
Displaying items by tag: New Zealand
Admixture markets in the US
25 May 2022More mergers and acquisition news emerged this week in the shape of potential buyers for Sika’s US admixtures business. Reporting from Bloomberg revealed that Holcim, HeidelbergCement and Turkey-based Sabancı Holding had all made it, amongst other unnamed companies, to a second round of bidding for the assets. Sika then confirmed this to the Finanz und Wirtschaft newspaper and added that the sale would also relate to Canadian assets as well. The intention here is to bypass the risk of a lengthy competition investigation in the US.
Switzerland-based Sika announced in November 2021 that it had signed a deal to buy MBCC Group from Lone Star Funds, a global private equity firm, for Euro5.2bn. At the time of the announcement Sika said that the transaction was subject to regulatory approval but it added that it was ‘confident’ that all required clearances would be obtained with closure planned for the second half of 2022. Known competition probes are now pending in the UK, Australia and New Zealand. A previous piece from Bloomberg suggested that internal analysis by Sika found that the company might need to divest operations with annual sales of around US$160m with a value of US$400m. However, the latest update suggests a value of up to US$1bn. The US represented US$1.71bn or 18% of Sika’s total group sales in 2021. Sika’s information to shareholders to let them know about the MBCC acquisition in November 2021, showed that MBCC had sales of around US$966m in the Americas in 2021 with 36 production plants. Overall, not just in the US, the deal is expected to change Sika’s technology mix from 40% concrete and cement systems to 49%, with most of the additions coming from concrete applications.
Divestments were always likely in an acquisition this large between competitors with shared geographies. What is interesting here to the cement sector is that the three named interested parties are all cement producers. Holcim is perhaps the least surprising given its size, pivot towards light building materials and the fact that its current head, Jan Jenisch, used to run Sika. If anyone knows how much an admixture company is worth, it’s the guy who ran one five years ago! HeidelbergCement does not have such a large light building materials business footprint but it is demonstrably interested in making heavy building material production more sustainable. Also, as the world’s second largest western multinational cement producer it is likely to be interested in an input market for some of its end products. Sabancı Holding is the outlier in this grouping with a more regional grey cement business based in Turkey, an international white cement business and a diverse set of business interests including finance and energy. Although, even as the smallest of the bunch, it still reported sales revenue of over US$9bn in 2021. One notable absence from the potential contenders list for Sika USA is Cemex. Its Urbanisation Solutions division, which produces admixtures among other products, reported sales of US$1.9bn in 2021 or 13% of the group’s total revenue. US$558m of this was made in the US.
The wider context in the North American admixture market is that the announcement of Sika’s deal with MBCC in November 2021 was followed about a month later when Saint-Gobain said it had entered into a deal to buy GCP Applied Technologies. This followed Saint-Gobain’s acquisition of Chryso in October 2021. However, Saint-Gobain said that the GCP deal would strengthen its position more in North America. Readers can find out more about Saint-Gobain’s ambitions here.
The final word at this stage should go on Lone Star Funds, the current owner of MBCC. Lone Star Funds bought the construction chemicals business from BASF for Euro3.17bn in September 2020. At the time the acquisition closed Saori Dubourg, a member of the board of executive directors of BASF, said “Lone Star has been a professional partner in this transaction and is committed to the future success of the business.” If the reporting is correct, Lone Star Funds is now selling the same business for over Euro5bn. There are two takeaways to consider at this point. One is that the perceived value of products that make cement and concrete more sustainable are growing. The other is that Lone Star Funds timed its acquisition of MBCC from BASF very well.
Holcim Australia and New Zealand announces upcoming Auckland low carbon cement distribution centre
17 March 2022New Zealand: Holcim Australia and New Zealand plans to establish a new low carbon cement import and distribution facility next to its existing cement terminal at Ports of Auckland. The company says that the facility will have the capacity to replace 100,000t/yr of ordinary Portland cement (OPC) used in New Zealand. In 2021, the country consumed 1.6Mt of cement, generating 1.3Mt of CO2 emissions.
CEO George Agriogiannis said “I’m pleased Holcim Australia and New Zealand is progressing to the building phase of a facility that will import and distribute low carbon cement replacement products. Once operational, the site will enable the reduction of carbon emissions via a cement replacement which can be used for applications such as infrastructure, commercial and residential projects.” He concluded “This initiative is a positive step toward the New Zealand government’s Zero Carbon ambitions and Holcim’s Net Zero climate pledge.”
New Zealand: Golden Bay Cement has obtained two hydrogen-fuelled cement trucks produced by Hyzon. TR Group leased the vehicles to the cement company.
Golden Bay Cement said “These two zero emission green trucks signal the future, and are just another step we take to a smaller carbon footprint across our business.”
New Zealand: Stevenson Concrete is set to bring concrete made using CarbonCure technology to the country in July 2021. The Auckland-based concrete producer is currently conducting final internal quality assurance at its Drury quarry and concrete plant before opening the product up on general sale. Canada-based CarbonCure’s technology uses a CO2 mineralisation process during production to reduce carbon footprint of concrete.
"Along with a number of other carbon-decreasing initiatives we are using, this technology is going to change the way New Zealand builds houses, footpaths, roads, pipes, and thousands of other man-made, everyday objects. Stevenson has brought it into the New Zealand mainstream, just as this technology is used in countries like Singapore, North America and parts of Europe," said Anthony Bitossi, general manager of Stevenson Concrete.
New Zealand: The New Zealand Ministry of Finance plans to launch a commission to investigate high building materials prices. The New Zealand Herald newspaper has reported that finance minister Grant Robertson said that New Zealanders pay too much for building materials. Robertson indicated that any probe would look into cement, among other building materials. The Productivity Commission previously estimated that average national building materials prices are 20 – 30% higher in New Zealand than in Australia.
Golden Bay Cement to host Girls in Infrastructure day
03 March 2021New Zealand: Golden Bay Cement has announced that the second annual Girls in Infrastructure day will take place on 30 March 2021 at its cement plant. The event aims to encourage female secondary school pupils in Northland to consider a career in the infrastructure industry. The company said that attendees will see the day-day-to-day operations of the cement plant, as well as learning about other job opportunities along the supply line of infrastructure building.
Process engineering manager Kelly Stevens said, “Having the event on site at Golden Bay, the students are able to get up close to our operations, as well as talk to our staff directly.”
Australia: James Hardie recorded net sales of US$2.10bn in the first nine months of its 2021 financial year, up by 9% year-on-year from US$1.93bn in the first nine months of its 2020 financial year. Adjusted earnings before interest and taxation rose by 25% to US$456m from US$366m. Sales and earnings increased in all three regions in which the company operates. In Australia and New Zealand, it reduced costs by consolidating fibre cement production at its two Australian plants.
Chief executive officer Jack Truong said, “I am pleased with these record results, underpinned by excellent execution of our business transformation that we began in 2019, combined with increasing demand for our premium-quality James Hardie brand products and solutions. The transformation we undertook to unlock capacity and increase efficiency in our global manufacturing network through lean initiatives and to better integrate our supply chain with our customers continues to deliver consistent market share gains and the ability to serve our customers seamlessly around the world. We are firmly on track with our investments in growth to broaden our portfolio with industry-leading innovations that enhance aesthetic value for homeowners. Our transformation initiatives will enable us to expand our market opportunity and allow us to continue to deliver strong performance.”
Australia/New Zealand/US: Ireland-based James Hardie has announced the planned closure of three of its fibre cement board plants. The Cooroy, Queensland plant in Australia, Summerville, South Carolina plant in the US and Penrose, Auckland plant in New Zealand will close permanently in mid-2020, resulting in a total of 375 job cuts. The NZ Herald newspaper has reported that the decision to shut the plants came about due to the impacts of the coronavirus outbreak on the global economic situation. James Hardie will now supply the New Zealand market from its Carole Park, Queensland and Rosehill, New South Wales plants. James Hardie also closed its Siglingen, Baden-Württemberg plant in Germany on a temporary basis, ‘in order to better match supply and demand in the European market.’
James Hardie revised its 2020 profit forecast to US$355m, down by 4.1% from US$370m.
Cement and the Coronavirus
04 March 2020The Coronavirus Disease 2019 (COVID-19) took on direct implications for the international cement industry this week when an Italian vendor infected with the virus visited Lafarge Africa in Ogun state, Nigeria. The cement producer said that it had ‘immediately’ started contact tracing and started isolation, quarantine and disinfection protocols. This included initiating medical protocols at its Ewekoro integrated plant, although local press reported the unit’s production lines were still open. Around 100 people were thought to have had contact with the man.
Global Cement has been covering the epidemic since early February 2020 when the virus’ effect on the construction industry in China started to become evident. First, an industry event CementTech was postponed, financial analysts started forecasting negative financial consequences for producers and plants started going into coronavirus-related maintenance or suspension cycles. Then at least one plant started to dispose of clinical waste and now China National Building Material Group (CNBM) is considering how to restart operations at scale. Also, this week Hong Kong construction companies reportedly laid off 50,00 builders due to a lack of cement due to the on-going production suspension in China.
The major cement companies have identified that their first business risk from coronavirus comes from simply not having the staff to make building materials. LafargeHolcim’s chief executive officer Jan Jenisch summed up the group’s action in its annual financial results for 2020 this week when he said, “We are taking all necessary measures to protect the health of our employees and their families.” Other major cement producers that Global Cement has contacted have placed travel restrictions for staff and reduced access to production facilities.
The next risk for cement companies comes from a drop in economic activity. The Organisation for Economic Co-operation and Development (OECD) forecasts a global 0.5% year-on-year fall in real gross domestic product (GDP) growth to 2.4%, with China and India suffering the worst declines in GDP growth at around 1%. The global figure is the worst since the -0.1% rate reported by the International Monetary Fund (IMF) in 2009. The OECD blamed the disease control measures in China, as well as the direct disruption to global supply chains, weaker final demand for imported goods and services and regional declines in international tourism and business travel. This forecast is contingent on the epidemic peaking in China in the first quarter of 2020 and new cases of the virus in other countries being sporadic and contained. So far the latter does not seem to have happened and the OECD’s ‘domino’ scenario predicts a GDP reduction of 1.5%. All of this is likely to drag on construction activity and demand for cement and concrete for some time to come.
Moving to cement markets and production, demand is likely to be slowed as countries implement various levels of isolation and quarantine leading to reduced residential demand for buildings directly and as workforces are restricted. Business and infrastructure projects may follow as economies slow and governments refocus spending respectively.
The UK government, for example, is basing its coronavirus action plan on an outbreak lasting four to six months. This could potentially happen in many countries throughout 2020. This has the potential to create a rolling effect of disruption as different nations are hit. Assuming China has passed the peak of its local epidemic then its producers are likely to report reduced income in the first quarter of 2020. The effect may even be reduced somewhat due to the existing winter peak shifting measures, whereby production is shut down to reduce pollution. Elsewhere, cement companies in the northern hemisphere may see their busy summer months affected if the virus spreads. The effect on balance sheets may be visible with indebted companies and/or those with more exposure to affected areas disproportionately affected. The wildcard here is whether coronavirus transmits as easily in warmer weather as it does in the cooler winter months. In this case there may be a difference, generally speaking, between the global north and south. Exceptions to watch could be cooler southern places such as New Zealand, Argentina and Chile. Shortages, as mentioned above in Taiwan, potentially should be short term, owing to global overcapacity of cement production, as end users find supplies from elsewhere.
The cement industry is also likely to encounter disruption to its supply chains. Major construction projects in South Asia are already reporting delays as Chinese workers have failed to return following quarantine restrictions after the Chinese New Year celebrations. As other countries suffer uncontrolled outbreaks then similar travel restrictions may follow. Global Cement has yet to see any examples of materials in the cement industry supply chain being affected. On the production side, raw mineral supply tends to be local but fuels, like coal, often travel further. Fuel markets may prove erratic as larger consumers cut back and suppliers like the Organisation of the Petroleum Exporting Countries (OPEC) react by restricting production.
On the maintenance side cement plants need a wide array of parts such as refractories, motors, lubricants, gears, wear parts for mills, ball bearings and so forth. Some of these may have more complicated supply chain routes than they used to have 30 years ago. On the supplier side any new or upgrade plant project is vulnerable if necessary parts are delayed by a production halt, logistics delayed and/or staff are prevented from visiting work sites. Chinese suppliers’ reliance on using their own workers, for example, might well be a hindrance here until (or if) international quarantine rules are normalised. Other suppliers’ weak points in their supply chains may become exposed in turn. This would benefit suppliers with sufficiently robust chains.
Chinese reductions in NO2 emissions in relation to the coronavirus industrial shutdown have been noted in the press. A wider global effect could well be seen too. This could potentially pose problems to CO2 emissions trading schemes around the world as CO2 prices fall and carbon credits abound. This might also have deleterious effects on carbon capture and storage (CCS) development if it becomes redundant due to low CO2 pricing. In the longer-term this might undesirable, as by the time the CO2 prices pick up again we will be that much nearer to the 2050 sustainability deadlines.
COVID-19 is a new pandemic in all but name with major secondary outbreaks in South Korea, Iran and Italy growing fast and cases being reported in many other countries. The bad news though is that individual countries and international bodies have to decide how to balance the economic damage disease control will cause, versus the effects of letting the disease run unchecked. Yet as more information emerges on how to tackle coronavirus, the good news is that most people will experience flu-like symptoms and nothing more. Chinese action shows that it can be controlled through public health measures while a vaccine is being developed.
Until then, frequent handwashing is a ‘given’ and many people and organisations are running risk calculations on aspects of what they do. It may seem flippant but even basic human interaction such as the handshake needs to be reconsidered for the time being.
Fletcher slows down under
18 February 2019New Zealand: Fletcher Building is expecting to declare lower earnings in the half year to 31 December 2018 due to a regional slowdown, particularly in Australia. Its earnings before interest and tax (EBIT) for the six month period was around 10% lower than the same period of the 2017-2018 financial year. It is expected to be in the range of US$432-467m.
In a report Fletcher Building said, “While the company continues to target a result at the top end of this range, it is prudent at this stage in the year to highlight that the 2019 financial year EBIT will be impacted by the outage at the Golden Bay Cement plant, the slowdown in the Australian residential market and the reduction in land development earnings compared to last year.”