Displaying items by tag: Merger

India: UltraTech Cement plans to complete its merger with Century Cement by September 2019. Chairman Kumar Mangalam Birla said the company has approval from shareholders, the Competition Commission and stock exchanges, according to the Mint newspaper. However, it still needs permission from the National Company Law Tribunal (NCLT).

The merger, which was first announced in May 2018, is a long running reorganisation of assets belonging to the Birla family. Once complete it is expected to give UltraTech Cement dominance in all regional markets with the addition of 13.4Mt/yr of production capacity in Madhya Pradesh, Chhattisgarh and Maharashtra.

Finland: Metso and Outotec have agreed to merge Metso Minerals and Outotec to create a company specialising in process technology, equipment and services serving the minerals, metals and aggregates industries. The new company will be called Metso Outotec. Metso Flow Control will be excluded from the merger and renamed as Neles and run as a separate company. The companies comprising Metso Outotec had combined sales of around Euro3.9bn in 2018.

The merger will be implemented through a partial demerger of Metso, in which all assets and liabilities of Metso that relate to Metso Minerals will transfer to Outotec in exchange for newly-issued shares in Outotec to be delivered to Metso shareholders. Outotec shareholders will continue to own their shares in Outotec.
The transaction will be dependent on shareholder and regulatory approval. The process is expected complete in the second quarter of 2020.

The current chief executive officer (CEO) of Metso, Pekka Vauramo, will become Metso Outotec’s CEO, and the current CEO of Outotec, Markku Teräsvasara, will become the Deputy CEO of Metso Outotec. Eeva Sipilä will become the chief financial officer (CFO) and Deputy CEO of Metso Outotec. The board of Metso Outotec will include board members from both companies. It is proposed that Metso Outotec’s chairman will be Mikael Lilius and that the Vice Chairman will be Matti Alahuhta.

“Today is an exciting day as we announce the transformational combination of two great companies and simultaneously create an independent leader in flow control. The combination of Metso and Outotec is a unique opportunity to deliver significant value for our shareholders with a broad presence across minerals, metals and aggregates value chains and an even stronger platform for growth and innovation,” said Mikael Liliu.

Nigeria: The Cement Company of Northern Nigeria’s (CCNN) profit rose in 2018 following its merger with Kalambaina Cement. Its profit after tax grew by 77% year-on-year to US$15.9m in 2018 from US$8.9m in 2017, according to the Punch newspaper. It produced 0.76Mt of cement in 2018 and it sold 0.74Mt. The company is planning to expand its production distribution in north-east and north-central regions as it does not expect the north-west to absorb its enlarged production capacity of 2Mt/yr.

Brazil: Investors have started legal action over in Cimento Tupi’s defaulted debts and attempts to merge with its parent company Cimento Santo Estevão. The cement producer defaulted in mid-2018 on payments to foreign investors that hold around US$30m in it, according to the Valor Econômico newspaper. It also stopped paying interest on the debts in 2015.

Other creditors are also working to stop Cimento Tupi’s plans to merge with Cimento Santo Estevão because it would raise the company’s debts rather than cut costs. A court in Rio de Janerio rejected one case although others are on-going elsewhere. Separately, the Agricultural Bank of China is also challenging the cement producer over arrears in a loan worth US$18m.

Cimento Tupi operates one integrated plant at Pedra do Sino in Minas Gerais and a grinding plant in Modi das Cruzes in São Paulo. It has a combined cement production capacity of 2.5Mt/yr but it has been producing half of this since around 2015. Its operating revenue remained stable at US$43m for the first nine months of 2018. However, its loss more than trippled year-on-year to US$76m.

Nigeria: The Cement Company of Northern Nigeria (CCNN) has successfully merged with Kalambaina Cement. Abdul Samad Rabiu, the chairman of CCNN, said that the merger would boost efficiency, productivity, output and the financial returns of the company, according to the Eagle newspaper. The merger plans were publicly announced in mid-2018.

Nigeria: The Cement Company of Northern Nigeria (CCNN) says it has received formal approval from the Securities Exchange Commission and the Federal High Court for its merger with Kalambaina Cement. It added that the scheme of the merger was effective from 24 December 2018. New CCNN shares have been issued to and allotted to Kalambaina Cement’s shareholders at an agreed ratio.

India: Dalmia Bharat’s sales rose but its earnings and profit fell in the half-year to the end of September 2018. Its income increased by 10% year-on-year to US$625m from US$570m and its sales volumes grew by 13% to 8.6Mt from 7.6Mt. However, earnings before interest, taxation, depreciation and amortisation (EBITDA) decreased by 8% to US$126m from US$138m and its profit after tax dropped by over a third to US$7.7m from US$12m.

The cement producer said it had reduced its logistic costs despite an increase in diesel prices. It also reported that its alternative fuels co-processing rate was 5.5% in the second quarter of its 2019 financial year with the company focused on raising this. The board of director also announced that the amalgamation with Odisha Cement had been completed.

Nigeria: The Cement Company of Northern Nigeria (CCNN) says it has received clearance by the Securities and Exchange Commission (SEC) and the Nigerian Stock Exchange (NSE) for its proposed merger with Kalambaina Cement. Following the merger all of the assets, liabilities, licences and undertakings will be taken over by the CCNN, according to the Punch newspaper. The completion of the proposed merger is subject to the approval of the shareholders of the CCNN and Kalambaina Cement and the final regulatory approvals from SEC, the NSE, Federal Inland Revenue Service and the Federal High Court.

India: The proposed merger between OCL India and Dalmia Cement East has been approved by the board of directors of OCL India. Following the amalgamation the company will be known as OCL India.

Nigerian financial analysts Cordros Securities concluded this week that the merger of some of Lafarge’s Sub-Saharan African businesses had reduced earnings at Lafarge Africa. The report is interesting because it explicitly points out a situation where the consolidation of some of Lafarge’s various companies have failed in the wake of the formation of LafargeHolcim.

Cordros Securities’ criticism is that Nigeria’s Lafarge WAPCO performed better in 2013 alone before it became part of Lafarge Africa, with a higher standalone earnings before interest, taxation, depreciation and amortisation (EBITDA) margin. Lafarge Africa formed in 2014, a year before the LafargeHolcim merger was completed, through the consolidation of Lafarge South Africa, United Cement Company of Nigeria, Ashakacem and Atlas Cement into Lafarge WAPCO. Since the formation of Lafarge Africa, Cordros maintains that its earnings per share have consistently fallen, its share price has dropped, its debt has risen, its margins have decreased and its sales volumes of cement have also withered.

Cordros mainly focuses on the Nigerian parts of Lafarge Africa’s business, given its interest in that market and the fact that about three quarters of the company is based in the country. It blames the current situation on growing operating costs since the merger, skyrocketing financing costs for debts and efficiency issues. In Nigeria, Lafarge Africa has had to cope with disruptions to gas supplies. Nigeria’s Dangote Cement had similar problems domestically in 2017 with falling cement sales volumes in a market reeling from an economic recession but Cordros reckoned that Dangote is picking up market share in the South West due to an ‘aggressive retail penetration’ strategy. Finally, Lafarge Africa faced a US$9m impairment in 2017 due to its abandoned pre-heater upgrade project at AshakaCem. The project has been suspended since 2009 due to security concerns in the North-East region. The plant faced an attack by the Boko Haram militant group in 2014 and the group has seemed reluctant to invest further in the site subsequently.

Cordros’ final word on the matter is that with the Nigerian cement market performing slower than it has previously, the local market has become a battleground between the established players of Dangote Cement, BUA Group and Lafarge Africa. What little the report does have on South Africa covers problems with old and inefficient hardware, labour disputes, low prices due to weak demand, high competition and a negative product mix.

Lafarge Africa itself presents a more mixed picture, with market growth picking up in Nigeria following end of the recession but continued market problems in South Africa. Overall, its reported sales grew by 4.8% to US$448m in the first half of 2018 but its EBITDA fell by 25% to US$76.4m. Overall cement sales volumes were reported as up by 5.4% to 2.6Mt in the first half but volumes were still falling in South Africa in the second quarter.

Part of the backdrop to all of this is the intention of Lafarge Africa to cut its debt. In May 2018 its chairman Mobolaji Balogun said that the company wanted to cut its debts by 2020 before continuing with its expansion programme. Part of this process will include a new rights issue later in 2018 to allow shareholders to buy stock at a discount.

It must have made sense, on paper at least, to merge the Lafarge subsidiaries in the two largest economies in Sub-Saharan Africa. Once the merger had settled in, with synergies generating extra revenue, the group could have considered adding extra territories such as Kenya. However, it’s not turned out like that. Two recessions in Nigeria and South Africa respectively, old equipment, debt and serious competition from locally owned producers have piled on the pressure instead. From a stockholder perspective, Cordros is not impressed by the performance of Lafarge Africa. The wider question is: what else did Lafarge and Holcim get wrong when they joined to form LafargeHolcim?