Displaying items by tag: Legal

Sweden: Cementa will not be able to appeal a land and environmental court’s ruling preventing it from using its quarries on the island of Gotland. The Swedish supreme court has ruled that the subsidiary of Germany-based HeidelbergCement has no basis for appeal. Its previous application to extend mining activities at the sites until 2041 failed due to shortcomings in its environmental impact assessments. The quarries supply cement production at the company’s Slite cement plant in Gotland.

Trinidad & Tobago: Barbados-based Rock Hard Cement has ended the operations of its Trinidad & Tobago-based subsidiary Rock Hard Distributors after losing a court case against the country’s Ministry of Trade and Industry in July 2021. The Barbados Today newspaper has reported that chief executive officer Mark Maloney said "Unfortunately, a limit on imports of 75,000t, combined with an import duty of 50%, means that Rock Hard Distributors simply cannot operate in Trinidad." He added, "it is with extreme sadness and disappointment, therefore, that we have closed our business in Trinidad and will now pursue opportunities in other Caribbean countries until such time as we are afforded equal treatment in our home country.”

Egypt: France-based Vicat raised a case against the Egyptian government with the International Centre for Settlement of Investment Disputes (ICSID) in late June 2021. It concerns its cement production business. Reporting by the Qatar-based New Arab newspaper alleges that the cement producer was forced to reduce its shares in its subsidiary Sinai Cement due to a law stopping foreign ownership of companies operating in the Sinai Peninsula on the basis of security grounds. It reports that Vicat has reduced its shares in its subsidiary to 42% from 56% previously.

Vicat confirmed in its financial report for 2020 that it was in the process of taking legal action locally on the matter of foreign ownership in the Sinai region. It added that an investment of around Euro35m in Sinai Cement had been delayed due to administrative approval time. In July 2021, Tamer Magdy, the country manager for Sinai Cement, told local press that Vicat was keen to continue investing in the market.

US: Fortera has appointed Eric Olsen to its board of directors. Olsen is the former chief executive officer (CEO) of LafargeHolcim.

He started his career in the field of mergers and acquisitions at Deloitte & Touche, Banque Paribas and was one of the managing partners of Trinity Associates for six years. He studied business at the University of Colorado and holds a Master of Business Administration (MBA) from HEC international business school in Paris. He joined Lafarge Group in 1999 and was a member of its executive committee from 2007 until its merger with Holcim in 2015 to form LafargeHolcim. He then worked as the CEO of LafargeHolcim until April 2017 when he resigned following a review into a conduct of a cement plant in Syria. Legal charges of financing a terrorist organisation were dropped by French authorities in 2019.

Fortera is a materials technology company that has developed a recarbonation process that uses captured CO2 and mineralises it into a secondary cementitious material. In March 2021 it signed a collaboration agreement with Lehigh Hanson to build a carbon capture and storage (CCS) system at the producer’s 0.8Mt/yr integrated Redding Cement plant in California.

Tanzania: The High Court of Tanzania has ordered G4S Secure Solution to pay Dangote Industries Tanzania US$0.33m for theft and loss of property. In 2018 the security company attempted to sue the subsidiary of Nigeria-based Dangote Cement was for failing to pay for its services, according to the East African newspaper. However, Dangote Cement raised a counterclaim in response due to multiple thefts that it blamed on poor security services.

France/Syria: The Court of Cassation, a court of last resort, has delayed its ruling on the conduct of Lafarge in Syria between 2011 and 2014 until September 2021. It was due to make a decision on a number of appeals related to the case including whether charges of charge of crimes against humanity should be upheld, according to the Agence France Presse. Other indictments include those of financing terrorism, endangering life and violating an embargo. Lafarge has been accused of financing terrorism through indirect payments to extremist groups to keep its Jalabiya cement plant operational after the outbreak of war in Syria.

Lafarge Cement Syria was a subsidiary of Lafarge in the early 2010s. Lafarge and Holcim merged in 2015 becoming LafargeHolcim. LafargeHolcim’s shareholders later voted to change the company’s name to Holcim in May 2021.

Sweden: Cementa says that the decision by the Supreme Land and Environmental Court to reject its renewal application to continue mining limestone at its quarries in Gotland will create a ‘crisis’ for consumers in the autumn of 2021. The quarries supply its integrated Slite cement plant. The producer said that the ‘majority’ of Swedish cement production could cease in November 2021 following the expiry of the current licence in October 2021.

“We are seriously concerned but also surprised by the court's ruling today,” said Magnus Ohlsson, the chief executive officer of Cementa. “Limestone has been mined in Slite for over 100 years, which has built up a huge knowledge bank about how the business affects the surrounding environment. Our application is solid and clearly shows that it is possible to conduct a continued sustainable limestone mining in the area. We must go through the decision carefully and then set up the strategy for how we will handle the situation,” He added, “For Sweden, our customers and for us and our employees, it is important that political decision-makers and authorities quickly draw up new guidelines for how the supply of critical building materials such as cement and concrete should work.”

The subsidiary of Germany-based HeidebergCement originally received clearance in 2020 to renew its mining operations at the site until 2041. However, this was subsequently challenged. The current decision by the Supreme Land and Environmental Court was reached as they said they had insufficient evidence to assess the environmental impact of the application.

Fernando A González and Cemex took to the virtual airways this week with Cemex Day 2021. The investors’ update comprised the usual greatest hits package explaining how well everything is going: earnings growth and leverage levels about to hit desired targets, selective investments and divestments on the way, new production capacity round the corner and punchy sustainability goals turning up earlier than expected. Or at least that’s the way that chief executive officer González and the team told it.

To be fair to Cemex, it seems to be in a good place right now. It weathered 2020 well and now its first quarter results in 2021 compared to the same period in 2019, before coronavirus hit, are looking rosy with cement sales volumes growth of 9%. How much of that is attributable to pent up demand from 2020 remains to be seen though. Its strategy of focusing on markets in North America and Europe appears to have paid off in recent years with its competitors copying it as they have retreated from riskier climes and concentrated on core territories. Its obsession with righting the ratio between its debts and earnings is closer than ever to being realised, with a 4.07x net leverage ratio in 2020 and a target of 3x or lower planned for 2023. That last target is crucial both materially and psychologically for the company as it starts to put it back in the same financial field as its Western multinational competitors and opens up new investment opportunities.

From a production angle, the big news from the event was a 10Mt/yr cement production expansion project between now and 2023. This wasn’t quite as promising as it sounded, as just under half of this was attributed to legacy projects in Mexico, Colombia and the Philippines and some of the new projects had already been announced, but it does bookmark a move from divesting plants to upgrading and building new ones.

The new projects comprise an additional 5.7Mt/yr capacity from on-going debottlenecking, new integrated plants, new grinding plants and reopening idle or mothballed plants. During the event José Antonio González, the Executive Vice President of Strategic Planning & Business Development broke it down into 3.5Mt in Mexico, consisting of 1.5Mt additional grinding capacity at the integrated Tepeaca plant, a 0.5Mt/yr expansion at the integrated Huichapan plant and 1.5Mt/yr from bringing both idled lines back into production at the CPN Hermosilla plant in Senora to support the US market. That last one notably was partly announced in February 2021. In Europe and the US the group plans to add 1.2Mt/yr including expanding grinding capacity at two plants in Europe with details to be announced later. Finally, the company plans to add 1Mt/yr of additional capacity in South American including restarting an idled 0.5Mt/yr kiln at a plant in the Dominican Republic and building a new 0.5Mt/yr grinding mill in Guatemala.

Cemex has also stepped up its target reduction in CO₂ emissions to below 475kg CO₂/t of cementitious material, an approximately 40% reduction in CO₂ emissions compared to 1990 levels, by 2030. The previous target for 2030 of 520 kg CO₂ has been brought forward to 2025. This compares to LafargeHolcim’s similar target of 475kg CO₂/t by 2030, HeidelbergCement’s target of 500kg CO₂/t by 2030 and CRH’s target of 530kg CO₂/t by 2030. The group is planning to spend US$60m/yr on its decarbonisation projects. This compares to a spend of around US$140m/yr on its 10Mt/yr cement production capacity expansion drive over the next three years. Or to put it another way, the group is spending more on growing than sustainability.

Unfortunately, it wasn’t all good public relations for Cemex this week with the news in the Colombian press that one of its former executives is set to be investigated by the authorities over his alleged involvement in the ongoing Maceo cement plant corruption case. The background to this one is that in 2016 Cemex fired several senior staff members, and the local subsidiary’s chief executive resigned, in relation to the building of a new integrated plant at Maceo. This followed an internal audit and investigation into payments worth around US$20m made to a non-governmental third party in connection with the acquisition of the land, mining rights and benefits of the tax free zone for the project. Legal proceedings followed in Colombia and the US. Many large companies have legacy problems to deal with. Just take LafargeHolcim’s continued connection to Lafarge Syria’s conduct in the early 2010s. At the time of writing the Maceo plant is still yet to start operation and is likely to be one of the ongoing projects mentioned above.

Cemex’s second quarter results are due to arrive towards the end of July 2021 but the group is presenting an upbeat image. Sales are up, debts are down, divestments are out and expansions are in. Confidence is important for a multinational trying to convince the rating agencies to give it back its investment grade, so whether this is strictly true or not it certainly knows how to talk the talk. One question going forward at least is how strictly Cemex will want to stick to its core markets if the good times really have returned?

Colombia: The Colombian prosecution service intends to summon former Cemex Colombia chief executive officer (CEO) Carlos Jacks to face charges in relation to the Maceo cement plant corruption case. Jacks was CEO of the company for 24 years and previously headed Cemex operations in Costa Rica, the Dominican Republic and Puerto Rico, according to the Noticias Caracol television channel. A statement made by Camilo González Téllez, the former Legal Vice President, has been used by the prosecutor’s office to press charges against Jacks. So far González is the only senior Cemex executive to have received a custodial sentence in relation to the affair.

In 2016 Cemex fired several senior staff members in relation to the Maceo project and its subsidiary’s chief executive resigned. This followed an internal audit and investigation into payments worth around US$20m made to a non-governmental third party in connection with the acquisition of the land, mining rights and benefits of the tax free zone for the project. Legal proceedings followed in Colombia and the US.

France/Syria: The Court of Cassation, a court of last resort, is considering whether a charge of crimes against humanity should be upheld against Lafarge. However, charges of financing terrorism, endangering life and violating an embargo seem set to stay. The legal case is investigating the company’s conduct in Syria between 2011 and 2014. It has been accused of financing terrorism through indirect payments to extremist groups to keep its Jalabiya cement plant operational after the outbreak of war in Syria. The Court of Cassation is expected to deliver its verdict on 15 July 2021.