Displaying items by tag: Ireland

After the initial shocking coverage of the Russian invasion of Ukraine, which began in February 2022, came announcements of the most extensive sanctions in history by the EU, G7 nations and others against Russia. In the EU, this effectively deconsolidated companies' Russian subsidiaries, leaving decision makers with the choice whether to sell up or hold out for better times.¹ Four Russian-facing EU cement producers - Buzzi Unicem, CRH, Heidelberg Materials and Holcim - finalised their strategic responses in March 2022.

One year on, on 15 March 2023, 666 (21%) of 3110 eligible multinationals have withdrawn from Russia, according to the KSE Institute.² Ireland-based CRH led the cement sector exit. It abandoned its Finland-based subsidiary Rudus' ready-mix concrete joint venture, LujaBetomix, on 2 March 2022. Switzerland-based Holcim took longer, but affected its exit on 14 December 2022, agreeing to sell Holcim Russia to local management. One condition of the sale was a rebrand (to Cementum, in February 2023) to withdraw the Holcim name from Russia. Unlike CRH, Holcim's Russian business included multiple cement plants - though the producer stated that it contributed less than 1% of group sales during 2021.

The KSE Institute uses the equivocal label of 'waiting' for companies which have paused investments, or scaled back operations, in Russia, while retaining their subsidiaries. This applies to 500 companies globally (16% of the pre-war total). Germany-based Heidelberg Materials acted swiftly to freeze further investments in HeidelbergCement Russia on 10 March 2022. At that time, its three cement plants were in winter shutdown. In terms of capacity, the 4.7Mt/yr-capacity Heidelberg Materials Russia constitutes 2.8% of Heidelberg Materials. In 2022, Heidelberg Materials suffered a Euro102m impairment on account of its Russian business. CEO Dominik von Achten, announcing the freeze, had described the subsidiary as a 'pure local business with no imports or exports.' Its website has since come offline, but the corporate structure presumably maintains in its frozen isolation.

1220 global multinationals - 39% of all those previously operating in Russia - are still 'continuing operations.' Among these is Buzzi Unicem. Having decided that 12 months was long enough, the Ukrainian National Agency for the Prevention of Corruption (NAPC) placed Italy-based Buzzi Unicem on its list of Russian war sponsors on 8 March 2023 for the actions of its subsidiary SLK Cement. A scathing denouncement accompanied the listing, in which the NAPC set out its main charges. It accused Buzzi Unicem of:

1. Expanding its business in Russia since the invasion;

2. Supplying its products to Russian state-owned businesses, including energy suppliers Rosatom and Rosneft;

3. Voicing support for the invasion via its social media presence.

The NAPC concluded “Buzzi Unicem's continued business in Russia means direct support and sponsorship of terrorism by Russia.”

Buzzi Unicem responded in no uncertain terms that these allegations are untrue: it has no business in Russia, and the entity bearing its logo on its (SLK Cement's) website is entirely independent in its decision-making and commercial actions.

This goes to the root of what it means to be a subsidiary of a corporation. Buzzi Unicem seeks to define the relationship as beginning and ending in operational involvement. Yet Buzzi Unicem and other corporations have invested large sums in businesses like SLK Cement. According to the NAPC, Buzzi Unicem paid Euro62m in taxes alone in Russia between 2016 and 2021. Whether they have elected to 'continue operations,' 'wait' or write in favourable buy-back options into sales contracts, as has happened in other industries, companies can be expected to seek to return to their investment.

As such, it is not entirely surprising that Buzzi Unicem should have followed up its rebuttal with a defence of SLK Cement. It stated "SLK Cement is a Russian domiciled entity operating exclusively in that country and therefore subject to domestic legislation. Payment of taxes and having employees being mobilised to the army are not discretionary decisions, rather legal obligations within the Russian jurisdiction."

In the decision to sell or hold, multinationals face the usual considerations: can they afford to yield their market share to other - less conscientious - competitors? Or, in this instance, those from Türkiye, India and China, whose potential investments are unrestrained by sanctions? Even as Holcim thrashed out its exit deal in October 2022, China-based West China Cement announced plans for a new US$260m, 1.2Mt/yr cement plant in Tatarstan, Volga Federal District. Meanwhile, Cemros (formerly Eurocement) is carrying out a Euro3m mill upgrade at its Lipetsk integrated cement plant in Central Federal District, which will increase the plant's capacity by 20% upon commissioning in early 2023. Between them, Central Federal District and Volga Federal District host four former Holcim cement plants.

12 months into the Russian invasion of Ukraine, an onslaught of withdrawals has shrunk, but not collapsed, the Russian economy.³ The Russian government insists that cement demand remains high (up by 2.1% year-on-year to 58.3Mt during the first 11 months of 2022, according to the Russian cement association Soyuzcement).⁴ The country has substituted new sources of imports for those lost since the beginning of the invasion, the government claims. It is even preparing for a cement shortage from 2024 onward by 'further developing domestic production capacities.'

Far from shrinking, Russian cement production rose by approximately 2.5% year-on-year to 60.7Mt in 2022.^{4, 5} The two aforementioned districts - Central Federal District and Volga Federal District - contributed a healthy 15.3Mt (25%) and 13.4Mt (22%) respectively. If the statistics are to be believed, the EU's recalled producers are missing out on a bonanza.

At the same time, all four EU-based producers face the parallel burden of increased costs in their key markets, as sanctions keep energy prices at an all-time high, and nowhere more so than in Europe. These sanctions purport to target Russian businesses and individuals, but their bite is far less discriminating. Companies may well wonder why they are being penalised by governments whose policies failed to prevent a Russian invasion of Ukraine in the first place.

We have no idea what will happen in Ukraine and Russia in the rest of 2023, but we can be sure it will be uncertain territory for the two countries’ cement producers. Those with (former) assets in the Russian market will have to continue their delicate balancing act.

1. European Commission, 'Frequently Asked Questions,' 16 March 2022, https://trade.ec.europa.eu/doclib/docs/2022/march/tradoc_160079.pdf

2. KSE Institute, 'Stop Doing Business with Russia,' 15 March 2023, https://leave-russia.org/leaving-companies?flt%5B147%5D%5Beq%5D%5B%5D=9062

3. European Council, 'Infographic - Impact of sanctions on the Russian economy ,' 9 March 2023, https://www.consilium.europa.eu/en/infographics/impact-sanctions-russian-economy/

4. Soyuzcement, 'Cement Review,' December 2022, https://soyuzcem.ru/documents/%D0%A6%D0%B5%D0%BC%D0%B5%D0%BD%D1%82%D0%BD%D0%BE%D0%B5_%D0%BE%D0%B1%D0%BE%D0%B7%D1%80%D0%B5%D0%BD%D0%B8%D0%B5_%D0%B4%D0%B5%D0%BA%D0%B0%D0%B1%D1%80%D1%8C%202022.pdf

5. BusinessStat, 'In 2022, 60.7 million tons of cement were produced in Russia,' 21 February 2023, https://marketing.rbc.ru/articles/14025/

UK: Breedon Group's sales were Euro1.57bn in 2022, up by 13% year-on-year from Euro1.39bn in 2021. Its earnings before interest and taxation (EBIT) rose by 16% to Euro166m from Euro143m. The group increased its cement volumes by 9.1% during the year, to 2.4Mt from 2.2Mt.

Breedon Group said "The outlook for the cement market is positive, underpinned by large ongoing infrastructure projects in the UK. In Ireland, housing and infrastructure are supported by the government’s development plans to accommodate a rapidly growing population."

Ireland: CRH is preparing to move its primary listing of shares to a US-based stock exchange. The group said in its financial results for 2022 that it had come to the conclusion that, “a US primary listing would bring increased commercial, operational and acquisition opportunities for CRH, further accelerating our successful integrated solutions strategy and delivering even higher levels of profitability, returns and cash for our shareholders.” It added that the US market represented around 75% of its earnings before interest, taxation, depreciation and amortisation (EBITDA). It expects that the US will be a ‘key’ driver of future growth for the company, with increases in infrastructure funding, a push for on-shoring of manufacturing activity and high levels of under-build in the residential construction market supporting this outlook.

The group plans to tell its shareholders in further details about the move in exchange. CRH plc will remain headquartered, incorporated and tax-resident in Ireland.

Ireland: CRH recorded consolidated sales of US$32.7bn in 2022, up by 12% year-on-year from US$29.2bn in 2021. The producer's Americas Materials business reported sales of US$14.3bn, up by 15% US$12.4bn. Across the Americas, its cement revenues grew by 8% year-on-year. A 12% regional price rise offset a decline in the business' cement sales volumes. CRH's Europe Materials business reported sales of US$10.6bn, in line with 2021 levels. Its cement revenues were US$2.04bn across the region.

Chief executive officer Albert Manifold said "Our 2022 performance reflects the outstanding commitment of our people, the underlying strength and resilience of our business and the continued delivery of our integrated, solutions-focused strategy. Despite significant cost pressures throughout the year, we delivered further improvements in profits, margins and returns. Our strong cash generation together with our relentless focus on disciplined capital allocation has also delivered the strongest balance sheet in our history, providing us with significant opportunities for further growth and value creation going forward."

Ireland: A court has ruled that the Irish government need not pay legal costs for Environmental Trust Ireland president Michelle Hayes' challenge against the Environmental Protection Agency (EPA) in mid-2022. Hayes unsuccessfully sued the EPA for issuing Irish Cement with a licence to use alternative fuel (AF) at its Limerick cement plant in May 2021. The AF will comprise up to 90,000t/yr of waste tyres, biomass and/or mining by-products.

At the costs hearing, the court noted that Hayes had already caused the EPA to incur 'very significant' legal costs. The court said that Hayes 'sought to have the taxpayer pay even more.' It added that, as a solicitor at Hayes Solicitors Limerick, which represented her in her unsuccessful challenge, Hayes stood to effectively benefit from any recuperated costs. The court concluded "It would mean that legal practitioners like herself are paid by the taxpayer for bringing environmental litigation which is unmeritorious."

Ireland: Ecocem has announced the launch of ACT, an alternative materials-based cement ingredient capable of reducing the CO₂ emissions of cement production by 70%. The developer says that any existing cement plant can produce ACT at comparatively low cost. The technology is globally scalable, and Ecocem expects to achieve full commercial availability across its Benelux, France, Ireland and UK markets by 2025.

Ecocem managing director Donal O’Riain said “We are eager to work closely with the cement industry and with policymakers to support the scaling and development of a new generation of low-carbon cements. Current policy priorities on decarbonising cement have now been overtaken by technology. Fully effective deployment of ACT requires policymakers to provide effective support well beyond their traditional emphasis on CCUS as the core cement decarbonisation technology.”

Ecocem's investors include France-based building products company Saint-Gobain and US-based Breakthrough Energy Investments.

CRH released its third quarter trading statement this week and the results were rosy, especially when compared to its peers in the cement business. Double digit growth in both sales revenue and earnings was reported for the nine month period so far in 2022. The company’s figures mainly attributed this to growth in its Americas Materials and Building Products divisions, although the presentation in its trading update took care to point out that the Europe Materials division had reported growth in the first half of 2022 only for it to run into a slowdown in the third quarter as energy prices increased. Even this wasn’t as bad on a like-for-like basis, with only earnings down in the third quarter in Europe. Chief executive officer Albert Manifold summed it up as follows: “This performance reflects the resilience of our business and the benefits of our integrated and sustainable solutions strategy.”

Manifold’s focus on integrated products was unsurprising given that the group has spent US$3bn in the year to date on businesses that make these kinds of things. These acquisitions have been added to its Building Products division adding to its already strong growth so far in 2022. The big one was the US$1.9bn deal to buy Barrette Outdoor Living, a US-based retailer and distributor of residential fencing and railing products. This was completed in July 2022. Other so-called bolt-on investments in 2022 have reached a total of US$1.1bn for 20 companies including Calstone, Hinkle, Rinker and Normandy in outdoor living, road and critical utility infrastructure sectors.

At the same time the group divested its architectural glass Building Envelope business for an enterprise value of US$3.8bn to private equity company KPS Capital Partners. That deal was completed in May 2022. On a smaller scale, it is also worth noting that Thomas Gruppe announced in early November 2022 that it had signed a purchase agreement to buy Opterra Zement and Opterra Beton. This includes the integrated Karsdorf cement plant, the decommissioned Sötenich grinding plant and the Neufahrn ready-mix concrete plant. However, there was no mention by Thomas Gruppe of the integrated Wössingen plant operated by Opterra Wössingen. Neither Opterra or CRH appears to have commented on this publicly yet though.

How CRH tweaks its business portfolio is interesting in comparison to the other cement companies. As Global Cement Magazine has covered recently, Holcim is bulking up a fourth business in light building materials and Cemex, Heidelberg Materials and others are similarly diversifying away from cement production to various degrees. CRH has generally held a more mixed portfolio away from the heavy materials trio of cement-concrete-aggregates over the last decade. However, it concentrated more on heavy materials when it picked up assets divested in the merger of Lafarge and Holcim in 2015. Since then it has been steadily pulling out of developing markets and focusing on North America and Europe. So, to see CRH moving out of the building envelope sector at the same time as Holcim and others dive in is a clear difference in approach.

The other point to highlight is that Manifold links sustainability to the group’s integrated products plan in his quote above. Earlier in 2022 the company revealed a new 25% reduction target in absolute CO₂ emissions by 2030, that has been certified by the Science Based Targets initiative (SBTi), and a continued goal of becoming net-zero by 2050. It clearly takes sustainability seriously as Manifold was also previously the president of the Global Cement and Concrete Association when it was set up in 2018. Other indicators include the company’s use of an internal carbon price as indicated in its 2021 sustainability report. It also mentioned here that 43% of its direct CO₂ emissions were covered under an emissions trading scheme. One implication here is that focusing on doing business in developed markets means that the group has to take its CO₂ emissions seriously, as legislators in these places do too.

CRH is one of the largest building materials companies in the world and its cement business has grown and shrunk a little over the last decade. Despite this it remains in the top 10 of cement producers globally based on production capacity. Its purview of multiple markets in building materials continues to make it a company to watch as the more traditional heavy materials cement companies adjust their own product portfolios.

Ireland: CRH's consolidated sales were US$24.4bn during the first nine months of 2022, up by 13% year-on-year from nine-month 2021 levels. Regional sales grew by 18% in the group's America's Materials business, with a 12% rise in cement sales there, despite a drop in volumes. Elsewhere, for the Europe Materials business, sales remained level year-on-year, and higher pricing offset costs growths in all key markets except Asia and Europe West. The producer's consolidated earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 14% to US$4.2bn.

For the full year 2022, CRH expects to record a profit before tax greater than that of US$3.1bn recorded in 2021.

Chief executive officer Albert Manifold said ‘‘Notwithstanding a challenging and volatile cost environment, I am pleased to report further growth in sales, EBITDA and margin during the first nine months of the year. This performance reflects the resilience of our business and the benefits of our integrated and sustainable solutions strategy. The strength of our balance sheet, combined with our relentless focus on disciplined capital allocation, provides further opportunities to create value for all our stakeholders." Manifold added "Looking ahead to the remainder of 2022, we expect to deliver full-year EBITDA of approximately US$5.5bn."

Europe: Ireland-based Ecocem and seven other European sustainable technology companies have launched the Cleantech Scale-Up Coalition, with the backing of green investment funding network Breakthrough Energy. The coalition will work to contribute to European climate neutrality, energy autonomy and industrially competitiveness. Other participants' fields include carbon capture, green hydrogen technologies, transport electrification, batteries and recycling.

Ecocem's managing director Donal O’Riain said “Scalable, low carbon cements, which can decarbonise the European cement industry by 50% by 2030, are ready to deploy today. To do so, they need to be rapidly industrialised. This coalition, which allows Ecocem to combine forces with other world-class companies, will enable our ambition by working to remove the barriers to an accelerated decarbonisation of European, and global, industry.”

Europe: RHI Magnesita is heading a European Union Horizon project called ReSoURCE. The project seeks to develop a sensor-based refractory waste sorting and powder handling system. It involves academic partners in Austria, Germany, Ireland, Norway and the UK. The European Health and Digital Executive Agency (HADEA) supplied Euro6m in funding for the study, while the UK government supplied Euro1m. Global refractory waste generation is currently 28Mt/yr.

RHI Magnesita chief executive officer Stefan Borgas said “On average, 60% of all spent refractories generated by refractory-consuming industries go to landfill, while only 30% are recycled. With the ReSoURCE project, we aim to increase it up to 75%. This means we can achieve significant savings of CO₂ emissions per annum. With this research project, we have the chance to make a difference in the world.”