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Displaying items by tag: Russia
Eurocement to use CNBM investment to cut debt
01 July 2016Russia: Eurocement Group plans to use part of the funds raised from China National Building Materials Group Corporation (CNBM) to reduce its debts. The cement producer told Interfax that, although negotiations are on going, it wants to use some of the funds raised through the Chinese company’s participation in its capital to restructure current debt. It will also use the funding to invest in new ‘high-return’ areas.
Eurocement signed a partnership agreement with CNBM on 25 June 2016 during Russian president Vladimir Putin's visit to China. CNBM plans to develop its business in the construction materials market in Russia and the CIS, including by acquiring an equity stake in Eurocement Group. The total investment could be as high as US$5bn.
Starlinger supplies production equipment for Ad Star sacks to Russian packaging producer KZSU
01 July 2016Russia: Kazanskiy Zavod Sovremennoy Upakovki (KZSU) officially inaugurated its new production plant in Kazan for Ad Star block bottom sacks in late May 2016. Austrian bagging machine manufacturer Starlinger supplied the equipment for the plant. KZSU will produce Ad Star block bottom sacks for use in the cement, gypsum, chemical, fertilizer, animal feed and other dry bulk goods sectors. Tatar President Rustam Minnikhanov attended the opening of the plant.
The plant will produce 44 million sacks per year for local and foreign markets. The investment includes extrusion, weaving, coating and printing lines, as well as two Ad StarKON sack conversion lines and a Recostar universal recycling line for treating the production waste from Starlinger. The sacks will be supplied to Russian and foreign companies including JSC Chemical Plant Karpov, Asia Cement, Poliplast, Knauf Gypsum, Servolux (Belarus) and the LLC Cement Plant Samadov in Tajikistan.
Starlinger has installed 10 Ad Star production plants in other former Soviet states. This is the first complete Ad Star production plant that has been set up in Russia.
CNBM may buy shares in Russia’s Eurocement Group
27 June 2016Russia: China National Building Materials Group Corporation (CNBM) plans to become a shareholder of Eurocement Group. The companies signed an agreement on cooperation in production of construction materials in China on 25 June 2016 in the presence of Russian President Vladimir Putin and President of the People's Republic of China Xi Jinping.
The companies have agreed to upgrade Eurocement’s cement plants and construct new production lines for dry process production of cement. The agreement also envisages establishing clusters for production of construction materials in seven Russian federal districts at the basis of the local company. Local media reports that CNBM will invest US$5bn in the project.
Eurocement targeting exports to Denmark and UK
16 June 2016Russia: Eurocement Group has said that it is targeting exports of cement at Denmark and the UK. Company chief executive officer Mikhail Skorokhod said that ‘contracts in Denmark and Britain are forthcoming’ in an interview with PricewaterhouseCoopers that was recorded ahead of the St Petersburg International Economic Forum.
Exports by Eurocement to Finland and the Baltic states have been taking place since the end of 2015 with a gradual increase in sales volumes. In Finland the cement producer has a market share of 5%. Skorokhod added that the devaluation of the Russian Ruble has opened up export opportunities for the company. However, the company has not disclosed the volume of its exports, according to Interfax.
The overall volume of cement exports from Russia in January to April 2016 reached 230,000t with production of 13.6Mt, according to data from the Union of Cement Producers.
St Petersburg endures cement shortage
15 June 2016Russia: St Petersburg is facing a market cement shortage of 40% due to a decrease in the volume of shipments by a number of producers. Local media has attributed the deficit to the failure of equipment of main suppliers, including Pikalevskaya Soda, Cesla and Eurocement Group. Concrete producers have been forced to shut their plants down due to the shortage. Local cement prices are expected to rise consequently.
Update on Russia
01 June 2016Eurocement owner Filaret Galchev has been surprisingly candid on Russian television this week commenting on why his company offloaded shares in LafargeHolcim in February 2016. He described the move as ‘unexpected’ and a reaction to the shares losing nearly half their value in six months.
Eurocement ran a repurchase deal for the stake with Sberbank in late January 2016 before the bank sold it in early February 2016. Galchev’s wallet wasn’t the only casualty of LafargeHolcim’s falling share price. Board chairman Wolfgang Reitzle announced his plans to resign from the company at about the same time. LafargeHolcim’s share price has since rallied somewhat although it remains well below the level it commanded in the summer of 2015 following the merger.
Back on Russia, Galchev also continued Eurocement’s theme of predicting doom and gloom for the domestic cement industry. He forecast a further drop of up to 10% in local demand for cement. This is in line with previous comments Eurocement has made since at least about mid-2015. Although on the plus side the steepness of the fall in demand may be softening at least.
Graph 1 – Cement production in Russia, 2011 – 2015.
As the data above from the Russian Federal State Statistics Service (ROSSTAT) shows, cement production in Russia fell by 9% year-on-year to 62.1Mt in 2015 from 68.5Mt. This follows years of growth. Data for the first four months of 2016 seemed to show an acceleration of this trend with an 18% drop in production to 8.9Mt for the first three months of the year. However, the latest released figures, for April 2016, show that production may be picking up somewhat. We won’t get a better idea until the middle of the year. On the supply side, ROSSTAT doesn’t release any figures on cement consumption but the Russian railways were have reported that their cement volumes to consumers were down by 9.2% to 4.8Mt in the first quarter of 2016. This is a percentage drop close to what Filaret Galchev has been suggesting for 2016 as a whole.
The news from the multinationals supports this picture. LafargeHolcim reported weak construction markets in the first quarter of 2016 following sharp declines in 2015. HeidelbergCement recorded ‘slight’ decreases in its sales volumes in the period. It also noted a knock-on effect in Sweden due to lowering export deliveries to Russia.
All in all it’s a similar picture to fellow BRIC country Brazil, which we covered last week, with falling commodity prices hammering the economy and the local industry battening down the hatches. However, international oil prices are slowly creeping up and the International Monetary Fund (IMF) has predicted lower decreases in its economic output in 2016. Perhaps Filaret Galchev will have some good news to talk about on Russian television sooner than he thinks.
Russian Federal Antimonopoly Service leads discussion on cement pricing and mandatory certification
26 May 2016Russia: The Federal Antimonopoly Service (FAS) has held a meeting to discuss cement pricing and mandatory certification. Representatives of FAS, cement producers, industry associations and government authorities - including the Ministry of Economic Development, the Federal Accreditation Service, the Federal Agency on Technical Regulation and Metrology, the Ministry of Construction and the Ministry of Industry and Trade - took part in the event on 17 May 2016.
Attendees reported that the pricing of bulk cement to industrial customers had increased slightly due to seasonal demand. FAS had received a growing number of complaints about rising prices from purchasers of bagged cement. To counter this, FAS has proposed using points of sale for bagged cement with the intention to remove intermediaries from the supply chain and cut costs.
On mandatory cement certification the Federal Agency on Technical Regulation and Metrology and the Ministry of Economic Development reported that over 50 cement plants in Russia and several Belarusian cement producers have certified their products. However, some cement importers have experienced difficulties with certification. FAS agreed to coordinate the forwarding of issues importers and other producers have experienced to the supervising body. It will also draft proposals on amendments to the certification. Mandatory cement certification came into force on 7 March 2016 due to No. 930 Decree of the Government of the Russian Federation.
Russia: Filaret Galchev, the owner of Eurocement, expects that demand for cement in Russia will fall by 8% - 10% in 2016 after falling 12% in 2015. The cement producer will sell about 20Mt of cement in Russia and about 3.5Mt in other regions including Uzbekistan and Ukraine in 2016. He added that average production costs at the group will produce cement at around US$25/t.
In an interview with Rossiya 24 television reported upon by Interfax, Galchev also described Eurocement’s sale of its 6.1% stake in LafargeHolcim in February 2016 as ‘unexpected’. The Russian cement producer sold its share in LafargeHolcim after they lost nearly half of their value in six months.
"No, I did not expect it. We analysed the situation for a long time, but that is the decision that was made," said Galchev. He added that he had no issues with Sberbank, the Russian bank that restructured Eurocement’s debt after the sale of the shares in LafargeHolcim.
Originally Eurocement was a shareholder in Holcim and it received a stake in LafargeHolcim after that company was formed in a merger. The stake was subsequently transferred to Sberbank of Russia in January 2016 after the shares, which Galchev had acquired with financing from Bank of America, lost over 40% of their value in half a year. At the beginning of February 2016, Sberbank sold the 6.12% LafargeHolcim stake to investors from the UK, Switzerland, the US and other countries.
Krasnoyarsk Cement starts making road cement
30 March 2016Russia: Krasnoyarsk Cement, a subsidiary of Siberian Cement, has started making Portland cement of CEM I type with strength class 42.5. The product is intended for the production of concrete for road and airfield paving, bridge structures and precast concrete elements for transport engineering. The material meets the requirements of GOST R 55224-2012 and GOST 30515-2013 state standards.
Russia: Eurocement and Sberbank CIB, Sberbank’s corporate and investment banking business have agreed on conditions for restructuring the company’s loan portfolio. The restructuring involves postponing the repayment of loans worth a total of US$592m and US$360m for up to six years, as well as optimising interest rates for the company’s loan portfolio at Sberbank.
“Sberbank CIB is a strategic partner of Eurocement. This agreement will help us cut debt servicing costs and minimise the influence of negative macroeconomic factors on our company,” commented Mikhail Skorokhod, President of Eurocement. The conditions for restructuring the debt portfolio will enable Eurocement to take a more flexible approach to financing its operational activities and help it achieve strategic goals.