Displaying items by tag: Lafarge

It's been a cold and rainy 'summer' so far in 2013 in the UK. So much so that crowds at the Glastonbury Music Festival watching the Rolling Stones this weekend were lucky they didn't get drenched during 'Jumpin' Jack Flash.' However, cement producers around the world are increasingly tackling the opposite problem as they concentrate on water conservation measures.

As we see this week, the Cement Manufacturers' Association of the Philippines (CeMAP) has started advocating the use of rainwater for cement production. According to figures put out by CeMAP, an average dry-process cement plant uses 100-200L of water per tonne of clinker produced. The Philippines uses around 3.2BnL/yr of water for its cement production capacity of 21Mt/yr, which operated at an 85% capacity utilisation rate in 2012. A simple calculation reveals a water usage rate of 179L/t of cement produced in the Philippines. Though close to the top of CeMAP's dry-process water use range, it is actually less than some of the multinational cement producers (see below).

Water conservation among multinational cement producers has become increasingly high-profile in recent years. In January 2013 Cemex announced that it had developed a methodology to standardise water measurement and management across all of the company's operations. This followed a three year partnership between Cemex and the International Union for Conservation of Nature (IUCN). In its 2012 Sustainability Report Cemex reported that 12% of its cement operations were in water-scarce or water-stressed locations. Its water consumption for cement was 305L/t. This compares to Holcim's water consumption for cement of 260L/t in 2012.

Other multinational cement producers have put into place similar measures. Lafarge started to assess its 'water risk' in 2011. It found that 25% of its cement production sites were located in areas of water scarcity or high water scarcity, based on 2025 projections of annual renewable water supplies per person. A follow-up with the WWF Water Risk Filter (WRF) continued the assessment, identifying 15 Lafarge cement sites as being located in 'high-risk' basins, with 10 particular sites identified in Pakistan, India, Algeria, Mexico, Jordan, China, South Africa, Iraq and Uganda.

It is worth noting here that most of these countries are currently growth areas for cement demand and so producers with plans to expand in these regions need to tread a careful line. Cement makers that use vast amounts of water in water-scarce regions will be less desirable neighbours for local populations than those that use less water. This, like consumer and regulatory pressures in developed markets, could turn into a major driving factor for improved environmental performance in developing regions. Investing in water conservation measures therefore appears to make sense socially, environmentally and (ultimately) economically.

Lafarge's decision to expand in Zimbabwe adds to the mix in sub-Saharan Africa.

As we discussed in Global Cement Weekly #104, Dangote and PPC (formerly Pretoria Portland Cement) may be facing off as the biggest local cement producers in the region but the influence of the European-based producers should not be dismissed too readily. Investing US$200m over the next 10 years matches PPC's similarly sized investment announced in November 2012. According to Lafarge, the spend will help maintain the cement producer's market share in the country.

The other point of note from Lafarge's Zimbabwe announcement is the emphasis on the multinational's 'Building Better Cities' campaign in the story. This is unsurprising given that that Lafarge Zimbabwe Managing Director Jonathan Shoniwa made the comments about Lafarge Zimbabwe at a branding event for the campaign. Similar events are happening around the world. However, looked at overall, the decision to place cities at the heart of its marketing makes an increasingly compelling case for a variety of markets.

Some commenters on the Global Cement LinkedIn Group discussed this very issue recently in response to a news story on Lafarge's next set of expansion plans for China. Specifically, someone asked why would Lafarge want to expand in a market suffering from overcapacity!

The Building Better Cities campaign offers one answer. As China prepares to shut down excess capacity, Lafarge's strategy to be in place once the dust settles (perhaps literally in some places) starts to make sense. As a marketing tagline 'building better cities' works well because who doesn't – from Zimbabwe to China to even France – want better cities with better transport links through price, planning, technical and aesthetic innovations.

To give a sense of the environmental zeitgeist happening in China right now, this week we carry a news story on the Chinese Institute of Public and Environmental Affairs reporting 17 Chinese cement companies for environmental misdemeanours. Elsewhere, we can see evidence of continued foreign enthusiasm for investment in the Chinese cement market from Japan's Sumitomo Osaka Cement, despite fears of overcapacity. Lafarge is saying the right things at the right time but it may not be alone in its strategy.

Spain: Spanish association of cement producers Oficemen has appointed Isidoro Miranda as its new chairman. Miranda, the managing director of Lafarge Cementos, will replace the former chairman of Cementos Portland Valderrivas and current CEO of builder FCC, Juan Bejar. Oficemen also named Jaime Ruiz de Haro, Jose Maria Aracama, Feliciano Gonzalez and Jorge Wagner as vice presidents.

Once again the winter weather was bad in Europe. Once again the major European cement producers reported a fall in sales. So what has changed between the first quarters of 2012 and 2013?

Lafarge's cement sales volumes in Western Europe for the first quarter of 2013 fell by 24% year-on-year, compared to an 11% drop in 2012. Holcim's decline in volumes stabilised, compared to a 13.2% drop in 2012. HeidelbergCement's volume decline increased slightly, from a drop of 8% in 2012 to one of 10% in 2013. Cemex didn't release sales volumes figures for cement but overall net sales in its Northern Europe region fell by 13% in 2013 compared to 11% in 2012. Italcementi's cement sales volumes maintained a steady decline in both the first quarters of 2012 and 2013 at about 19%.

Even with the reduced number of working days for the quarter in 2013 taken into account, things are not looking good. Generally the results fit the prediction made by the UK Mineral Products Association (in the UK at least) that construction activity remains subdued in 2013 so far.

Profitability measures for the European divisions of the big producers, such as earnings before interest, taxes, depreciation and amortisation (EBITDA), reinforce the gloomy outlook, suggesting that most of the cost cutting exercises aren't having much effect on investor balance sheets quite yet. Lafarge's EBITDA in Western Europe fell by 94% to Euro5m. HeidelbergCement's loss before interest and taxes (EBIT) increased to Euro91m. Cemex's operating EBITDA fell from US$55m in 2012 to a loss of US$17m in 2013. Italcementi's EBITDA decreased to Euro12.8m.

Only Holcim reversed this trend, growing its EBITDA by 43% to Euro23.5m. The Holcim Leadership Journey appears to be working. Although the sale of a 25% stake in Cement Australia certainly helped.

Elsewhere, we have an additional story at add to last week's focus on Iraq, with the announcement that Mondi has opened an industrial bags plant in Iraq. It's based in Sulaimaniyah in northern Iraq near to the new Sinoma-Lafarge project that we reported on.

Finally, the news that the Competition Commission of India has been asked to investigate a complaint against a Chinese waste heat recovery vendor raises tensions between the world's largest two cement producers. The story echoes similar trends in the gypsum wallboard business in April 2013 where a selective anti-dumping duty was imposed on imports from China, Indonesia, Thailand and the UAE. Watch this space.

With the annual results for 2012 in from Lafarge, Holcim and CRH we now return to look at how the European markets coped.

Holcim summed up the mood perfectly in its media release on its annual results for 2012. First it pushed the big positive (net sales up overall) but then finished its first (!) sentence with: '...despite the difficult economic environment in Europe.'

Overall in Europe, Lafarge saw its cement volumes fall by 9% to 29.6Mt from 32.5Mt. Notably sales volumes fell significantly in Spain and Greece, by 26% and 37% respectively.

Holcim saw its cement volumes fall by 2% in Europe to 26.3Mt from 26.8Mt. There were specific country figures from Holcim but it did comment that the 'severe crisis' in southern Europe had 'contaminated' economies further north such as a France, Benelux, Germany and Switzerland.

CRH was less candid about its cement business in Europe although it did report that its sales revenues fell by 10% to Euro2.69bn in 2012 from Euro2.99bn in 2011. Notable losses occurred in Poland (11% volume decline), Ireland (17% decline) and Spain (30% decline).

These figures compare against a 4% decline in volumes in Western and Northern Europe to 22.1Mt from 21.3Mt by HeidelbergCement, a 13% drop in overall net sales to Euro3.05bn in Cemex's Northern Europe section and a 16% drop in volumes to 16Mt from Italcementi in its Central Western Europe region.

The question to ask at this point is how HeidelbergCement and Holcim managed to suffer smaller losses compared to everybody else. Less exposure to southern Europe is one answer. Depressingly though they both suffered similar drops in profit indicators such as earnings before interest, taxes, depreciation, and amortisation (EBITDA) to the others (20% and 33% respectively).

Both Holcim and CRH are expecting continued tough conditions in Europe in 2013. However, both companies are mildly optimistic that the worst has passed, with talk of the work of the European Central Bank supporting peripheral Eurozone economies showing some effect. Lafarge doesn't even mention Europe in its outlook.

As mentioned in Global Cement Weekly #87 on 13 February 2013, EU regional GDP growth is forecast to become positive in 2013. Everybody is going to be watching the European quarterly results for the cement majors in 2013 very carefully indeed. In the meantime all every cement producer with a presence in Europe can do is to carry on cutting costs.

Pakistan: Lafarge Pakistan has announced the appointment of Amr Reda as the new Country CEO. Prior to joining Lafarge Pakistan he was the Regional Business Controller Lafarge Middle East and Pakistan and has served as member Board of Directors' Lafarge Pakistan since January 2007.

"We are fortunate to have Amr as the new CEO and I have full faith that he will take the company to the new heights of professionalism. We will together work for the benefit of all stakeholders of the Company," said outgoing Lafarge Pakistan CEO Major General Rehmat Khan. Khan will take a new role as Chairman Board of Directors of Lafarge Pakistan.

UK: Lafarge and Anglo American have appointed the chairman, chief executive office (CEO) and CFO of their joint-venture in the UK. Jamie Pike is appointed as non-executive Chairman, Cyrille Ragoucy as CEO and Guy Young as CFO of the joint-venture. The appointments are subject to the completion of the joint-venture and final clearance from the UK Competition Commission. It is anticipated that the joint-venture will commence operations in early 2013.

Jamie Pike, aged 57, is the non-executive chairman of Lupus Capital, a leading international supplier of building products to the door and window industry, RPC Group, a leading international supplier of rigid plastic packaging and MBA Polymers, a private US plastics recycling business. He was chief executive of Foseco, an international business serving the foundry and steel-making industries, until its acquisition by Cookson Group in April 2008. He led the buy-out of Foseco from Burmah Castrol in 2001, which culminated in flotation on the main market in 2005.

His early career was as a consultant with Bain and Co and A T Kearney before joining Burmah Castrol in 1991. He rose to chief executive of Burmah Castrol Chemicals before leading the Foseco buy-out. Pike was educated at the University of Oxford, holds an MBA from INSEAD and is a member of the Institute of Mechanical Engineers.

Cyrille Ragoucy, aged 56, is currently senior vice president for Health and Safety at Lafarge. From 2005 to 2009 he was CEO and regional president for Lafarge's cement operations in China (Lafarge Shui On Cement) where he was responsible for 25 plants and 10,000 people. Between 1999 and 2005 he was regional president for Aggregates, Concrete, Asphalt and Paving for Lafarge in Eastern Canada. Ragoucy joined the Lafarge group in 1998 as vice president Cement Strategy for Lafarge North America.

Guy Young, aged 43, has been CFO of Tarmac since 2010 with responsibility for Tarmac's financial, IT and legal operations as well as the pre-integration planning for the joint venture. Guy has been with Anglo American for 15 years in a variety of roles, including CFO of Scaw Metals, Group Procurement and within the CEO's Office. Guy was educated at the University of Cape Town and qualified as a chartered accountant after doing articles at Deloitte.

Back in May 2012 we asked who would buy Lafarge's Hope cement plant in Derbyshire. The answer was, of course, a company with an Indian background: Mittal Investments.

The sale was a condition of the UK Competition Commission in response to the proposed joint venture between Lafarge and Tarmac. It also included 172 ready mix concrete plants, five aggregates quarries, two asphalt plants, one marine aggregates wharf, one rail-linked aggregates depot and the sale of Tarmac's 50% ownership interest in Midland Quarry Products. Mittal has paid Euro339m for the assets, including up to Euro37m dependent on the performance of the assets over the next three years.

At the time we predicted that it might be a company from a fast growth area, with excess cash and a desire for technical knowledge, perhaps from China or the Middle East. Far more fitting for the UK, however, was a company with Indian roots, especially considering the cultural links between the two countries dating back to the colonial era.

Originally from India but based in London, owner Lakshmi Mittal runs steel multinational ArcelorMittal and he frequently tops UK rich lists. The Mittal family even own shares in Premier League football team Queens Park Rangers. The sale follows acquisitions of well-known British brands such as car manufacturers Jaguar Land Rover and British Steel/Corus to the Tata Group.

The sale to Mittal leaves the UK cement market with four companies. Mittal's new plant in the UK joins Lafarge's four plants, Cemex's two plants, Hanson Cement's three plants and Tarmac Buxton, Lime & Cement's single plant, which is soon to join with Lafarge's plants in the joint-venture. Geographically the sale to Mittal breaks up a concentration of three Lafarge and Tarmac plants in Derbyshire in the southern Pennines. Presumably this was the aim of the Competition Commission in the first place.

Selling the Hope plant makes sense for Lafarge and Tarmac. The sale leaves Lafarge's generous spread of plants across the UK in key locations except the south of England. The combined cement production capacity of Lafarge and Tarmac will fall from 4.35Mt/yr to 3.85Mt/yr. The reduction may actually help Lafarge, given its 9% fall in cement sales volumes so far in 2012 and the pessimistic outlook for the UK cement sector in 2013. The reduction in capacity manages this decline closely at 11%.

The UK cement industry has likely become more competitive with the range between the production capacities of the four companies reduced. However the price Lafarge and Tarmac have paid the Competition Commission for their joint venture was almost certainly worth it. Lafarge-Tarmac retains Lafarge's dominant position in a streamlined shape now matching the market reality.

Update: This article was corrected on 27 November 2012. The UK temporarily has five cement producers until the Lafarge-Tarmac joint venture gains approval from the UK Competition Commission. Then it will return to four.

The results are in from the European cement majors and the news from the Mediterranean producers is grim. A common phrase found in most of these financial reports was the 'challenging economic environment' in western Europe. Here's what this means.

In Spain, Cemex saw its net sales in its Mediterranean region (consisting mainly of Spain) slump by 17% to Euro1.10bn. Cementos Portland Valderrivas (CPV) posted a loss of Euro83m for the first nine months of 2012, almost 10 times the loss for the same period in 2011. In July 2012 the Spanish cement association Oficement noted that demand had fallen by 60% year-on-year.

In Italy, Italcementi reported a 92% crash in net profit, to Euro17.1m, for the first nine months of 2012, and a drop in revenue of 4%, to Euro3.39bn, for the first nine months of 2012. Buzzi Unicem reported a 21% decline in sales volumes of cement and clinker, and a drop in sales of 15% to Euro430m. Vicat reported that Italian sales across all its business lines were down by 9% for the year.

By contrast, beleaguered Greek producer Titan has finally started to show a (slight) increase in its revenue. It has been able to report a second consecutive quarter where turnover has risen year-on-year. Although Titan's net profit for the same period still plummeted by 96% to Euro2m.

Elsewhere progress of a kind is being made despite the ongoing European slump, mainly due to profitable assets held outside of western Europe.

Lafarge reported that its overall sales were up by 4% to Euro4.39bn in 2012 so far. Yet its income has fallen by 44% to Euro332m and its profits are suffering from its restructuring programme. In western Europe Lafarge noted that cement volumes were down by 11% to 12.5Mt so far in 2012 and that sales were down by 9% to Euro2.43bn.

Holcim reported a 5% increase in overall net sales and a 7% increase in operating profits to Euro1.57bn. In western Europe Holcim's sales volumes were down by 4.6% (like-for-like) to 20.1Mt and sales were down by 6% to Euro3.68bn.

HeidelbergCement reported a 2.5% increase in overall sales but pre-tax profits have fallen by 5% to Euro601m. HeidelbergCement's revenue from its cement business in western and northern Europe was down by 5% to Euro1.3bn. Buzzi Unicem reported overall flat sales at Euro2.15bn but net profit rose by 50% to Euro85m. Despite this Buzzi Unicem reported a drop of 8.5% in Germany.

Vicat reported little change in sales at Euro1.73bn for the year so far. Vicat's financial reporting made it hard to tell how much was lost in Europe but French cement sales were noted as being down by 12%. Cemex's sales volumes were down by 13% in northern Europe, with net sales down by 15% to Euro3.09bn. Italcementi's cement sales volumes in central and western Europe fell by 16.8% to 12.2Mt.

Of the major producers only Lafarge failed to state the obvious in its outlook about western Europe: that sales will continue to decline in 2012 and 2013. If Titan has set the bar for how much more pain the other European producers have yet to face then conditions are likely to get worse. Get ready for even more 'challenges' in 2013.

Lafarge UK's release of its 2011 Sustainability Report for its cement business this week presented some bold headline figures. Key statistics for the period covering 2009 - 2011 included a 17% reduction in CO2 emissions through the use of solid recovered fuels (SRF), a 17% reduction in the use of electricity and a 26% cut in emissions to air.

For a European producer this is some positive news in a time of gloom. Looking a little deeper into the report reveals the usual ambiguities that can arise with interpreting statistics. Lafarge UK's fossil fuel consumption actually rose by 9% from 285,000t in 2009 to 311,000t in 2011. CO2 emissions to air rose by 15% from 2.31Mt to 2.65Mt. In terms of emissions per tonne of Portland Cement Equivalent (tPCE), the figures are more encouraging with fossil fuel use decreasing from 87kg/tPCE to 82kg/tPCE (6%) and CO2 emissions remaining stable at 704kg/tPCE. These figures are good considering that Lafarge's production increased from 2009 to 2011 due to construction for the London 2012 Olympics.

As mentioned in Edwin A R Trout's article 'The British cement industry in 2011 and 2012' the move to refuse-derived fuels (RDF) has consistently made the news with projects at several Lafarge plants. RDF use at Lafarge UK plants rose by 48%, from 92,758t in 2009 to 137,143t in 2011. Each of the alternate fuels – tyres, waste-derived liquid fuel, processed sewage pellets (PSP), meat and bone meal, SRF – roughly increased its unit share per tonne of cement produced by 2%.

Lafarge UK is clearly reacting to uncertain input costs and preparing for any further future green taxes. It failed to meet its 2011 target rate for RDF substitution of 31% (it reached 29%) but it has raised the target to 35% for 2012. It is also continuing to secure permits for PSP use at its Dunbar plant and SRF use at its Hope plant, although by the time this is approved Hope may be someone else's facility. However, the key question is, how can Lafarge push alternate fuels? It will be interesting to see how much Lafarge UK's fuel mix can be reduced in cost over the next five years.