Displaying items by tag: Lafarge

Lafarge's third quarter financial results have coincided with the alarming news that terrorists attacked one of its cement plants in Nigeria. Thankfully nobody was hurt at the Ashaka plant. The suspected Boko Haram insurgents reportedly came looking for French nationals but the plant had been mostly evacuated following an earlier more violent incident at a nearby town. Instead they stole explosives and trucks and fled.

The resonance here with Lafarge's global financial situation is that rebel action elsewhere in the world was noted as having an adverse effect on the cement producer's coffers for the third quarter of 2013. In Iraq cement volumes have reportedly fallen by 15% in the year-to-date and almost halved in the third quarter, hit by an inability to transport cement across the country since June 2014, when Islamic State fighters captured parts of northern Iraq.

Looking at the nine months so far in 2014, Lafarge's sales have fallen by varying amounts with the exception of one territory: Middle East and Africa. Here, bucking the trend, sales rose by 3% to Euro2.8bn. The area had been the group's single largest sales region so far in 2014. Of course countries such as a South Africa are much more stable, but most other countries in the territory have had recent terrorism campaigns where a European-backed cement plant might present itself as a target.

This is not good news for a corporate balance sheet relying on these same countries to keep the profits up. However, as Lafarge states in its outlook, 'emerging markets continue to be the main driver of demand and Lafarge will benefit from its well-balanced geographic spread of high quality assets.' Spreading its bets geographically should pay off.

Also in its outlook, Lafarge announced that it intends to pause its stand-alone divestments pending completion of the planned merger with Holcim. The move suggests that the company is prioritising the impending merger over debt reduction. With Lafarge's and Holcim's recent formal notification to the European Commission of their proposed merger to obtain regulatory approval, the last of its necessary notifications worldwide, the merger is getting closer. So far, the original expectation of closure in the first half of 2015 does not look unreasonable.

When former British prime minister Harold Macmillian was asked what causes governments trouble, his apocryphal reply was, "Events, dear boy, events." The same applies to building materials producers. There may be more 'events' before the merger completes.

Nigeria: Lafarge Africa has notified the Nigerian Stock Exchange of the appointment of Adepeju Adebajo and Anders Kristiansson to the board of Lafarge Africa. Both staff members were formally appointed on 27 October 2014.

Adebajo is currently the MD of WAPCO operations. Prior to this, she served as the Chief Executive Officer and Managing Director at Mouka Limited. She was already the CEO of UTC Nigeria Plc, where she successfully turned the business around.

She previously headed strategic planning, brand management and product development at the United Bank for Africa and has had management consulting experience at Boston Consulting Group in the UK and financial analysis experience at Citibank in the UK.

Peju holds a Bachelor of Engineering (Chemical Engineering) from the Imperial College of Science & Technology, London; a Master of Engineering (Chemical Engineering) from the University of London; and a Master of Business Administration, Harvard University, Boston.

Anders Kristiansson is a Swedish citizen who started his career with Procter & Gamble (P&G) in Scandinavia and thereafter worked for P&G in South Africa. He has been a Global Divisional Controller for Eaton Automotive working in Europe and North America, whereafter he returned to Africa to oversee Celtel's finance departments across its African operations as Director of Financial Operations.

He moved to Nigeria in 2008 as Group CFO for PZ Cussons Nigeria, managing Finance and IT for PZ's five Nigerian companies. Prior to joining Lafarge, he was the CFO for NBC/Coca-Cola HBC's operations in Nigeria.

He holds a Master of Science Degree in Business Administration and Economics from the Gothenburg University, Sweden.

The 'revelation' this week that South Korean cement producers have been paid US$127m to use/dispose of Japanese coal that is thought to be radioactive certainly sounds scary. If it is true that cement made with contaminated coal has led to the construction of radioactive buildings and roads, this may have prised open a 'can of worms' for coal producers, exporters and cement players alike. According to local media, four South Korean firms - Ssangyong Cement, Tongyang Cement, Lafarge Halla Cement and Hanil Cement - received the money to use the coal between March 2011, when the Fukashima nuclear power plant started to leak radiation, until 2013. A total of 3.7Mt of cement is 'under suspicion.'

Caesium-137 is formed by fission reactions that start with uranium-235 in nuclear reactors. The Fukushima reactor that started leaking in 2011 used this type of fuel. Once it leaked, caesium-137 was deposited into the sea and onto the land, presumably also making its way into nearby coal deposits.

As it is a metal with a melting point of just 28.5°C and a boiling point of 671°C, the caesium-137 would vaporise if it were to enter a cement production line operating at 1450°C as a metal. However, caesium will not enter the cement-making process as a metal due to its rapid and explosive reaction with water. An interesting slow-motion of this reaction can be seen here.

Instead, caesium will enter the cement-making process either as its oxide or a simple salt (e.g.: caesium chloride) in the coal. The salt will be ionized in the heat of the flame, sending caesium ions into the kiln and thus direct contact with the clinker as it is being formed. Here it will become part of the matrix of the clinker and hence the final cement product. All the time the caesium-137 is radioactive.

And it stays radioactive once it is in the finished product, for example in a building or road surface. Its half-life, the time that it takes for half of the caesium-137 to decay to meta-stable barium-137 (emitting radiation as it decays), is unfortunately very well matched to the life-span of concrete buildings at 30.7 years. This means that after about 100 years of building life the building would still be around 10% as radioactive as it was when it was built.

This would certainly be a problem if the coal was highly contaminated. However, a few questions come to mind. Firstly, if the coal contains 20-73 becquerels per kilogramme (Bq/kg) of caesium-137, as has been claimed by Lee In-young, an opposition spokesman for the New Politics Alliance for Democracy party and member of the National Assembly's Environment Labour Committee, why is this a problem when the Japanese legal limit for eating caesium-137 in contaminated vegetables is all the way up at 500Bq/kg? When the most dangerous mechanisms of caesium-137 poisoning relate to accumulation in soft tissue, how can driving along a caesium-137-containing highway constitute a health risk?

Also, the coal may well start the cement making process with 25-73Bq/kg of caesium-137 but the clinker will have a lower level. This is because for every 1t of clinker the plant will typically consume just 100-200kg of coal. The caseium-137 and hence the radiation will therefore be spread out over a larger mass. A level of 50Bq/kg in the coal would translate to a clinker level of 5-10Bq/kg. This is around 100 times lower than the Japanese vegetable limit. After this, the clinker is extended with additives to make cement. This is then added to aggregates and / or sand when concrete or mortars are made, further diluting the caesium-137, perhaps to as low as 1-5Bq/kg. It is arguable that South Korea has received a higher caesium-137 dose from Japan via air and sea than via coal imports.

In light of all this, it appears that those calling for investigations on scientific grounds, like Lee, may be misguided. However, there may be political gain. The histories of Japan and South Korea are long, violent and distrustful. Indeed, according to a BBC World Service poll conducted earlier in 2014, South Korea and China jointly have the most negative perceptions of Japan of all world nations. In this environment stories about radioactive coal become much easier to believe in.

In reality the Japanese vegetable limit is well above the likely levels that might be found in any cement products resulting from the use of this coal. It is consistent with EU limits set more than 20 years earlier (600Bq/kg). A search on the US Environmental Protection Agency's website fails to bring up any formal limit. Instead it states that everyone is exposed to caesium-137 from atmospheric fallout to a low level and that the most dangerous cases are where waste metal processors unwittingly come across sources.

So on the surface then, the South Korean reaction seems like a storm in a teacup. One question remains though. If the caesium-137 levels in the coal are so much lower than the Japanese vegetable limit, why are Korean firms being paid to take it out of Japan?

Spain: Lafarge has appointed Maruxa Suarez as director of its Spanish plant in Villaluenga de la Sagra, Toledo. Suarez, who was previously a production director at the plant, will replace Mariano Garcia Hoyos. Suarez started working for Lafarge in 2004 at the environment unit of the company in Madrid. He later joined the management team as process engineer and production director.

A significant amount of recent news has come from the fallout from the proposed LafargeHolcim merger. Lafarge and Holcim, as well as a raft of global cement producers, are stepping up activity and those outside the deal are starting to jostle for position. They will want to take advantage of the many opportunities to snap something up from the long list of assets to be sold.

First up, Turkey's Sabançi Holding has been reported to be investigating the LafargeHolcim divestments, although the actual targets were not reported. There are none on offer in Turkey itself but potential Sabançi interests could lie in nearby Romania, Serbia or Hungary. Of course, it isn't possible to rule out any wider ambitions.

Next we have Elementia, which has acquired Lafarge's former stake in their Mexican joint venture, prior to the announcement of its initial public offering there. In Singapore, CVC Partners and the Government entered discussions over the purchase of assets. It was earlier agreed by the Singaporean competition authorities that Lafarge and Holcim would be able to merge due to them being relatively small players in that market.

Meanwhile, in the UK and the US, HeidelbergCement is positioning itself via share deals in its subsidiary Hanson Building Products so that it may bid for the LafargeHolcim divestments in the US and UK. Hanson Building Products has filed for an Initial Public Offering in the US in preparation for HeidelbergCement to sell it later in the year. This sounds like a case of HeidelbergCement focusing on its core markets of cement.

There have also been moves by Lafarge and Holcim, most notably their approach this week to the European Union (EU) prior to the merger. The multinationals plan to iron out possible EU concerns over the merged company's market power before filing for approval of the deal, the step that starts an EU review.

Activity seems to be hotting up ahead of the LafargeHolcim merge and it will only intensify. It will be interesting to see which other multinational and regional players decide to 'show their hand' through the rest of the merger process. There are many more assets in Austria, France, Germany, the UK, Canada, Mauritius, the Philippines and Brazil to be divided up before the LafargeHolcim merger can be completed.

South African authorities have started a new investigation into imports of cement from Pakistan. This time the inquiry will examine trade dumping allegations made by local producers including Afrisam, Lafarge, NPC Cimpor and PPC.

The application made by the cement producers provided evidence that the difference between the price of cement (the dumping margin) in Pakistan and for imports from Pakistan in 2013 was 48%. Or, in other words, the price of Pakistan cement imported to South Africa was nearly half that of what is was being sold for in the country that it was actually produced in.

The data submitted to the International Trade Administration Commission of South Africa comes from a report by Genesis Analytics on Pakistan cement prices in 2013 and tax information from the South African Revenue Service. Neither source is readily available for more detailed analysis here but data released by XA International Trade Advisors suggests that cement imports from Pakistan rose to 1.1Mt/yr in 2013 and at a value of US$59m. Roughly, this gives a price of US$55/t. This compares to an average price of US$90/t, from the All Pakistan Manufacturers' Association for the first nine months of the 2012 – 2013 Pakistani fiscal year, giving a dumping margin similar to the allegation by the South African cement producers.

Separate industry sources quoted by the Pakistan media on the story reported that the country supplies 1.5 - 1.6Mt/yr of cement to South Africa, its biggest export market, receiving a revenue of US$125m. Although this suggests a dumping margin lower than the one presented to the authorities it is still high.

Other information of note in the investigation notification is that the Pakistan cement imports are only competing heavily with the local bagged cement market in the Southern African Customs Union, which also includes neighbouring Botswana, Lesotho, Namibia and Swaziland. The notification discounts bulk cement imports from Pakistan as being 'prohibitively' expensive suggesting that the Pakistan cement producers have no import infrastructure in southern Africa or that something else is stopping them. For example, the country's market leader for production, Lucky Cement, has export facilities in Karachi with silos and automatic ship loaders. Yet it's only 'brick-and-mortar' presence overseas are projects building an integrated plant in the Democratic Republic of the Congo and a grinding plant in Iraq.

It may also be worth considering that South African industry newcomer Sephaku Cement hasn't joined the dumping allegation. The Dangote subsidiary was set to start producing clinker in late August 2014. This is out of character considering how prominent the Nigerian-based cement producer has been in campaigning against imports to its home nation. However, the Aganang plant in Lichtenburg, North West Province is over 700km from the coast and presumably safe from foreign imports at present.

One final question occurs. How are Pakistan cement producers able to dump bagged cement on the South African market at prices lower than what they are selling it for at home? If individual producers sold their excess at home at a lower price they could potentially undercut their competitors and make a profit. There are many barriers, from input costs to industry structural issues and other reasons that may be preventing this. However, if the South African cement producers succeed in their latest attempt to block imports from Pakistan it may add more impetus to remove such barriers.

It has been another week of financial results from the global cement industry, with big hitters Lafarge and Holcim reporting what some might call 'concerning' numbers for the first half of the year. Both cement producers are, of course, making preparations ahead of their proposed merger, which could come to pass within 12 months, all being well. But are things well?

In the first half of 2014, Lafarge saw its earnings before interest, tax, depreciation and amortisation (EBITDA) decrease by 2%, with sales down by 5%. Lafarge noted that its shrinking size, this week highlighted by the sale of its Pakistani assets, and adverse exchange rate effects did not help matters. CEO Bruno Lafont was up-beat in asserting that North American and European markets would see improvements over the rest of 2014. Meanwhile, things are slightly better at Holcim, which reported an increased EBITDA (albeit just by 0.2%) as well as like-for-like sales that were up by 4.8% compared to the first half of 2013. However, its increased sales volumes and revenues could not prevent a fall in net income.

If one takes these results together, the first half of 2014 seems to been one of general stagnation for the future LafargeHolcim. It is important to remember that even more asset sales are inevitable, mainly from the weaker performer Lafarge. We are left to ponder how the new LafargeHolcim will perform in 12 months time.

At present, without serious improvement across all world economies, it is likely that LafargeHolcim (and other multinational producers) will continue to be on relatively shaky ground post-merger. The reality is that many of the promising markets that the company will serve are no longer rapidly-growing emerging economies, but are instead caught up in lower-than-expected growth (for example in Indonesia, India, China and Brazil), political disputes (for example in Algeria, Thailand, Eastern Ukraine and the Middle East) and other damaging events (for example the Ebola outbreak in West Africa). The global economy is certainly 'uneven,' as Holcim's CEO Bernard Fontana said in Holcim's results statement, but it also seems to be getting more uneven. Simple geographical and income groupings for countries, for example 'Far East = Profit,' are becoming increasingly out of date.

Navigating such a rapidly-changing world is, in one sense, less difficult for larger companies than smaller ones because risk can be spread over a much wider range of economies. However, larger companies are also slower to react to changes and the appropriateness of their responses may not be ideally tailored to individual markets. When LafargeHolcim comes to be, it will likely suffer also due to the inherent difficulties of merging two such large firms that may not see eye-to-eye on all issues. This will have to be done without some of its best assets and a lot of its 'run-time' will be dedicated to the merging process. In such an environment it is easier to be distracted from its main tasks: is it possible that this effect is already becoming apparent? As Lafarge and Holcim's latest results show, there is little room for deterioration in their results.

There is a key question: Is the LafargeHolcim first half EBITDA slide a sign of poor markets or related to preparations for the merger that shareholders will tolerate as they anticipate future riches? Will LafargeHolcim be profitable in the long-run?

The single most notable observation regarding the last seven days is that the cement industry news has been overwhelmingly positive. After many years of consolidations, buy-outs and financial losses, it seems the global cement industry is finally turning itself around, with reports citing numerous expansion projects and growing cement demand in most regions.

The Indian government is taking control of its coal shortage problem with the appointment of a new Inter-Ministerial Task Force (IMTF) to rationalise existing coal resources. India's Ultratech Cement reported a 12% increase in cement sales in the April - June 2014 period, while both Shree Cement and Maha Cement are investing heavily to increase production capacity for the Indian and nearby Sri Lankan markets. In Myanmar, Thailand's Siam Cement Group (SCG) plans to construct a new 1.8Mt/yr capacity cement plant, while China's Guangdong Province has cut another 3.23Mt/yr of cement production capacity to meet overcapacity issues and reduce harmful emissions.

Signs also point to an anticipated upswing in cement demand in Europe. The UK's Hope Construction Materials has invested in 36 new Mercedes-Benz trucks for cement dispatch, while in Croatia, Holcim has predicted a 15% revenue increase in 2015, having finally completed consolidation of its unprofitable operations. Eurocement plans to construct a new 2.4Mt/yr capacity cement plant at the site of its Akhangarancement plant in Uzbekistan, although the existing plant is currently under scrutiny by the State Competition Committee and the subject of a nationalisation attempt by the Uzbek authorities.

In the US, Eagle Materials has reported a 4% increase in cement sales volumes in the April – June 2014 period, while Holcim has broken ground on its Hagerstown, Maryland cement plant modernisation project. Similarly, cement demand in Latin and South America continues to grow. Cemex Latam Holdings reported a 6% year-on-year increase in cement sales for the first half of 2014, while Mexico's Cemex reported that net sales grew by 4% year-on-year during the second quarter of 2014. Cemento Andino is building a new line that will triple the cement production capacity of its Trujillo plant in Venezuela to 600,000t/yr.

In Africa, Tanga Cement Company Limited (TCCL) plans to increase its cement production capacity, having signed an agreement to double its power supply to 40MW. Tunisia's Carthage Cement has reported a 419% increase in turnover for the first six months of 2014, while in Egypt, Suez Cement reported a 1% increase in cement demand. Lafarge's Nigerian subsidiary, Ashaka Cement, is fast-tracking the expansion of its Gombe State plant to meet demand, while the Standards Organisation of Nigeria (SON) is forging ahead to improve cement standards and consumer confidence. ARM Cement's revenues grew by 16% for the first half of 2014, including a 10% increase in Kenya and a 33% increase in Tanzania.

Finally, Lafarge and Holcim are moving forward with their mega-merger, officially notifying various competition authorities around the world. While the global cement industry will undergo some major changes as a result, the upheaval could prove positive for those players willing to seize the day.

France: Thierry Legrand has been appointed as senior vice president of transformation and acceleration at Lafarge's head office in Paris. Legrand has been the chief executive of Lafarge South Africa for five years. Kenneth MacLean, who is currently Lafarge group's senior vice president for performance aggregate, will replace him from 1 August 2014.

During his time in South Africa, Legrand integrated the company's local cement, aggregates, ready-mix concrete, gypsum and fly ash business lines into a country organisation and drove its ambition of contributing to building better cities. MacLean said that he was excited to be in South Africa and looked forward to the challenge.

An update on the algae bioreactor project at Votorantim's St Marys cement plant in Canada this week provides a good opportunity to review this particular aspect of carbon sequestration. The project, run with Pond Biofuels, went live in 2009. It has now reached its third generation bioreactor at the site.

Little or no performance data has been released generally so we have no way at present of knowing how viable the process is commercially. Cement backers, Brazilian firm Votorantim, are certainly excited by the project even if only for the sustainability kudos it gives them. Director Edvaldo Araújo Rabello presented the project as one of the company's highlights at a keynote presentation at the 6°CBC Congresso do Cimento held in São Paulo, Brazil in May 2014.

One hurdle for the St Marys pilot is the relative lack of light, a required input for algae photosynthesis, even in Canada's most southerly state. Pond Biofuels have reportedly dodged this by using continuously flashing LEDs to simulate artificially short days that encourage growth. On paper or powerpoint a process that could potentially cut even a proportion of CO₂ emissions from a cement plant sounds enticing. Yet if it creates more CO₂ than it saves, through electricity requirements for example, than it isn't worth using.

This is probably what shelved Lafarge's Carbon Capture and Transformation project. It ran a pilot project at its Val d'Azergues plant in France in 2009 with Salata GmbH. The pilot worked but the researchers decided that new advances in processes and biotechnology were required to make the economic and environmental results better. Other companies have also had problems. Holcim started its Aurantia – GreenFuel project in late 2007 at its Jerez cement plant in Spain, backing it with an investment US$92m. This project stalled when GreenFuel shut in 2009 citing lack of funding as the recession hit.

ACC in India also reportedly started its own algae project in 2007, mentioning it in its sustainability report, but nothing more has been reported since. Since this burst of interest InterCement has invested US$2.5m towards algae research in 2013 working with the Federal University of São Carlos, the Federal University of Santa Maria and Algae Biotecnologia.

Algae-based carbon projects for cement plants may remain stuck in the research stage but the market for biofuels continues to grow. For example, this week we report that Ohorongo Cement in Namibia plans to increase its use of blackthorn as a biofuel to use as an alternative fuel in co-processing. The prospects of turning waste CO₂ into a valuable commodity remains uncertain, but the rewards are great. Let's wait and see what St Marys can do.