Displaying items by tag: Results
Oman Cement reports strong first quarter
24 April 2023Oman: Oman Cement, which is undergoing a change of ownership to China-based Huaxin Cement, reported a revenue of US$50.7m in the first quarter of 2023. This represented a 15% rise year-on-year compared to the first quarter of 2022, when its revenue was US$43.2m.
The company reported net profit of US$5.2m, a 126% year-on-year jump due to one-off earnings, as total expenses increased by 7% year-on-year US$44.2m.
Holcim grows sales and earnings in first quarter of 2023
21 April 2023Switzerland: Holcim’s sales and earnings have risen in the first quarter of 2023 on a like-for-like basis despite the divestment of its India-based business in September 2022. Its net sales rose by 8% on a like-for-like basis to Euro5.84bn in the first quarter of 2023 from Euro6.57bn in the same period in 2022. Recurring earnings before interest and taxation (EBIT) grew to Euro503m from Euro626m. Sales and earnings increased, in real terms, in Europe and Latin America but earnings fell in North America. Both sales and earnings fell in Asia Middle East Africa. Holcim did not comment on the fall in earnings in North America but Reuters noted that US construction spending declined in February 2023 as the housing market coped with increases in the interest rate by the Federal Reserve.
Jan Jenisch, the chief executive officer of Holcim, said "This profitable growth was led by strong performances across our building materials businesses. Our teams continued our fast-paced execution, with 12 value-accretive acquisitions, including Duro-Last, completing our range of flat roofing systems. With strong underlying trends across all our businesses, we are confident we will close the full year strong.” He added that the group reached 16% of ready-mix concrete net sales with its ECOPact product and expanded its ECOPlanet product range with two calcined clay production facilities in France and Mexico. It also launched its ECOCycle technology platform with a target to beat a previous 2025 target of recycling 10Mt/yr of construction, excavation and demolition waste.
Cash flow issues noted in Vietnamese cement sector
19 April 2023Vietnam: Cash flow issues have been noted as a risk for local cement producers struggling to create enough revenue to continue operations. Revenue is reliant on output, local consumption and exports but these are all falling with raw material costs rising and no improvement forecast for the real estate in the short-term, according to the Việt Nam News newspaper. Examples of cement companies reporting a loss include Quang Ninh Construction and Cement in the fourth quarter of 2022. An estimate by the Quang Ninh Tax Department also showed that the company owed more than US$4.m in July 2021, making it the largest debtor in the province’s building materials industry. Quang Son Cement, based in Thanh Hoa province, also reported an after-tax loss of US$13.5m in 2022.
Data from the Vietnam Association for Building Materials (VABM) shows that the cement industry’s production capacity reached 114Mt/yr in 2022, with an estimated output of 93Mt in 2022, giving it a capacity utilisation rate of 82%. However, domestic consumption accounts for around 60 –65Mt/yr, with exports accounting for the remainder. Information from the General Statistics Office reveal that local cement production fell by just under 10% year-on-year in the first quarter of 2023.
Thai Duy Sam, vice president and general secretary of VABM, told Vietnam Investment Review “In recent years, the cost of input materials, particularly coal, has increased multiple times. It has an effect on both production and output.” He added, “Currently, several significant corporations continue to ensure production. However, small enterprises with production lines that can produce 1 - 2t/day face both manufacturing and consumption challenges.” He continued by saying that the production lines of older plants have high depreciation costs and greater heat and electricity consumption than modern units. In addition, these smaller and older plants often lack a trademark, which can make the sales process harder. Commenting on the real estate market, Sam noted complicated payment processes can cause problems with both construction companies and building material suppliers. He cited examples of how the payment for the building materials used to build the Dong Tru and Vinh Tuy bridges had still not been settled 10 years after completion.
Nigerian cement producers among group of manufacturers that spent around a quarter of revenue on raw materials in 2022
19 April 2023Nigeria: Raw material costs for a group of major local manufacturers – including BUA Cement, Dangote Cement and Lafarge Africa – accounted for 24% of revenue in 2022. The increase in the cost of raw materials was driven by a shortage of foreign currency, raw material availability, logistics issues at ports and rising energy costs, according to the This Day newspaper. BUA Cement’s spending on raw materials rose by 9% year-on-year to US$54.3m in 2022, Dangote Cement’s spend grew by 12% to US$427m and Lafarge Africa’s expenditure increased by 32% to US$106m. The other companies included as part of the grouping included BUA Foods, Nestlé Nigeria, Cadbury Nigeria, Nigerian Breweries and Dangote Sugar Refinery.
India: India Ratings & Research forecasts that cement demand will grow by up to 9% in the 2024 financial year that started in April 2023, due to continued government infrastructure spending. Despite mounting inflation and a large number of capital expenditure projects in progress, it expects cement company profits to recover due to slowing increases in energy costs, according to the Press Trust of India. The current prediction for the 2024 financial year follows a growth estimate of 9% in the 2023 financial year.
The credit ratings agency warned that sector expansion projects will hold back cement production capacity utilisation rate below 70% in the 2024 financial year compared to 65% in the 2023 financial year. It forecasts that three-quarters of around 150Mt/yr of new production capacity is likely to be commissioned by the end of the 2025 financial year. However, as most of this new capacity will be grinding plants, the clinker utilisation rate is likely to remain high.
It added that it expects to see more industry merger and acquisition activity in the south of the country in the short-to-medium term.
Head of Khutul Cement and Lime responds to strike
17 April 2023Mongolia: L Naranbaatar, the head of Khutul Cement and Lime, has responded to a strike at the company by outlining changes made since it was nationalised in 2022. Workers are protesting with demands to add wage incentives and to appoint managers from within the company, according to the UB Post newspaper. They have also alleged that the company is spending its budget illegally.
During a press conference Naranbaatar explained that the company produced 403,000t of cement in 2022, an increase from 2021. It reported a profit of US$3.3m in 2022, the first time it had made a profit in the last decade. However, the producer’s wage bill nearly doubled to just below US$6m in 2022. The company also spent US$2.25m on upgrades to the plant in 2022, the first such investment made in five years, compared to US$171,000 spent on maintenance in 2021.
Former economist L Naranbaatar was appointed as the head of Khutul Cement and Lime in March 2022. The company was transferred to the Development Bank of Mongolia when the heir of the previous owners refused to accept the inheritance.
Steppe Cement’s first quarter sales drop in 2023
13 April 2023Kazakhstan: Steppe Cement recorded sales of US$10.9m in the first quarter of 2023, down by 22% from US$14m during the first quarter of 2022. The producer sold 215,000t of cement during the quarter, down by 22% from 282,000t.
Steppe Cement said that Kazakh cement demand fell by 13% year-on-year in the first quarter of 2023. Its market share was 13%, compared to 14% in the corresponding quarter of 2022.
Update on Oman, April 2023
12 April 2023Huaxin Cement completed its acquisition of a majority stake in Oman Cement this week. The China-based company estimated that the purchase price was around US$193m. Following the transaction with a subsidiary of the Oman Investment Authority, the country’s sovereign wealth fund, the cement producer now controls just under a 60% share in Oman Cement.
A key part of the deal includes Oman Cement’s integrated plant at Ruwi in the north of the country. The three-line unit has clinker and cement production capacities of 2.6Mt/yr and 3.6Mt/yr respectively. With the partial ownership share of 60% taken into account, this places the capacity purchase price at around US$124/t, a lower figure for capacity compared to other international acquisitions.
Oman Cement has a couple of new projects in the pipeline that have been mentioned on and off previously over the last year or so. These include the construction of a new 10,000t/day fourth production line, an upgrade to line 3 to 4000t/day from 3000t/day at present and plans for a new plant at the Special Economic Zone (SEZ) at Duqm. The company said it was looking for a contractor to carry out the upgrades at the Ruwi plant. However, Rashid bin Sultan al Hashmi, the chair of Oman Cement, said in the company’s annual results for 2022 that the Duqm project, operating under the name Al Sahawa Cement, had run into problems with the supply of gas for the proposed unit. Another recent development was the signing of a deal between Omani Environment Services Holding Company (Be’ah) and Oman Cement for the supply of refuse-derived fuel (RDF). As an aside, that last one may also have received a boost this week with the news that the local Environment Authority has suspended licenses for the export of used tyres from the country.
How these existing projects will fare under the new ownership remains to be seen, but Huaxin Cement has a track record for developing new cement production capacity outside of China. The cement producer describes itself as de-facto controlled by Switzerland-based Holcim although Holcim said in its annual report for 2022 that Huaxin Cement is a joint-venture. It currently operates plants in Cambodia, Kyrgyzstan, Malawi, Nepal, Tajikistan, Tanzania, Uzbekistan and Zambia and says that it has 10 additional projects in Africa, the Middle East and elsewhere in preparation for future business expansion. In 2022 it started operating a 3000t/day production line at Nepal Narayani and commenced the second stage of a project to build a 4000t/day clinker line at Maweni in Tanzania. Plus, as mentioned in our recent roundup of China-based producers, 13% of the group’s operating revenue derived from business outside of China in 2022 compared to 8% in 2021.
Other producers from outside of Oman have also been active locally in 2023. In late January 2023 India-based UltraTech Cement agreed a deal to buy a 70% stake in Duqm Cement Project International from Seven Seas for US$2.25m. The agreement covered a limestone mining lease that UltraTech Cement said was important for “raw material security.”
The other big development in the Oman cement market since we last covered the country in September 2021 was an intervention by the Capital Market Authority (CMA) on Raysut Cement. The chief financial officer resigned in November 2022 before the CMA questioned the company’s financial results for the second quarter of 2022. The CMA then replaced the board of Raysut Cement in December 2022 saying it had detected ‘material misrepresentation’ in the company’s third quarter results.
The last four months or so have marked a turning point for the local cement sector with a change in leadership for the two largest producers. Oman Cement reported strong growth in 2022 although it warned of “low priced cement being supplied by competitors.” Raysut Cement, unsurprisingly, recorded a loss in 2022. The construction market in the country is expected to grow as the economy leaves the coronavirus period behind, mounting energy prices boost national revenue and potentially some of this heads into infrastructure development. This puts the new management at both producers in a good position going forward.
China: China Resources Cement has forecast a loss of US$4.46 – 5.73m during the first quarter of 2023, which ended on 31 March 2023. Dow Jones Institutional News has reported that the group attributed the anticipated scale of the loss to a year-on-year decline in its cement prices.
China: China National Building Material's (CNBM) revenue fell by 16% year-on-year to US$33.4bn in 2022 from US$40.0bn in 2021. Its adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) fell by 31% to US$5.18bn from US$7.50bn. Sales from its cement and concrete business segments fell by 18% to US$16.0bn and 29% to US$5.25bn respectively. Adjusted EBITDA fell by 42% to US$2.89bn and 7% to US$470m. Its sales volumes of cement and clinker decreased by 15% to 316Mt from 373Mt. Sales volumes of concrete decreased by 24% to 84.7Mm3 from 112Mm3.
The group said that, “In 2022, the triple pressure from shrinking demand, supply shock and weakening expectations persisted, and the complexity, severity and uncertainty of the development environment increased.” With regards to the building materials segment it blamed a declining real estate market, a poor economy and general poor demand in both the peak and off seasons. It added, “The downturn in demand has further aggravated the contradiction of overcapacity in the industry, with prices running low, coupled with a sharp rise in the cost of coal and other elements leading to escalating production costs, the production and operation situation was extremely critical.” In response the company is continuing to push for supply-side reform, promote precise staggered peak production, working on stablising the market and seeking out opportunities to supply large-scale infrastructure projects.