Displaying items by tag: Lafarge

France: Lafarge has reported that during the fourth quarter of 2014, its sales were up by 2% year-on-year to Euro3.21bn, its earnings before interest, taxes, depreciation and amortisation (EBITDA) were down by 4% to Euro679m and operating income fell by 8% year-on-year to Euro450m. In the entirety of 2014, Lafarge's sales were down by 2% year-on-year to Euro12.8bn, EBITDA was down by 3% to Euro2.72bn and operating income fell by 3% to Euro1.88bn.

"2015 will be an exceptional year for Lafarge. Over the past few years, we have undertaken a structural and fundamental transformation. We have focused on our customers, promoted innovation and reshaped our portfolio to concentrate on fast growing market segments," said Bruno Lafont, chairman and CEO of Lafarge. "In 2014, we completed our 2012 - 2015 cost reduction and innovation objectives a full year ahead of schedule, supporting our solid operating results. Lafarge is now perfectly-positioned to best benefit from upswings in any and all of its markets in an economic environment that, while remaining volatile, will be more favourable in 2015. I am confident that we will drive significant growth of our results and we do expect EBITDA of Euro3 – 3.2bn in 2015."

Cement sales volumes were up by 4% in 2014 thanks to continued growth in most emerging markets and the US, the benefit from innovation actions and the start-up of new plants in India and Russia. Lafarge delivered its 2014 cost cutting and innovation target, generating Euro600m in 2014, Euro370m from cost cutting and Euro230m from innovation. Net debt was further reduced to Euro9.3bn as of 31 December 2014.

Overall, Lafarge sees cement demand increasing in 2015 by 2 – 5% year-on-year, predominantly driven by growth in emerging markets. Cost inflation in 2015 should continue, at a slower pace than in 2014 given the recent changes of fuel oil prices. Lafarge has confirmed its target to generate at least Euro1.1bn of additional EBITDA from its cost reduction and innovation measures in 2015 - 2016. Its capital expenditures in 2015 will be limited to Euro1.1bn. Net debt should be reduced to Euro8.5 – 9bn by 31 December 2015.

Canada: The Cement Association of Canada (CAC) has welcomed the British Columbia government's efforts to improve the Province's carbon tax. The British Columbia Carbon Tax is applied only to domestically-produced cement, while imported cement from the US and Asia is exempt, resulting in a net loss to the British Columbia economy. With local manufacturers facing higher costs under the carbon tax, cement imports from jurisdictions without a carbon policy have risen significantly.
The proposed 'transitional incentives,' of US$22m paid over a three year period, to encourage the British Columbia Cement industry to adopt cleaner fuels and further lower emission intensities will assist the current inequality that the industry faces as a result of imports coming from the US and Asia into British Columbia with no carbon tax applied. The cement industry has been working with the British Columbia government and other stakeholders for many years to find a win-win solution to protecting jobs, economic development and the environment.

"British Columbia produces some of the highest quality cement in the world, so the change makes sense both for the environment and for the Province's continued economic prosperity. British Columbia cement is a strategic commodity and a key component of concrete, which is essential to the implementation of the government's ambitious plan for infrastructure development," said CAC president and CEO Michael McSweeney.

"This incentive will help level the playing field for domestic producers of cement. It assists our company to ensure that good jobs stay and continue to be created in British Columbia," said Bob Cooper, vice president of Lafarge Western Canada. "Our competitiveness has been threatened by imports for the past five years and the move by the British Columbia government will also ensure that British Columbia has a long-term and secure local supply of made-in-British Columbia cement."

Mexico: The National Competition Commission (Cofece) in Mexico has approved the merger between Holcim and Lafarge, as it does not see any risk to free competition in the country. Lafarge operates in Mexico via ELC Tenedora de Cementos, which it sold to Elementia on 16 December 2014.

Russian refractory manufacturer Magnezit Group has struck a deal this week with Vamtec to sell product in Brazil. What such a cooperation agreement will actually entail, as ever, remains vague but it is an interesting time for a cement equipment supplier to enter the market. The majority of refractories sales are to the iron and steel industries but cement and lime holds the biggest minority market. Industrial research analysts Roskill placed the cement and lime share at 13% in a recent market report.

Competitor refractory producer RHI placed Magnezit in the same Euro0.5 – 1bn revenue bracket with producers such as a Magnesita, Inerys, Krosaki and Shinagawa. Magnesita is the most relevant company out of that list because it is headquartered in Belo Horizonte in Brazil. It is a global company but some of its major mines and production sites are based in Brazil. In 2013 its revenue grew by 8% to US$937m despite static refractory sales volumes led by falling steel production. In 2013 its refractory revenues came mainly from South America. So far in 2014 it appears to have increased its refractory sales volumes, despite a declining marking in Brazil and South America as a whole, by moving into new markets.

A similar situation has been reported by RHI in the region so far in 2014 with falling steel production hitting refractory revenue. RHI originally planned to build a refractory plant in Rio de Janeiro in 2011 but this was amended in late 2012. In this environment it seems that Magnezit may be testing the market rather than planning a full-scale incursion into Brazil.

For the first half of 2014 the Sindicato Nacional Da Indústria Do Cimento (SNIC) has reported that cement sales were 34.5Mt in Brazil, a rise of 2.8% compared to the same period in 2013. Despite this modest growth, Brazilian cement producers will see this as disappointing following years of higher growth prior to 2013.

However, events may not be that gloomy in Brazil after all. The prospect of CRH's impending purchase of three cement plants and two grinding plants from Lafarge and Holcim in Brazil with a cement production capacity of 3.6Mt/yr may stir up the market. For starters CRH may audit the suppliers the new plants are using and decide whether they want to continue using them. The acquisition will add a new player to compete with the existing producers in the high producing states of Minas Gerais and Rio De Janeiro. Competition authority Conselho Administrativo de Defesa Econômica (CADE) set up the terms for what Lafarge and Holcim would have to sell in December 2014, so now that a buyer has been found the move may go smoothly. Needless to say this presents an opening for any, say, Russian-based refractory producers looking for new clients!

CRH has made good on its intentions. This week it stumped up Euro6.5bn to buy assets from Lafarge and Holcim in four continents. The move follows preparation since at least May 2014 when the Irish building materials group announced a divestment programme. In October 2014 it announced that it would sell its brickwork division.

CRH is finding the cash through a mix of existing cash, debt and equity placing. Interestingly, back in 2012 an Irish stockbroking analyst who was interviewed reckoned that the company could spend up to Euro3.5bn on acquisitions whilst remaining within its banking agreements. Throw in the recent sales and planned divestments and the planned acquisition from LafargeHolcim doesn't seem like too much of a stretch for CRH.

If completed, the purchase will see CRH take on 24 cement plants with a production capacity of 36Mt/yr. As a back of the envelope calculation suggests the sale price of Euro6.5bn isn't far off the occasionally used price of US$200/t for western cement production. The deal also includes aggregates, ready mixed concrete and asphalt assets.

The purchase marks a change in CRH's buying strategy both in terms of scale and distribution. Much of CRH's previous acquisitions have been minority shareholdings that make it difficult to accurately report the company's position in the cement industry. For example, in our Top 100 Report CRH was reported to have a production capacity of 6.49Mt/yr for majority shareholdings with another 19.9Mt/yr for minority shareholdings. The new cement capacity being purchased blows this away because it more than doubles CRH's total capacity and it appears to be all majority owned. CRH thinks that this will propel it to become the world's third biggest building materials manufacturer after LafargeHolcim and Saint-Gobain, leapfrogging Cemex and HeidelbergCement in the process. Strangely there is no mention of the huge Chinese players in the top five manufacturers in CRH's acquisition presentation.

CRH has avoided buying plants in southern Europe but it is relying on the slowly improving growing UK market, where CRH will pick up four plants, to balance the risk. Elsewhere in Europe, the three Holcim plants in France have been suffering from continued low construction rates in that country and the two Lafarge cement plants in Romania are unlikely to have recovered from a production fall in 2013. Outside of Europe growth has been poor in Quebec in 2013 and 2014, where CRH is buying two plants from Holcim. Both Lafarge and Holcim have also seen a slowdown in Brazil. However, the Philippines does seem like a better bet for CRH, with solid cement volumes growth seen by Lafarge in 2013 and the first three quarters of 2014.

With CRH now looking like a company that wants to produce cement rather than one that owns parts of companies that produce cement, all eyes are on the construction markets. 14 of the 24 cement plants CRH are buying are in Europe. Buying at the bottom of a sustained production slump makes sense because the asking price will be low. However, has the bottom been reached yet?

Zimbabwe: Lafarge Cement Zimbabwe is going ahead with plans to upgrade its plant to increase capacity from 390,000t/yr to 450,000t/yr. The upgrade will cost US$15 – 20m, according to Lafarge Cement Zimbabwe CEO Amal Tantawi.

"Lafarge has a nominal capacity. We could produce up to 450,000t, but we do have some challenges that we are working on. Beyond that, we want to stabilise and be able to reach our maximum capacity, but that will not come before 2016," said Tantawi. "The challenges that we are facing are the cement mills that cannot reach this capacity, but we are looking at installing new mills by 2016. Once we do the upgrade, we will be able to operate at maximum capacity of 450,000t."

Lafarge Cement Zimbabwe is in a closed period and is due to release its financial results for 2014 by March 2015. Tantawi said that the year has not been a good one. Group revenue for the half year that ended in June 2014 declined by 12.5% to US$28.2m, while gross profit was US$9.4m, compared to US$14.1m in the same period of 2013.

"Traditionally, the second half of the year has always been better in terms of business growth and the trend is expected to continue in 2015. Going forward, the construction industry has positive growth prospects premised on the mounting housing backlog and the pressing need for overall infrastructural rehabilitation and development. The company is well positioned to take advantage of the expected growth in the construction sector," said Lafarge Cement Zimbabwe in a statement.

World: Lafarge and Holcim have entered exclusive negotiations to sell a number of assets to Ireland's CRH for Euro6.5bn as part of their planned merger. The assets include operations in Europe, Canada, Brazil and the Philippines. The combined assets, which include Lafarge Tarmac in the UK, generated Euro5.2bn of sales in 2014, with estimated 2014 operating earnings before interest, taxes, depreciation and amortisation (EBITDA) of Euro744m.

"The projected transaction is a key step towards the creation of LafargeHolcim and the value offered reflects the strong quality of the selected assets. With this announcement, we remain firmly on track to complete our proposed merger in the first half of 2015," said Wolfgang Reitzle, designated chairman of the Board of Directors of LafargeHolcim and Bruno Lafont, designated CEO of the future combined company.

The divestment process will be carried out in the framework of the relevant social processes and the ongoing dialogue with the employee representatives' bodies. It will be submitted to the relevant competition authorities and to the shareholders of CRH. The divestments are subject to the completion of the merger, including a successful public exchange offering and approval by Holcim's shareholders in the second quarter of 2015. The closing of the planned merger is expected in the first half of 2015.

Canada: Austria's Radex-Heraklith Industriebeteiligungs (RHI) has received a US$11.6m order from Lafarge in Canada. RHI will deliver materials for the expansion of Lafarge's cement plant in Exshaw, Alberta. The cement industry comprises 12% of RHI's sales.

Europe: Responding to the recent press speculation, Ireland-based building materials group CRH plc has confirmed that it is in discussions with Lafarge and Holcim regarding the potential acquisition of certain assets being disposed of by Lafarge and Holcim in advance of their proposed merger.

In December 2014, The European Commission, the European Union's antitrust authority, said that it approved the proposed merger of French cement giant Lafarge SA with Swiss peer Holcim Ltd, subject to asset sales by both companies in regions where their activities overlap.

The European Commission or EC's approval of the merger was conditional upon the divestment of Lafarge's businesses in Germany, Romania and the UK. Holcim was required to divest its operations in France, Hungary, Slovakia, Spain and the Czech Republic.

India: Lafarge India has begun the process of buying back the 14% stake it sold to global private equity investor Barings Asia in May 2013 for US$265m. This comes about nine months after Lafarge and Switzerland's Holcim announced their intention to merge their global assets, including those in India.

The move is part of the sale agreement that Lafarge signed with Barings Asia, which said that any changes in shareholding structure will trigger the buy-back clause. According to local media, the process has just started and may take a few months. Once the Competition Commission (CC) has cleared the LafargeHolcim merger proposal, the process is expected to gather steam.