of the plant's construction. It is intended that the plant will reach full cement production capacity in the autumn of 2014.

The Khantau cement plant has a design capacity of 0.36Mt/yr of clinker and 0.5Mt/yr of Portland cement with grades M400 and M500. The Hengyuan International Engineering Group has supplied technology for the plant. Its raw materials are extracted from the Khantau limestone deposit, Khantau sand and gravel deposit and the Ulkensai clay deposit located near the plant.

In 2007, ACIG borrowed US$30m from the Development Bank of Kazakhstan for the construction of this cement plant. At the time the plant was 85% complete and mothballed due to the shortage of funds. In 2013, the project was transferred from the Development Bank to the Investment Fund of Kazakhstan.