Displaying items by tag: Morocco

Morocco’s Directorate of Financial Studies and Forecasting has reported that cement sales rose by 8.4% year-on-year in October 2016. It's good news for a local cement industry that saw its sales fall from 16.1Mt in 2011 to a low of 14.1Mt in 2014. Sales picked up slightly in 2015 and it looks like the same is going to happen again in 2016. Data from the Moroccan Cement Association (APC) support this with consumption of cement very slightly higher for the first nine month for 2016. Good sales figures in October can only help.

Graph 1: Cement consumption for the first nine months of the year, 2013 – 2016. Source: L’Association Professionnelle des Cimentiers du Maroc.

2016 has also been an interesting time for the Moroccan cement industry due to consequences of the merger and acquisition activity by the multinational producers that operate there. In March 2016, amidst a slew of divestments, LafargeHolcim made a point of announcing that it was holding on to its cement businesses under Lafarge Maroc and Holcim Maroc and enlarging them with its local partner SNI to form LaafrgeHolcim Maroc. The deconsolidation of Holcim Maroc picked up a net gain before taxes of Euro219m for a total consideration of Euro463m, which should considerably add to the group’s cash proceeds.

It managed to avoid being forced to sell off assets by the local competition body when it merged in 2014 due to its relatively low stakes in its companies. Today it has a production capacity of 13.2Mt/yr from seven integrated cement plants or over half the country’s production capacity. In its annual report for 2015 LafargeHolcim said that its cement business saw its results improve, mitigating problems in its aggregate and ready-mix concrete markets. This was followed by good results in the first half of 2016. New projects in the pipeline include plans to build a cement plant in Agadir and a grinding plant in Laâyoune in Western Sahara.

2016 has also seen the acquisition of Morocco’s second largest cement producer, Ciments du Maroc, by HeidelbergCement as part of its purchase of Italcementi. It’s too soon for HeidelbergCement to have reported upon the territory in its first integrated quarterly financial report following the takeover but it did describe Morocco as a having a ‘high growth potential.’ How these assets fit into the wide portfolio of HeidelbergCement’s new production base will be interesting. Ciments de l’Atlas’ (CIMAT), the country’s third largest and local producer, saw its sales fall slightly to Euro124m in the first half of 2016. However, its net profit rose by 13% year-on-year to Euro30m.

The other story of note in recent months in Morocco has been the public outcry against a shipment of refuse-derived fuel (RDF) from Italy in June 2016 destined for a cement plant in Casablanca. The subsequent protests saw waste imports to be suspended, leading Hakima al-Haiti, the government minister at the heart of the affair, to describe the furore as causing damage to the country’s economy in the aftermath. However her opponents rallied under the phrase “Nous ne sommes pas une poubelle” or ‘We are not a trash can.’ Despite this setback for the secondary fuels market, LafargeHolcim highlighted the work its Ecoval waste processing subsidiary has been conducting producing RDF at its Oum Azza site ahead of the Climate Change Conference of the Parties held in Marrakech in mid-November 2016. Although the key difference here is that Ecoval is generating RDF from local waste streams not importing them.

Perhaps as a sign of the growth potential Morocco may hold, this week, a non-cement producer was revealed to be planning to build a cement plant at Tarfaya. Previously the company, Global Oil Shale, had intended to develop shale oil resources at the site but it has switched its plan to constructing a 1.6Mt/yr cement plant instead and hired Luis Verde, a former technical director at Cemex who has also worked for Dangote. Together with the Lafarge project in Laâyoune and the Ciement Sud (CIMSUD) plant also in Western Sahara due to open in mid-2017 it suggest that the investors smell opportunity.

Morocco: Global Oil Shale, a Finnish shale oil development company, intends to build a 1.6Mt/yr cement plant at Tarfaya for a cost of around US$100m. Previously the company had intended to develop shale oil resources at the site, according to the Challenge business newspaper. It intends to focus the plant’s output on the south of the country as well as using its position to target export markets in West Africa.

Morocco: LafargeHolcim, ArcelorMittal, Evonik and Solvay have formed a Low Carbon Technology Partnerships Initiative across the steel, cement and chemicals industries. This new partnership will look at the potential synergies that exist between the manufacturing processes of these three energy intensive sectors, and how these synergies could be harnessed to reduce CO₂ emissions.

As a first step, and following preliminary research, the innovative partnership will produce a study with the technical support of Arthur D Little to identify potential ways to valorise industrial off-gases and other by-products from their manufacturing processes to produce goods with a lower carbon footprint than through the fossil path. The preliminary research has already allowed identification of significant potential in selected trans-sector pathways.

The study is aimed at bringing a fact-based overview of carbon and energy sources from industrial off-gases (first at a European level), and evaluating the technical, environmental and economic feasibility of different Carbon Capture and Usage (CCU) pathways and their potential.

Initial findings from the first step already underway suggest that deploying cross-sector carbon capture and reuse opportunities on an industrial scale could reduce up to 3 GT/yr or 7% of global anthropogenic CO₂ emissions. Existing conversion technologies that could be deployed across the three sectors could utilise by-products in the off-gases to create building materials, organic chemicals and fuel. Increased availability and greater access to renewable energy sources would significantly boost net carbon reduction efforts by those three sectors, within a supportive legislative framework. Cross sector carbon capture and reuse should also result in job creation, to be further investigated.

The study, carried out at European level, is building the ground for similar investigation extended at global level and paves the way for identifying and assessing industrial scale projects on CCU at the interface between the sectors.

“Concrete offers the highest level of life-cycle sustainability performance and we are continuously developing new products and solutions for a low carbon society. This new ambitious partnership will support our mission to cut our net emissions per ton of cement by 40% towards 2030 (versus 1990) and to develop and further deploy low carbon solutions for the construction sector. But to make this a reality, we will need an enabling regulatory framework and support for innovation,” said Bernard Mathieu, Head Group Sustainable Development of LafargeHolcim.

Morocco: Ciments du Maroc has decided to abandon its wind farm project at its Safi cement plant. The subsidiary of Italcementi has decided to change its energy policy in response to a growing number of renewable energy projects in the country, according to SeeNews. CEO Mario Bracci said that the cement producer is considering various options including signing a deal with local developer Nareva for electricity supply to several of its sites instead of investing in a generation solution at just one site.

Ciments du Maroc commissioned its first wind farm at its Laayoune cement grinding plant in 2011. This wind farm consists of six 850kW turbines that joined an existing 150kW pilot turbine installed in 2003. A 150 kW pilot concentrating solar power (CSP) plant was inaugurated near its Ait Baha. Cement plant in October 2014. The site at Safi would have been the company's second wind farm, with a planned capacity of 10MW.

South Korea/Saudi Arabia/Morocco: LafargeHolcim has confirmed plans to divest its assets in South Korea and Saudi Arabia and to enlarge its presence its Morocco. The announcement was made as part of the release of its annual results 2015. The sales form part of the group’s Euro3.2bn divestment program

In Morocco, the group signed an agreement with SNI, its partner in the country, at the same time as the Lafarge-Holcim merger to enlarge its joint-venture by merging Lafarge Ciments Maroc and Holcim Maroc to create LafargeHolcim Maroc. LafargeHolcim and SNI would own a 64.7% stake in the new company once the merger is complete. The group expects to gain a synergy savings of Euro41m over two years from the merger.

LafargeHolcim and SNI also agreed to create a common platform in French-speaking Sub-Saharan Africa. The merger is expected to close in the third quarter of 2016 subject to regulatory authorities’ approval, customary closing conditions and the approval of the shareholders of Lafarge Ciments Maroc and Holcim Maroc.

In South Korea, the group has confirmed that it has signed an agreement with a consortium of private equity funds - Glenwood and Baring Asia - for the divestment of Lafarge Halla Cement in South Korea for Euro427m. The sale is expected to complete in the second quarter of 2016. Lafarge Halla Cement runs one 8.3Mt/yr integrated cement plant, a distribution network across the country and has around 500 employees.

In Saudi Arabia the group has signed an agreement for the sale of the Group’s 25% stake in Al Safwa Cement Company to El-Khayyat Group for total proceeds of Euro120m. This transaction is expected to close in the course of the third quarter of 2016.

Morocco: Spanish mortar producer Grupo Puma and Italian cement maker Italcementi have signed an agreement for the construction of a plant in Morocco.

The companies have set up a joint venture named Meastro Drymix, which will distribute the products in Morocco. Meastro Drymix was incorporated in May 2015 by FYM, the Spanish subsidiary of Italcementi, and Grupo Puma.

Morocco: Holding company Anouar Invest plans to build a 500,000t/yr cement plant in Laâyoune as part of the new southern provinces development projects in infrastructure and housing. With an investment package of US$30m, Ciement Sud (CIMSUD) will start operations by July 2017. The plant will be located in the area in Foum El Oued, Laâyoune. The group has also started construction of a cement plant in Settat with a budget of US$300m. It will produce 2.2Mt/yr of cement and will be in operation late 2018.

Switzerland: Dominique Drouet, CEO of Holcim Morocco, has been appointed Area Manager for Africa Middle East and member of Senior Management of Holcim with effect from 1 January 2015. He will assume this responsibility in addition to his current role. Drouet will succeed Javier de Benito, who has decided to leave Holcim effective from 1 January 2015, to take up a new challenge outside the group.

Drouet joined Holcim in 1994 as CEO of Holcim Outre Mer and was appointed CEO of Holcim Lebanon in 1999. He took over his current role in 2004. Before working for Holcim, Dominique occupied various engineering, commercial and managerial roles in the construction materials industry. He holds a degree in Engineering from the Ecole des Travaux Publics in Paris and a Bachelor's degree in Mathematics from the University of Toulouse.

Chad/Morocco: Moroccan company Ciment de l'Afrique intends to build a US$40m cement unit in Chad. The announcement was made by Chadian president Idriss Deby Itno at a launch event in N'Djamena for two large investment projects made in conjunction with Morocco.

Holcim released its first quarter results for 2014 this week and benefits of a merger seemed clear: both sales and profit were down. Net sales fell by 5.4% to Euro3.35bn and net income fell by 57.5% to Euro65.6m. However, Chief Financial Officer Thomas Aebischer was upbeat on meeting the regulatory requirements of any merger and the prospect of divestment opportunities.

This week we have a guest contributor - Andy Gboka, an analyst at Exotix LLP, a London-based broker specialised in Frontier markets – writing about the impact in Africa from the Lafarge-Holcim merger:

No change in Sub-Saharan Africa cement markets

Looking at (1) the location and size of the assets that both groups operate across the region but also (2) the expansion projects recently announced, we do not anticipate any upheaval in the competitive landscape, at least in the medium term.

Potential reshuffle of African assets

We identify Nigeria and Morocco as the main countries where the two companies are likely to reorganise their operations post-deal.

After the market excitement Lafarge / Holcim's price gains have averaged 9% since the announcement versus +8% the same day (04/04/14). We think it timely to discuss, from a competition angle, the likely impact on sector dynamics in Africa.

Starting with Sub-Saharan Africa where Lafarge and Holcim have been present for decades, the two groups have grown their output capability over time to reach a combined ~20.7Mt/yr. Holcim is a much smaller cement producer through its ~2.6Mt/yr in Ivory Coast, Guinea and Nigeria, whereas the French manufacturer is a regional leader with ~18.1Mt/yr capacity across 10 different countries. North African exposure paints a similar picture, as the Swiss company's installed capacity is ~9.6Mt/yr versus ~21.6Mt/yr for Lafarge (including their respective shareholdings in Lafarge Cement Egypt).

Although we do not believe the proposed merger will significantly alter Africa's competitive environment, business reorganisation is likely in:

(1) Nigeria. LafargeHolcim would control more than ~70% of the United Cement Company of Nigeria Ltd (UNICEM, 2.5Mt/yr in Calabar) which, in our view, is a suitable context for minorities' buyout.

(2) Morocco. More than ~50% of the industry's production capacity is controlled by the two players, a situation that may lead to asset disposals after review by the local competition commission.

Beyond the corporate implications, this announcement also puts into perspective the multiples investors are willing to pay for companies operating in Africa. Indeed, for 2014/2015 financial year the enterprise multiple (enterprise value / earnings before depreciation and amortisation) and price-to-book ratio for the main stocks listed in Nigeria and Kenya average 10.3x and 2.9x respectively, vs. 8.4x and 1.3x for LafargeHolcim (Bloomberg). While demand growth prospects in the teen digits or margins above ~25% (especially in Nigeria) would support a premium for the former names, we think the extent of that premium is questionable.

The best illustration is Dangote Cement, whose market capitalisation stands at ~US$25bn for total capacity estimated at 50 – 55Mt/yr by the 2016 financial year, relatively high when compared to the expected ~US$55bn market capitalisation for LafargeHolcim with (1) 427Mt/yr cement capacity globally and (2) ~60% of its revenue from emerging markets. This underpins our cautious stance on the sector.

Source: Andy Gboka, analyst at Exotix LLP (London-Based broker specialised in Frontier markets).

Andy Gboka will be speaking at the forthcoming Global CemTrader Conference, taking place in London on 2 -3 June 2014.