Displaying items by tag: LafargeHolcim

Ivory Coast: Xavier Saint-Martin-Tillet, the chief executive officer of LafargeHolcim Côte d'Ivoire has been appointed as the head of the Association of Cement Producers of Cote d'Ivoire (APCCI). His term will last two years, according to Financial Afrik. He will be assisted by Soro Nagolo, deputy general manager of the Société des Ciments d'Abidjan (SCA), who will serve as the vice-president of the association.

Saint-Martin-Tillet is a graduate of the École Centrale Paris in France. He spent 20 years working for Lafarge before joining LafargeHolcim Côte d'Ivoire in October 2016 as its managing director.

Romania: Mădălina Gogorici has been appointed as the Health and Safety Manager at Holcim Romania, a new position within the company. A biochemistry graduate from the University of Bucharest with a Master’s degree in Ecology and Sustainable Development she holds over 20 years of experience in the field.

South Africa: Lafarge South Africa has appointed Rossen Papazov as its country chief executive officer (CEO). Papazov will join the company with effect from 1 October 2017, according to Business Report. He has been the country head for Holcim in Azerbaijan for the last four years. Prior to this he originally joined Holcim in 2000 as its Business Development Manager for Bulgaria. He has also held roles in Belgium and Romania.

Cement sales volumes are down at the larger multinational cement producers so far in 2017. As the first half-year results emerge, a picture seems to be appearing of sluggish growth at best for the major internationals. Reduced working days and poor weather have been blamed for the underwhelming performance.

Graph 1: Cement sales volumes for selected multinational cement producers during the first half of 2017. Source: Company financial reports.

True, LafargeHolcim’s sales rose by 0.4% year-on-year on a like-for-like basis, probably due to the assets the group has been sloughing off since the merger, but this is hardly the dynamic growth shareholders may have hoped for. Meanwhile, HeidelbergCement, following its acquisition of Italcementi in late 2016, has only been able to increase its cement and clinker sales by 1% for the first half of 2017 once consolidation effects were excluded. Here the problem appears to be reduced sales in both the US and Indonesia at the same time. This then leaves Cemex with a 2% drop in sales volumes to 33.9Mt with a big drop in the US despite a promising construction market otherwise. It blamed the decline on a high comparison base in 2016 and the weather.

The larger regional players examined here appear to have fared better. Both UltraTech Cement in India and Dangote in sub-Saharan Africa reported flat or falling sales volumes. However, delve a little deeper and there’s more going on. UltraTech didn’t offer any reason for the decline although it was likely focused on its acquisition of assets from Jaiprakash Associates and the knock-on from the demonetisation process last year. That purchase increased its cement production capacity by nearly 40% to 91.4Mt/yr from 66.3Mt/yr and it seems keen, to investors at least, that it will be able to rocket up the capacity utilisation rate at the new plants.

Dangote meanwhile has taken a blow from the poor economic situation in Nigeria, where it still produces most of its cement. Here, sales fell by 21.8% to 6.86Mt from 8.77Mt, causing its overall sales to fall by 11.3% to 11.5Mt. Almost incredibly though, as Graph 2 shows, Dangote upped its sales revenue by a whopping 41.2% to US$1.13bn off the back of improved efficiencies and a much better fuel mix in Nigeria. The turnaround is impressive considering the pressure the company faced in 2016. Today’s news that the firm has sold a 2.3% stake to foreign investors adds to the impression of a company on the move.

Graph 2: Sales revenue for selected multinational cement producers during the first half of 2017. Source: Company financial reports.

Looking at overall sales revenue shows a happier picture for most of the producers detailed here, with the exception of HeidelbergCement. Although Graph 2 shows declines for LafargeHolcim and Cemex on a like-for-like basis, at least growth is occurring. HeidelbergCement though has reported static revenue on an adjusted basis for the period. This suggests that the producer has hit problems just as it is starting to integrate the Italcementi assets into its portfolio. In theory the geographic spread of its new production units should shield it from lowered growth elsewhere but if this doesn’t happen it may be in for a rougher ride than LafargeHolcim following its merger.

In summary, being a large-scale multinational cement producer doesn’t quite seem to be offering the balanced growth one might expect so far in 2017. Cement sales volumes are slipping and revenue is also down on a direct comparison basis. It’s barely a case for comparison but smaller regionally based producers like UltraTech Cement and Dangote, in the right locations, seem to be capitalising on their positions. We’ll see how the big Brazilian producers Votorantim and InterCement, Buzzi Unicem and CRH fit this trend when they release their financial results over the next few weeks.

Spain: Sergio Martínez Hernández has been appointed as the new director of LafargeHolcim’s Carboneras cement plant in Almería. Martínez Hernández holds over 24 years of experience in the cement industry, according to Teleprensa. He joined Holcim in 1993 after training as an engineer at the Escuela Técnica Superior de Ingenieros Industriales (ETSII) in Madrid. During his career he has worked at plants in Gádor in Almería, Yepes in Toledo and Portland in Colorado, USA.

Sad news this week from the Talcahuano cement plant in Chile that is to stop producing clinker. Local media reports that the Cementos Bío Bío unit has decided to import clinker from Asia instead, which will reduce its production costs. At the same time it has laid off a third of its workforce. The plant has been producing cement since 1961.

The decision carries echoes of Holcim New Zealand’s closure of its Westport cement plant in 2016, another unit in a country on the Pacific Rim. However, in that country LafargeHolcim has purposely moved towards becoming a distribution company by opening import terminals and depots. Plus the local subsidiary benefits from the cement-trading arm of a multinational company. By contrast, local producer Cementos Bío Bío still retains two integrated plants and a grinding plant in Chile. Following the closure its production share from integrated plants will drop to 2.4Mt/yr (39%) from 3.2Mt/yr (45%). The country will retain a total production capacity of 6.2Mt/yr from its clinker producing plants.

The timing of Cementos Bío Bío’s decision is also interesting given that the Chilean competition authority (TDLC) approved Hurtado Vicuña Group to buy a controlling stake in Cemento Polpaico from LafargeHolcim in early July 2017. The deal was originally announced in October 2016 to sell LafargeHolcim’s 54.3% stake in Cemento Polpaico for US$225m. The sale includes one integrated plant with a cement production capacity of 2.3Mt/yr and two grinding plants. Hurtado Vicuña has not been required by the regulator to sell any of its cement units but it has been asked to sell parts of its concrete business and to abide to a ban on repurchasing the assets within 10 years. Hurtado Vicuña owns Cementos BSA, a subsidiary that runs the El Bosque cement grinding plant in Santiago and it has just started-up production at a new 0.95Mt/yr grinding plant at Quilicura, also near the capital.

In its 2016 annual report LafargeHolcim reported that cement sales volumes of cement fell in Chile due to a fall in the residential construction market in the second half of the year. However it did manage to raise its operating earnings before interest, taxation, depreciation and amortisation (EBTIDA) off the back of higher prices and lower production costs compared to the previous year. Cementos Bío Bío concurred with this assessment of the market in its 2016 report, lamenting the country’s poor economic growth since 2015 and declines in the mining and construction sectors. Despite this its cement despatches rose very slightly to 1.56Mt in 2016. The big drop in its sales occurred in 2014 when its sales fell by 10% year-on-year to 1.51Mt. More recently, Bío Bío noted a 37% decrease in its operating profit for its cement, concrete and lime division for the first quarter of 2017 due to falling sales volumes and margins in cement and lime. However, it did benefit from falling costs for energy and petcoke inputs. The group also announced plans to sell a minority stake in itself in February 2017.

These stories show another country that is realigning its cement industry to a clinker-rich world market. Chile appears to retain a ‘big three’ group of local clinker producers that has shifted with the rise of Cementos BSA and the departure of LafargeHolcim. However, the market share in the cement grinding business has changed significantly as Cementos BSA has gained both an integrated plant and a more national profile, away from the capital, with its grinding plants. Once the local market picks up it will be interesting to see whether this trend towards clinker import and local grinding continues.

UK: Aggregate Industries has appointed Pablo Libreros as its Growth and Innovation Director. He will be responsible for developing, recommending and delivering growth and innovation opportunities for the business. This will include facilitating greater cross promotion of products both in the UK business and in the wider group.

Libreros joins the UK subsidiary of LafargeHolcim after working for the parent company in Latin America since 2011. Most recently he was the chief executive officer (CEO) for Holcim Costa Rica. Prior to this he held various senior roles, including Logistics Director and Supply Chain Director within the business’ Brazil division. He has also worked in a number of ecological public sector positions in Paris, most notably as an advisor to the Minister for sustainable development in France.

Further shifts in the South Korean cement industry this week as Ssangyong Cement purchased Daehan Cement. Private equity firm Hahn & Company owns both producers so this looked like a realignment exercise. Yet it follows a corporate version of pass-the-parcel within the local cement industry. Hyundai Cement was acquired by Hanil Cement in the first half of 2017, Halla Cement was bought by investment firms from LafargeHolcim in mid-2016 and Tongyang Cement was bought by Sampyo Group in 2015.

Ssangyong Cement’s purchase is seen in the local media as an attempt to reaffirm its market dominance. Before the Hyundai Cement auction, Ssangyong Cement was the market leader with a cement production capacity of 15Mt/yr and a market share of around 20%. Hanil Cement’s on-going purchase of Hyundai Cement will see it increase its production capacity from 7Mt/yr to over 15Mt/yr. Ssangyong Cement’s transaction for Daehan Cement puts it back in the lead again.

The local industry is notable for the high ratio of cement grinding plants to integrated plants. The Korean Cement Association (KCA) reported that the country had 12 integrated plants to 23 grinding plants in 2015. This compares to other developed countries in relatively remote places such as Australia and Chile that also have high numbers of grinding plants. South Korea doesn’t import that much clinker though. One difference is its prominent steel industry that has hovered around 70Mt/yr since 2014 and which puts it in the top ten of world producers. Subsequently, as POSCO’s Sunghee Han explained at the Global Slag Conference 2016, 13.9Mt of granulated blast furnace slag (GBFS) was produced in 2015 and the majority of this ended up being used as supplementary cementitious materials (SCM) either to grind cement or to make concrete. The size of this slag market underlines the value of the Daehan Cement sale, as it is a major slag cement producer.

Other notable point about the local cement industry includes the presence of a few extremely large multi-kiln plants with production capacities in excess of 7Mt/yr. The country also has a relative scarcity of limestone. South Korea is the fifth biggest importer of limestone in the world at US$34m. It brings limestone in principally from the UAE, Japan, India, Malaysia, and Vietnam. Notably it also has one of the world’s longest single conveyors, with a length of 12.8km, connecting a quarry to Ssangyong Cement’s Donghae plant.

Graph 1: Cement production and consumption in South Korea, 2010 – 2015. Source: Korean Cement Association.

Unlike the European cement-producing nations that this column has covered in recent weeks, fundamental market structural changes do not appear to be driving the merger and acquisition activity in South Korea. As Graph 1 shows, production and consumption fell from 2010 onwards but has started to pick up since 2013. Instead, a general slowing of the economy from 2010 and a relaxation of the rules triggered merger and acquisition activity. Unsurprisingly then, perhaps, given the potential opportunities for market manipulation, that the Fair Trade Commission fined six of the seven major producers a total of US$168m in early 2016 for alleged price fixing. With the private equity firms widely expected to exit the market after a relative short time, the cement industry looks set to remain volatile for the next few years. Doubtless the market regulators will be watching very carefully indeed to see how it all plays out.

France: LafargeHolcim has appointed Heike Faulhammer as Group Head of Research & Development with effect from 1 July 2017. She will be based at the group’s global research and development (R&D) centre near Lyon, France.

Faulhammer, aged 50 years, joins LafargeHolcim from Arkema, a French chemicals producer, where she has spent 20 years in research, production, product innovation-related functions and sustainable development. In particular, she acted as a Director at Arkema’s global R&D centre in Lacq. Faulhammer graduated from the University of Freiburg (Germany) and holds a PhD in Chemistry.

The changeover at the top of LafargeHolcim, with Eric Olsen standing down and with the appointment of Jan Jenisch (CEO of Sika AG), is worthy of note for a number of reasons. American/French Eric Olsen has been in charge of the merged company since its inception and has made a good job of bringing together two very different companies, while at the same time battling uneven economic growth worldwide which has seen some patchy results over the last two years. Given more time, he would undoubtedly have presided over more robust results as yet more synergies are discovered in the newly-lean company.

In fact, lean-ness is one of the four ‘strategic pillars’ that are now governing LafargeHolcim, according to the recent fascinating 2016 annual report. Alongside ‘commercial transformation,’ ‘cost leadership’ and ‘sustainability,’ the report stipulates that the company will be ‘asset light.’ The report goes on to explain that LafargeHolcim ‘will optimise our current asset base, better leveraging our industrial footprint, reducing our capital expenditure and exploring new growth opportunities with lower capital expenditure.’ It says that ‘Future growth will be focussed on low-capital intensive business models that enable us to access more of the value chain.’ Putting numbers to the words, LafargeHolcim’s capex in 2016-2017 was CHF3.5bn (Euro3.21bn), but it will plummet to CHF2bn (Euro1.83bn) from then on. As CEO, Eric Olsen’s prints are all over this plan.

The company plans to use its ‘know-how in preventative maintenance and capacity optimisation’ to reduce its ongoing capex in the cement industry, and says that ‘we outsource our fleet management whenever possible and develop alternative logistics offers to reduce capital expenditure.’ So, out with its own fleets of vehicles, and in with contractors, freeing-up capital (but possibly leading to lower retained profits). The company also says that ‘the leveraging of our global trading platform enables us to serve some markets without the need to invest in local clinker capacity.’ Alongside various statements in the annual report that suggest that the company has quite enough clinker production capacity already, we can see that it intends to stop building any new greenfield plants, and to potentially invest in clinker grinding facilities in markets where it does not have a presence, supplied by its currently under-utilised clinker-producing plants. It plans to expand into low-capital concrete markets, stating that ‘we are implementing franchise models in the ready-mix and retail segments, enabling us to reach customers in a differentiated way while keeping capital expenditure low.’

Eric Olsen’s plan is/was a sensible one: stop sending money out the door, make the current assets work a lot harder, and get into businesses with a good margin but which don’t cost a lot in which to become established. This is a plan that will take time to come to fruition, but unfortunately, Eric Olsen will not be at the helm of the company to see the benefits. He resigned at the end of April after an internal investigation at the company showed that managers at the company’s cement plant in Syria had paid-off local militias in order to stay open. As Eric Olsen stated at the time, “While I was absolutely not involved in, nor even aware of, any wrongdoing I believe my departure will contribute to bringing back serenity to a company that has been exposed for months on this case.” It seems that the chairman and the board of directors owe Mr Olsen a few beers - at least - for taking the heat off the company.

German national Jan Jenisch steps into Eric Olsen’s shoes at an interesting time then. He is coming from a company, Sika AG, that has also seen some tumultuous events in the last few years. The company’s controlling family wish to sell its 16% stake (including 53% voting rights) to multi-national building materials group Saint-Gobain, which is eager to buy, against the wishes of the company’s board, senior managers and other shareholders. So far the sale has been foiled by Mr Jenisch, but a crucial court case decision is due later in the year. Who knows, in the meantime maybe another building materials company might step-in to try to take over Sika’s attractive business? Mr Jenisch managed to increase Sika’s profit by 22% in the last full year of operation of the company, and the board of LafargeHolcim will be hoping that he can repeat the magic with his new company. If he manages it though, just remember that he has inherited Eric Olsen’s ‘cunning plan that might just work.’