Displaying items by tag: Titan Cement

Greece/UK: Titan Group has joined the Global Cement and Concrete Association (GCCA), a global organisation dedicated to strengthening and promoting the sector’s contribution to sustainable construction. The cement producer said that its participation would build on its commitment to, “actively engage in collaborative initiatives aiming to address global sustainability challenges.”

Launched in January 2018, the GCCA intends to become a respected industry voice and trusted source of information on sustainable construction. It complements and supports the work done by cement associations at national and regional level. As of January 2019 GCCA will incorporate the activities of the Cement Sustainability Initiative (CSI) following a strategic partnership with the World Business Council for Sustainable Development (WBCSD).

UK: The Global Cement and Concrete Association (GCCA) reports that it continues to grow, with the addition of several new member companies from Europe, South America and Asia. In August 2018 there were six new members: Buzzi Unicem, Cementos Argos, Cementos Pacasmayo, Çimsa Çimento, SCG Cement and Titan Cement. The GCCA also welcomed the US Portland Cement Association (PCA) as an Affiliate.

Albert Manifold, GCCA President (and CEO of CRH) said, “We are delighted to welcome further cement and concrete companies and like-minded organisations to the GCCA. The GCCA was set up to provide the authoratitive global voice for this essential sector. With every new member, the voice becomes even stronger.”

The new members and affiliates join 10 existing member companies: Cemex, CNBM, CRH, Dangote Cement, Eurocement, HeidelbergCement, LafargeHolcim, Taiheiyo Cement, UltraTech Cement and Votorantim. Further applications for member and affiliate status have been received and are being processed.

Turkey: Greece’s Titan Group has reached an agreement to increase its share in its joint venture, Adocim Çimento Beton Sanayi ve Ticaret. At present the cement producer is a 50-50 joint-venture operated with Cem Sak Group since 2008. The arrangement will see it buy an additional 25% share in Adocim and dispose of its 50% share of a grinding plant. The transaction is conditional upon approvals by regulatory authorities and is expected to be concluded by the end of November 2018.

Adocim owns an integrated cement plant with a production capacity of 1.5Mt/yr, a grinding unit with a production capacity of 0.6Mt/yr and three ready-mix concrete units.

Greece: Titan Cement’s turnover fell during the first half of 2018 due to a stagnant US market and negative currency effects. Its turnover fell by 7.9% year-on-year to Euro713m in the first half of 2018 from Euro774m in the same period in 2017. Its earnings before interest, taxation, depreciation and amortisation (EBITDA) fell by 14% to Euro122m from Euro142m. However, its net profit rose by 78% to Euro24.8m from Euro13.9m.

In the US the group reported that demand for cement continued to grow but that ‘exceptionally’ rainy weather in the eastern states held back sales and ‘production challenges’ in Florida had to be addressed through increased imports via its Tampa terminal. Turnover declined in Greece due to falling infrastructure projects and a poor house-building sector.

Markets in southeastern Europe reported mixed performance with overall turnover falling. In Egypt negative currency affects limited turnover although earnings rose in both local and Euro terms. In Turkey the net results of Adocim were close to the previous year’s levels. In Brazil a truck drivers’ strike in May 2018 dented a construction market that was showing ‘encouraging’ signs.

Greece: Titan Group’s turnover fell slightly to Euro1.51bn in 2017. Bad weather, the devaluation of the Egyptian Pound and weakening of the US Dollar affected its operating results despite a buoyant US market. Its earnings before interest, taxation, depreciation and amortisation (EBTIDA) fell by 1.9% year-on-year to Euro273m in 2017 from Euro279m in 2016. Its net profit fell by 66.5% to Euro42.7m from Euro127m.

The cement producer’s turnover grew by 9.9% to Euro873m in the US despite Hurricane Irma in September 2017 and other poor weather effects. In Greece it reported that build activity weakened further in 2017. It said that although export volumes remained high, its profit margins were hit by the lowering value of the US Dollar and increased fuel prices. Overall, the turnover of its Greece and Western Europe region fell by 4.8% to Euro249m. In Southeastern Europe turnover rose by 10.5% to Euro226m due to increased demand for building materials. Turnover in the Eastern Mediterranean region fell by 36.5% to Euro158m due to negative currency effects in Egypt and a fall in cement demand.

Egypt: Titan Cement Egypt is planning to spend US$8m towards building a 8MW solar power plant next to its Beni Suef cement plant. Surplus energy from the unit will be sold to the national grid, according to the Al Borsa newspaper. The project is at the bidding stage with contractors but the cement producer is believed to be in ‘advanced talks’ KarmSolar.

Weather always seems like an excuse in cement company financial reports. It seems that it can pop up when a producer has nothing else to blame for its poor performance. Except, of course, when there has actually been some bad weather. With this in mind the weather is likely to have a rather larger presence in the next set of results for companies in the Caribbean and Florida in the aftermath of Hurricane Irma. The storm tore across the region in a rough north-western bearing, reaching Category Five hurricane status on the Saffir–Simpson scale with sustained winds of over 252km/hr. It caused loss of life and mass destruction to property and infrastructure.

Bottom lines flutter in the wind as construction markets upend in the wake of the weather. Yet cement companies have a more direct relationship with extreme weather events. Cement plants themselves are large industrial sites with staff and equipment that are vulnerable to the elements. This is covered by a company’s resilience strategy but it can include things like reducing non-essential staff levels, shutting down production and securing a site. Cemex USA, for example, set up telephone lines to help employees in need of assistance for both Hurricane Harvey in Texas in late August 2017 and Irma this week. Titan America shut down its Florida operations over the weekend ahead of Irma and then started reopening them on 12 September 2017.

To look at one facet of preparing a cement plant shutting a clinker kiln down with adequate notice, like for a maintenance period, is one thing. Yet doing it in an emergency is an entirely different proposition as the kiln generally needs time to cool down. Global Cement discovered what happens when a kiln is simply stopped when it visited the Cemex South Ferriby plant in the UK. The plant suffered a complete electrical outage following a tidal surge at the site. A 22m-long section of one of the kiln shells had to be replaced because it had been distorted by the sudden cooling.

Secondly, the concrete that cement is used to make plays a key role in what the Portland Cement Association (PCA) and others call resilient construction. Typically concrete structures and buildings survive extreme weather events better than other weaker building materials. Although a wide range of other factors such as building design, foundations and roofing construction are also important. Notably, much of the footage that emerged during the storm in Florida was shot from concrete buildings. As Cary Cohrs, former chairman of the PCA put it: "The greenest building is the one still standing." At the time of this push 2013 Cohrs and the PCA were lobbying to strengthen US building codes and standards. It is likely that the association will renew its efforts in the wake of Irma.

With the winds slackening, the clean up operation starts. Cemex USA’s Houston Terminal said it had reopened for business after Harvey despite being two feet under water a week earlier. As reports start to emerge about the scale of the devastation in the region following Hurricane Irma the insured losses have been estimated at US$20 – 65bn by analysts quoted by the Financial Times. Two things are certain though. One, bad weather is likely to make an appearance in the third quarter financial reports and, two, the rebuilding is going to need lots of cement.

LafargeHolcim was the last major European cement producer to release its second quarter financial results last week. The collective picture is confused. Cement sales volumes have risen but sales revenue have fallen.

Most of the producers have blamed negative currency effects for their falls in revenue during the first half of 2016. Holding a mixed geographical portfolio of building materials production assets has kept these companies afloat over the last decade but this has come with a price. The recent appreciation of the Euro versus currencies in various key markets, such as in Egypt, has hit balance sheets, since the majority of these firms are based in Europe and mostly use the Euro for their accounting. Meanwhile, sales volumes of cement have mostly risen for the companies we have examined making currency effects a major contributor.

Graph 1 - Changes in cement sales volumes for major non-Chinese cement producers in the first half of 2016 compared to the first half of 2015 (%). Data labels are the volumes reported in 2016. Source: Company reports.

As can be seen in Graph 1, sales volumes have risen for most of the producers, with the exception of LafargeHolcim. Despite blaming shortages of gas in Nigeria for hitting its operating income, LafargeHolcim actually saw its biggest drop in sales volumes in Latin America by 13.2% year-on-year to 11.8Mt. The other surprise here was that its North American region reported a 2.7% fall to 8.8Mt with Canada the likely cause. Vicat deserves mention here for its giant boost in sales volumes due to recovery in France and good performance in Egypt and the US, amongst other territories.

Graph 2 - Changes in sales revenue for major non-Chinese cement producers in the first half of 2016 compared to the first half of 2015 (%). Data labels are the sales reported in 2016. Source: Company reports.

Overall sales revenue for these companies presents a gloomier scenario with the majority of them losing revenue in the first half of the year, with most of them blaming negative currency effects for this. Titan is included in this graph to show that it’s not all bad news. Its growth in revenue was supported by good performance in the US and Egypt. Likewise, good performance in Eastern Europe and the US helped Buzzi Unicem turn in a positive increase in its sales revenue. They remain, however, the exception.

Looking at sales revenue generated from cement offers one way to disentangle currency effects from performance. Unfortunately, only about half of the companies looked at here actually published this for the reporting period. Of these, LafargeHolcim reported a massive rise that was probably due to the accounting coping with the merger process that finalised in 2015. Of the rest - HeidelbergCement, Italcementi and Vicat – the sales revenue from each company’s cement businesses fell at a faster rate than overall sales. Like-for-like figures here would help clarify this situation.

Meanwhile, a mixed global patchwork of cement demand is focusing multinational attention on key countries with growing economies like Egypt and Nigeria. Both of these countries have undergone currency devaluation versus the Euro and are facing energy shortages for various reasons. The exposure of the multinational cement producers to such places may become clearer in the second half of the year.

The Greek debt crisis directly hit the local cement industry on Tuesday 30 June 2015 when Titan Cement reported that it was unable to pay a dividend to its shareholders. The leading local cement producer blamed the capital controls introduced by the government.

It is worth looking at the effects on the domestic cement industry as the Eurozone bureaucracy and the Greek government play 'chicken' with each other while Greece starts the default process, having failed to pay the latest International Monetary Fund (IMF) payment on 30 June 2015. Greece will now join a group, possibly even more select than the European Union, of countries that have failed to pay back the IMF, including current defaulters like Sudan and Zimbabwe.

A better comparison might be made with Argentina which defaulted upon its foreign debts in 2001. Its construction industry fell by 12% year-on-year in 2001 and by a further 30% in 2002. Cement consumption and cement production utilisation rates hit 23% in 2002. One key difference with Greece is that the country has had major financial difficulties for far longer than Argentina. Argentina ran into financial depression in 1998 and defaulted in 2001. Greece ran into financial trouble following the 2008 financial crisis and then received its first bailout in 2010.

As the capital controls show, even initial responses to the financial situations are impacting upon the standard transactions a limited company conducts. The Financial Times ran an article in May 2015 examining the potential effects on businesses of a debt default and Greek exit from the Eurozone (Grexit). In short, business and commerce will continue where possible reacting to whatever comes their way. For example, an olive oil producer reported switching to exports to make profits. Crucially though, another company interviewed, a construction contractor, worried about potential cuts to government or EU-led infrastructure projects.

As Titan reported in its first quarter results for 2015, its Greek market has been dependent on road building. In February 2014 Titan Cement reported its first improved operating results in seven years followed by profit in 2014 as a whole. The other major cement producers, Lafarge subsidiary Heracles General Cement and Italcementi subsidiary Halyps Cement, reported an improved construction market in 2014 with rising cement volumes. However, it was noted by Lafarge that it was developing exports to 'optimise kiln utilisation.' Titan also noted the benefits of exports in its first quarter report for 2015, focusing on a strengthening US Dollar versus the Euro. Given on-going events, one suspects there is going to be a lot more 'development' of this kind.

To set some sense of scale of the crisis Jim O'Neill, former head of economics at Goldman Sachs, famously calculated that, at the height of its growth, China created an economy the size of Greece's every three months. What happens next is down to the crystal balls of economists, although the path of least resistance now seems to be pointing at further default, departure from the Eurozone and Euro and further significant financial pain for Greece.

It looks likely that the local construction market will stay subdued and exports will offer a lifeline. How much the EU is prepared to let Greece default on its bills and then try and undercut its own over-capacity cement industries remains to be seen. However, since the main cement producers in Greece are all multinational outfits, it will afford them some flexibility in their strategy in coping with the fallout. Meanwhile a cement production capacity of around 14Mt/yr for a population of 11m suggests over capacity by European standards. If exports can't help then the situation looks grim.

UPDATE: Here is Global Cement's previous take on Greece from June 2012

Regular readers of Global Cement will have become familiar with the tales of doom and gloom coming out of Titan Cement's various markets in recent years. With significant numbers of assets in Greece (economic turmoil), Egypt (political instability) and the USA (massive drop in cement consumption), Titan was hit hard by the economic downturn.

However, reading Titan's 2014 first half report was a nice surprise this week. Titan reported improvement in every single market that it operates in. Rewind by just 12 months, it is hard to imagine this kind of turnaround. The group reported a net profit, albeit just Euro2.9m, but this is a massive improvement on the Euro21.8m loss made in the first half of 2013. It reported its ninth successive quarter of revenue improvement in the second quarter of 2014.

Away from Titan's improved fortunes there have been other good announcements from an increasingly strong-sounding global cement industry. Other troubled multinationals, France's Vicat Group and Italy's Cementir Holding, have announced improved profits and regional producers Semen Indonesia and Tabuk Cement (Malaysia) have posted revenue improvements. There have been announcements of new integrated projects in Russia, Peru, Pakistan, Zambia, and the UK (yes... the UK!). There was also news of a joint Turkish-Ivorian grinding plant project in Ivory Coast.

The exceptions that highlight this recent positive trend were results from Siam Cement and HeidelbergCement. Siam Cement is being buffeted by continued instability in its native Thailand and its net profit was down accordingly. HeidelbergCement, slightly worryingly, followed last week's poor results from Lafarge and Holcim with a lower second-quarter profit. Cement sales, however, were up.

However, it looks like the worst could be behind Titan – and if it's behind Titan, could it be behind everyone else too? As Titan America's new CEO said this week, "Our company has successfully weathered economic storms on both sides of the Atlantic." Let's hope the seas are calm for the time being.