Displaying items by tag: New Zealand
LafargeHolcim finances and rumours down-under
02 December 2015This week we got our first real sense of how things are going at the new global cement leader LafargeHolcim. The group released its first 'combined' results, which cover the third quarter of the year and the nine month period to 30 September 2015.
First impressions are that LafargeHolcim is having a tough time of it, struggling, as many cement industry players are, with an increasingly tricky and uneven global market. It reported a fall in net sales and adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) for the first nine months of 2015, compared to the same period of 2014. Cement sales were also down by 1.3%. The group said that lower than expected demand was the reason behind lower sales, particularly in China and Brazil, which continue to struggle economically. It also picked out India as a country where momentum was lacking.
Of course, it's not all bad. While net sales were down, they were only down very slightly, by 0.6% year-on-year in the first nine months. Many a cement producer would love to pull in Euro20.4bn in sales and ship 189Mt of cement in just nine months! And, after a sticky start to the year, the picture is improving in some regions, with third quarter performance buoyed by improving fortunes in Asia, excluding China and India. LafargeHolcim was able to continue banking on the strong recovery in North America and parts of Europe, where some markets, such as the UK, continue to buck the otherwise depressing trend.
While these results will be a concern they are by no means horrific. However, they have already given rise to (or at least sped up) LafargeHolcim's future divestment plans. According to Dow Jones, LafargeHolcim plans to raise Euro3.23bn in 2016 from selling off assets, around half as much as Lafarge and Holcim had to sell to allow the merger to go through. The company has reportedly started discussions with interested parties, including private-equity firms and industry rivals about some of the assets. The proceeds will be returned to shareholders through dividends or share buybacks, according to CEO Eric Olsen.
Which assets will be divested remains to be seen. However, it reportedly won't involve LafargeHolcim's assets in Australia and New Zealand, at least in the short term. In the past week or so local media has reported that LafargeHolcim's assets in the two countries were to be sold off. However, since then Holcim Australia's Chief Executive Mark Campbell said the company was 'not currently being sold.' Campbell also added that he couldn't rule out a possible sale in the future.
So, while being clear that LafargeHolcim has no plans to sell its Australian and New Zealand assets at the moment, what could happen if it did? The starting point is complex, especially in Australia. According to the Global Cement Directory 2016, there are six operational integrated cement plants and 12 grinding plants in the country, which share a combined 13.9Mt/yr of cement capacity. LafargeHolcim has a 50% interest in Cement Australia's 4.0Mt of cement capacity, giving it 2Mt/yr of capacity and around 14% of national capacity. The other 50% of Cement Australia is owned by HeidelbergCement. Other major players include Adelaide Brighton, which has 2.3Mt/yr in its own name and a 50% stake in Independent Cement, and Boral Cement, which owns 2.3Mt/yr of capacity outright and 50% of SunState Cement's 1.5Mt/yr of capacity. In New Zealand there are two integrated plants, one operated by Golden Bay Cement and one by LafargeHolcim. The latter, however, is due to be closed in 2016.
If LafargeHolcim was to leave the mix in Australia, it is possible that neither Adelaide Brighton nor Boral would be able to take over its share, due to their already-large market presences. This may leave the door open for other regional players, perhaps a Chinese player looking to exit that country's rapidly-declining domestic market? Cemex is contracting and still heavily indebted, leaving it out of the running. While it is also possible that assets could be sold to private equity firms, another interested player could be Ireland's CRH, with 'cash to burn' and recent disappointment from its failure to buy Lafarge and Holcim's former assets in India.
Of course, if the assets aren't for sale, it won't be possible to buy them, meaning that for now the above is just speculation. However, the quick analysis above does highlight the relative lack of viable cement industry suitors in this region. If LafargeHolcim does ever decide to sell in this region, it might find the assets hard to shift.
LafargeHolcim says Australasian business is not up for sale
01 December 2015Australasia: LafargeHolcim has said that, despite what has been reported recently in the media, its Australian and New Zealand operations are not for sale.
LafargeHolcim recently announced a plan to divest almost US$5bn of assets in 2016 after posting unexpectedly weak third-quarter results. Speculation had emerged that it might exit from the Australasia region.
However, according to local media, an internal email sent to staff on 30 November 2015, Holcim Australia Chief Executive Mark Campbell said the company was 'not currently being sold,' but could not rule out an exit in the long term.
"I have checked whether the LafargeHolcim group had made a decision to sell the businesses in Australia and New Zealand and started a sale process without my knowledge and the answer I have received is 'no,'" said Campbell. "That said, organisations change focus over time and it is impossible to say that we will always be part of the LafargeHolcim group."
Australian-listed rivals, including Boral, Fletcher Building and Adelaide Brighton, are seen as potential acquirers, should the multinational giant choose to sell off its local arm. Ireland's CRH may also be interested. However, Morgan Stanley said that many of LafargeHolcim's local competitors might run into competition issues, given that the market is concentrated among several large players. "Should Adelaide Brighton fully participate, we cannot rule out that the 50% share in Cement Australia would be divested due to Australian regulations, given Adelaide Brighton's already strong share in cement," said Morgan Stanley Analyst James Rutledge. "While we think Fletcher Building is unlikely to be in a position to participate in industry consolidation, a change in owner that was less integrated into the region may be a positive for Fletcher Building at the margin," said Rutledge. "Given Boral's strong share in aggregates and the concrete market, we believe it will be difficult to participate in industry consolidation."
While Lafarge has a limited local presence in Australia and New Zealand, Holcim bought a string of Australian assets from Mexico's Cemex in 2009 for US$2bn and now boasts more than 350 sites nationwide.
New Zealand: Two cement ship unloaders, a ship unloader and two conveyor belt systems purchased by Holcim are being shipped to New Zealand from the Netherlands on a heavy lift ship called the Happy Dragon.
One of the cement ship unloaders along with a ship unloader, which have a combined weight of 240t, will arrive in Timaru in early November 2015 and will be used by Holcim at its new dome at the Timaru Port. The other unloader and conveyor belts are bound for Holcim's Auckland dome.
Holcim's Capital Projects Manager Ken Cowie said that Holcim was excited to have the cargo in transit in the North Atlantic. "This signals the arrival on site of all the major equipment for the terminal and brings us closer to commissioning the operations later this year."
The cement ship unloaders were built by Van Aalst Bulk Handling in Hazerswoude. The largest of them is 33m long, 15.5m wide and 18m high. A logistics company brought the unloaders 20km east of Rotterdam, where they were placed on a pontoon by a floating crane and floated down to be loaded onto a ship.
Holcim's Westport job cuts near as cement import facilities open sooner
23 September 2015New Zealand: Holcim, part of LafargeHolcim, is making faster than expected progress on an operational restructure that will lead to 120 job losses on the west coast.
The New Zealand operation has revealed plans to close its manufacturing plant at Cape Foulwind, Westport, with cement instead to be imported from the Mitsubishi Kanda plant in Fukuoka, Japan, via the Timaru and Auckland ports. Holcim will now close its Westport cement plant in the middle of 2016, with 120 job losses expected. The company said that some employees have switched to other roles.
Holcim is building a 30,000t cement silo at Timaru Port and is spending a similar amount at the Port of Auckland. The company had previously said that the silo and importing facilities would be finished in the second half of 2016. However, Holcim New Zealand country manager Glenda Harvey said that the Timaru facility could be operational in January or February 2016 and that the Auckland facility should be completed in May 2016 rather than June 2016. The Westport cement plant will remain operational until the Auckland import site is fully commissioned, then it will be closed.
When the Timaru and Auckland terminals are completed, there will be about 30 staff employed in sales, operations and technical laboratory roles. Westport cement plant staff have been able to apply for positions at Holcim's Timaru and Auckland operations and also overseas, with a small number having taken up roles in other parts of the business. Workers have redundancy provisions in their contracts. The company has about 40 staff within its Christchurch head office operation and 360 in the country across the cement and aggregates businesses.
Some Westport residents have said that the Westport cement plant site and buildings could be used as an industrial park, for electricity generation or as an eco park. Harvey said there has been no update on the site, or if alternative uses could be found. The cement plant has been operating for 57 years.
Fletcher Building earnings driven by New Zealand growth
19 August 2015New Zealand: Fletcher Building has reported a gain in its 2015 fiscal year earnings before one-time charges, as strong growth in its biggest market of New Zealand offset a weaker performance in Australia and the rest of the world.
Operating earnings, excluding one-time items, rose by 5% to US$653m in the year that ended on 30 June 2015. Net profit fell by 20% to US$270m after US$150m of one-time charges for plant closures and impairments. Fletcher's US$150m of one-time charges included a US$78m impairment of goodwill relating to its Forman, Stramit, Tasman Insulation and Humes businesses. There were site closure costs of US$65m related to the Crane Copper Tube business and Iplex Australia. Operating earnings before one-time items in New Zealand rose by 24%, accounting for 69% of the group total, while in Australia earnings fell by 30% and by 7% for the rest of the world.
The heavy building products, which includes New Zealand cement, concrete pipes and quarry products, Australian concrete and quarry products, plastic pipes and steel and is Fletcher's biggest division, recorded a 6% decline in gross revenue to US$2.1bn. Operating earnings dropped by 17% to US$177m, as weaker trading in Australia offset gains in New Zealand. A US$8m loss from plastic pipes reflected a drop in demand from the coal seam gas sector and increased competition in Australia. Light building products, which takes in New Zealand and Australian building materials and roofing tiles, had little changed gross revenue at US$1.3bn, while operating earnings before one-time items rose by 2% to US$118m. New Zealand distribution revenue rose by 6% to US$1.76bn and earnings gained 29% to US$108m, with most of the growth coming from building supplies. In Australia, distribution revenue fell by 11% to US$826m and operating earnings before one-time items rose 6% to US$18m. Construction revenue jumped by 21% to US$1.58bn and earnings before items rose by 32% to US$140m.
In other news, Fletcher has conditionally agreed to sell the operations of Rocla Quarry Products to Hanson Construction Materials in a deal valued at about US$149m. The company expects a pre-tax gain of about US$73.5m from the sale, which requires Australian regulatory approval.
Holcim’s US$50m silo inflated on Auckland's waterfront
12 August 2015New Zealand: A controversial new US$50m dome-shaped silo for storing cement has been inflated on Auckland's waterfront in New Zealand.
The state-of-the-art 28m-high silo holds 30,000t of cement and is located at a Ports of Auckland site on the corner of Plumer and Quay Streets, opposite Vector Arena. The dome's outer skin is made of a membrane similar to that used to build the Cloud on Queens Wharf. Consent to build the silo was granted on a non-notified basis, meaning the public did not have a say, angering groups concerned about the port's growing footprint on the waterfront.
Holcim New Zealand country manager Glenda Harvey said that the storage dome signalled a major milestone for the company. Holcim is investing US$100m to build two 30,000t new storage facilities in Auckland and Timaru as part of its business strategy of global sourcing for supply into the New Zealand market. The Auckland terminal will provide effective access to the major market of the greater Auckland and upper North Island while the terminal in Timaru would provide effective distribution to the whole of the South Island market and lower North Island.
"The project falls within the existing port operations and the company has all the approvals required," said Harvey. "We continue to work closely with the Ports of Auckland and the Auckland Council to ensure all regulatory requirements are met. We have contacted residents and businesses in the nearby vicinity of the new terminal in Auckland around the timing of the dome going up, as part of our commitment to keep them informed." Holcim hopes to have the terminal fully operational by the end of 2016.
James Hardie faces class action over HardieTex
11 August 2015New Zealand: Victims of leaky homes are being urged to join a class action being formed against James Hardie over one of its fibre cement cladding products, HardieTex.
Law firm Parker & Associates has filed a High Court case on behalf of a Wellington couple, who have claimed that HardieTex was the cause of their US$200,000 leaky home problem. The claim alleges that James Hardie was negligent in the design, manufacture and supply of HardieTex, which was used to build thousands of houses through the 1990s and early 2000s. Building owners who have suffered damage have until December 2015 to join the action.
The country manager for James Hardie in New Zealand, Justin Burgess, said that HardieTex is no longer on the market.
Holcim New Zealand develops Waitemata Port
31 July 2015New Zealand: Holcim New Zealand is building a new cement silo at the Waitemata Port. Cement ships will relocate from Onehunga to the new site, which is expected to be completed in the middle of 2016, according to the Manukau Courier. A Holcim spokesperson said that the Onehunga Port will continue to be used as a bagging plant and the silos will remain operational.
New Zealand: The third-largest lime producer in the world, US-based Graymont, has bought the Makareao lime plant in Otago from Holcim and took over the facility on 1 July 2015. Graymont, which has extensive interests in Canada, the US and Mexico, has also bought the McDonald's lime plant at Te Kuiti, Waikato, New Zealand.
Graymont Makareao's operations manager Craig Porter said that the lime plants' output had grown over the last two or three years and that he was excited about the new ownership. Staffing at the plant will not be affected.
Holcim's Weston cement plant project was put on hold in 2013 after it decided to import cement into New Zealand and build two new terminals, including one at Timaru, about four months from the completion of the plant. Waitaki Mayor Gary Kircher said that Holcim still owns the Weston site, associated quarries for limestone, coal and sand and consent for the cement plant that could be established there.
Graymont to buy Holcim’s McDonalds Lime for an undisclosed sum
15 December 2014Canada/New Zealand: Canadian lime company Graymont has agreed to buy McDonalds Lime from Holcim New Zealand and Bluescope Steel, owned New Zealand Steel, for an undisclosed sum. The McDonald's sale is subject to regulatory approvals and should be completed in 2015.
Holcim plans to close its Westport cement plant in 2016 and will also sell its Taylor's Lime assets to Graymont. McDonalds Lime is 72% owned by Holcim New Zealand, with the remainder owned by New Zealand Steel. It has the country's largest lime quarry at Oparure, north of Te Kuiti.
Graymont is North America's second-largest supplier of lime and lime-based products and also has an investment in Grupo Calidra, Mexico's largest lime producer. This is the Canadian company's first investment in the New Zealand market.
Holcim has been trying to sell the lime business, which it no longer considers a core business, as it plans for imported cement to replace local production at Westport. It wrote down the value of its Westport cement plant ahead of the coming closure, booking US$24.1m of charges for the plant. The plant will close by the second half of 2016 when new US$77.6m import facilities at Waitemata in Auckland and Timaru are fully operational. Plans for a new cement manufacturing plant at Weston in North Otago remain on hold, but Holcim is keeping the assets so it has the option of 'eventually building a new cement plant.'