Displaying items by tag: VICAT

Senegal: Youga Sow, the director general of SOCOCIM Industries, says that his company is aiming for a market share of above 56%. He made the comments at a local festival, according to local press. Sow added that the country produced 3.2Mt of cement in 2016 despite having a production capacity of 8Mt/yr. The other major cement producers include Ciments du Sahel and Dangote Cement.

France: Vicat’s earnings have been negatively affected by the devaluation of the Egyptian Pound and performance issues in Turkey. Its earnings before interest, taxation, depreciation and amortisation (EBITDA) fell by 8.7% year-on-year to Euro188m in the first half to 2017 from Euro206m in the same period in 2016. Its sales fell by 0.8% to Euro1.25bn from Euro1.24bn. By business line its cement sales fell by 4.2% to Euro612m and its cement sales volumes declined by 2.6% to 10.8Mt.

“The Vicat Group’s first-half performance was affected by very unfavourable weather conditions in Europe, the US and Turkey, especially at the beginning of the year, and by a difficult macro-economic and industrial environment in Egypt. Other key regions such as India, the US and France recorded improvements. In a year that should be characterised by a very strong seasonality effect, Vicat now expects to benefit from a marked progression in its activities in the second semester,” said the group’s chairman and chief executive officer (CEO) Guy Sidos.

Belgium: Gonçalo Salazar Leite has been appointed as the president of Cembureau, the European cement association, for a two-year term at the association’s general assembly held on 9 June 2017 in Paris. The vice-chairman of Secil has served as the association’s vice-president since 2015. He succeeds Daniel Gauthier, the former chief executive officer (CEO) Western Europe-Africa and member of the managing board of HeidelbergCement, in the role. In addition, Raoul de Parisot, advisor to Vicat’s chairman and CEO, has been elected as the vice-president of Cembureau for a two-year term.

Leite said that he intends to focus on supporting the industry on the path towards its low-carbon targets, framing the association’s European Union (EU) policy discussions in a wider international context and contributing to the ‘true image’ of the industry.

2017 is an anniversary year for the French cement industry as it marks the bicentenary of Louis Vicat’s pioneering work into the creation of ‘artificial’ cement. The company that bears his name, Vicat, is a major force in the global cement industry to this day. However, the French industry has suffered since the global financial crash in 2007, with steadily declining production volumes, despite a bounce in 2011. Lafarge was only able to maintain its international status through a merger with Switzerland’s Holcim in 2015 and the arguments surrounding that ‘merger of equals’ are still playing out now with the resignation of the group’s chief executive officer in April 2017.

Graph 1: Cement consumption in France, 2012 – 2016. Source: Syndicat Français de l’Industrie Cimentière & Vicat.

Thankfully, the industry started to recover in 2016 and the signs are positive that this will continue into 2017 with the presidential elections concluded. Graph 1 shows the situation since 2012.

Sensing the rebound in 2016 the head of the French building federation (FFB) placed growth in construction materials volumes at 1.9% in December 2016 with a forecast of 3.4% in 2017 based on new residential housing. Naturally he used his position to lobby the politicians in the run-up to the election and the FFB have carried on in this vein haranguing the new administration with 112 (!) proposals to ‘rebuild’ France.

The major cement producers broadly agreed with the outlook in 2016 with LafargeHolcim describing the local construction sector as growing ‘slightly’ despite subdued public spending on infrastructure and HeidelbergCement concurring. Vicat was more effusive pointing to its 6% rise in sales volumes to 2.9Mt in the domestic and export markets. It pinned the recovery down to the last quarter of 2015. However, it noted that the rise in volumes had compensated for a fall in prices due in part to the increased exports. On this point, although it’s outside the scope of this column, it would be fascinating to know how much the European Union Emissions Trading Scheme is stoking the French cement indsutry’s recovery through exports (see GCW290).

Investment has been returning to the market though with Ecocem France’s order of a Loesche mill for a slag cement mill it is building Dunkirk, the inauguration of a new tyre recycling unit at Lafarge France’s Martres plant and the start of a gasifier project at Vicat’s Crechy plant in 2016. More recently Lafarge France reported to the French press in May 2017 that it was starting to consider contractors for a new production line at the Martres plant, leading to fears that it might choose a Chinese provider.

So far in 2017 the situation is on a knife-edge with LafargeHolcim, HeidelbergCement and Vicat all reporting slight declines in sale volumes or earnings that they have blamed on the weather. However, LafargeHolcim did mention growing momentum towards the end of the period offering some hope. As seen above the fundamentals for the French cement industry are all ready and present for growth. Now with the pro-business Euro-centric new president installed in office the industry should be about to flower in time for Louis Vicat’s anniversary.

Today HeidelbergCement publishes its financial results for the first quarter of 2017, giving us an idea of how the year is shaping out for the major cement producers outside of China. Looking at graphs 1 and 2 below of cement production volumes and sales revenue gives the initial impression of a reversal of fortunes for the two leading multinational companies. LafargeHolcim’s production and sales are declining as HeidelbergCement races to catch up, boosted by its acquisition of Italcementi in 2016.

This interpretation would be misleading, however, given that LafargeHolcim has been steadily whittling down its assets to become more profitable and because HeidelbergCement has just taken on a raft of production units. The real figures to look at might be the like-for-like changes with adjustments made for currency, consolidation effects and suchlike. Under these conditions each of the three leading cement producers, with the addition of Cemex, have reported stagnant cement sales in the period. Yet the surprise comes from an analogous look at sales. LafargeHocim and Cemex both reported sales revenue increases of 5 – 6% on a like-for-like basis, whilst HeidelbergCement reported no change. This is further backed up by operating earnings before interest, taxation, depreciation and amortisation (EBITDA) figures that rose significantly on a like-for-like basis for LafargeHolcim at 8.8%, more modestly at 2% for Cemex but fell by 3% for HeidelbergCement.

Graph 1: Cement sales volumes at selected multinational producers in Q1 2016 and Q1 2017. Sources: company reports.

Graph 2: Sales revenue at selected multinational producers in Q1 2016 and Q1 2017. Sources: company reports.

The tragedy of the picture above appears to be that Eric Olsen, the chief executive officer of LafargeHolcim, has started to turn the company around following the merger between Lafarge and Holcim in 2015, just as he is leaving the company. This week Olsen denied that his departure was related to the Syria scandal but that it was related to ‘tensions’ at the group. The lesson that HeidlebergCement can take from this is that enlarging a building materials company in a supressed global market requires decisive action to maintain profitability. Certainly, if it doesn’t go HeidelbergCement’s way in future months and years then the stability of its management and major shareholders may become apparent. Although it doesn’t mention internal matters, HeidelbergCement does flag up higher geopolitical and macroeconomic risks in its outlook for 2017 as well as a ‘shift of political measures towards protectionism.’ That last one is potentially bad news for a multinational cement producer looking to move excess clinker around as it downsizes towards profitability.

Of the rest of the producers included in the graphs above Dangote Cement is worth some attention. The production and sales figures show a company evolving from a national player into an international one. Challenged by economic problems and a market contraction at home in Nigeria the company is exploding internationally in sub-Saharan Africa. Roughly, it sold a third of its cement outside of Nigeria in the period but only made a quarter of its revenue outside of its home turf. This has interesting implications for the international future of the company. However, it will be a big moment for the firm once it finally builds a plant in Nepal outside of Africa.

Italy’s Buzzi Unicem and the Brazilian operators Votorantim and InterCement are due to release their first quarter results in the coming weeks which will flesh out the international picture. Already there are lots of fascinating regional trends emerging that require discussion, such as the Philippines that we looked at last week and a ‘back to business’ feeling in China. Next week in the run up the IEEE/PCA Cement Industry Technical Conference in Calgary, Canada we’ll look at the US.

France: Improvements in its French market have led to modest gains for Vicat in the first quarter of 2017. The group’s consolidated cement sales rose by 4.5% on an adjusted basis to Euro283m compared to the same period in 2016. Overall its sales rose by 1.4% on an adjusted basis to Euro554m. Its cement sales volumes rose by 1.2% year-on-year to 4.8Mt from 4.83Mt.

“France continued its progressive recovery, while the US posted further growth in its business. In Asia, a firm performance in India partly helped to make up for the business downturn in Kazakhstan and Turkey, where very difficult weather conditions took their toll. In the Africa and Middle East region, Egypt posted a strong top-line increase at constant scope and exchange rates, which made up for the decline in West Africa,” said group chairman and chief executive chairman Guy Sidos.

France: Sales in the US have supported Vicat’s revenue in 2016. Its consolidated sales in the US rose by 6.2% year-on-year to Euro363m in 2016 from Euro342m in 2015. Overall the company’s sales fell slightly to Euro2.45bn in the year, although they rose by 4.1% at constant scope and exchange rates. Its earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 3.2% to Euro458m from Euro444m. Sales volumes of cement rose by 10.5% to 21.9Mt from 19.8Mt.

"Vicat performed well in 2016 against the backdrop of a very difficult geopolitical and monetary climate. Operating margins rose and results reflected the good sales momentum achieved by the group's staff, combined with a very firm grip on costs. The year was marked by renewed growth in Egypt and France, and our operations continued to improve in the US," said group chairman and chief executive officer Guy Sidos.

By region, notably, sales volumes rose in France by 6% in domestic and export markets, boosted particularly by export sales, with sales revenue up also. Elsewhere in Europe sales fell but volumes rose after a difficult first half of the year. Sales volumes in the US rose by 4% driven by ‘strong momentum’ in the Southeast region, making up for a decline in California caused by a strong previous year and poor weather. In the group’s Asian region its sales revenue fell mainly due to currency variations in Turkey and particularly in Kazakhstan. Finally, in its African and Middle East region, sales revenue in Egypt rose by 3.5% despite a devaluation of the local currency driven by a ‘sharp’ increase in volumes. Two coal grinders that entered into service in late 2015 also helped to grow its EBITDA.

France: Vicat’s sales revenue has fallen by 0.9% year-on-year to Euro1.87bn in the first nine months of 2016 from Euro1.88bn in the same period of 2015. However, its cement sales volumes rose by 10% to 16.6Mt from 15.1Mt. It noted that negative currency effects had affected its results.

“Excluding currency effects, our sales during the period were boosted by further growth in the US, improvement in the French market and a rebound in the markets in India, Egypt and Kazakhstan. In Turkey, business trends remained brisk in spite of recent events. In West Africa, the strong performance recorded in Senegal helped to partly offset the decline in Mauritania. Lastly, the temporary slowdown in our business in Switzerland held back the Europe (excluding France) region,” said the group’s chairman and CEO, Guy Sidos.

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.

France: Vicat’s sales revenue from cement has fallen by 1.5% year-on-year to Euro761 in the first half of 2016 from Euro773m in the same period in 2015. The group has blamed the decline on a fall in selling prices in most of its market regions except for the US. It was also hit by negative currency effects in relation to the high value of Euro. Overall, Vicat’s sales fell by 0.4% to Euro1.24bn but its EBITDA rose by 2.3% to Euro208m.

Despite this, its cement sales volumes rose by 12.1% to 11.1Mt from 9.88Mt. Volume increases were noted in India, Turkey, Egypt, France, the US and, to a lesser extent, by Kazakhstan, Italy and West Africa. Switzerland was the only country to record a fall in sales volumes of cement the first six months of the year. Alongside this the construction materials company reported that its earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 3.3% to Euro168m from Euro163m. It noted particular profit indicator gains in Egypt, due to sales volumes growth and lower energy costs following the commissioning of two coal mills in the second half of 2015 and increased prices and sales volumes of cement in the US.

“The Vicat Group delivered a good performance in the first six months of the year. The positive trends from the first quarter continued, with our business growing across most of our markets, with especially renewed growth momentum in France and in Egypt,” said Guy Sidos, the group’s chairman and CEO.