Displaying items by tag: coronavirus
Philippines: LafargeHolcim subsidiary Holcim Philippines says that it will “strengthen its commitment to development as a supporter of manufacturing and construction” on Mindenao, where it operates the Davao and Misamis Oriental cement plants, to help the island recover from the economic effects of the Covid-19 outbreak.
Sales senior vice president William Sumalinog said, “We are not slowing down at this time when the government has deemed it essential to continue upgrading infrastructure. Doing so not only raises the level of competitiveness of the manufacturing industry, but also shields the economy from the blows of the pandemic. We remain confident that we are well-equipped to deliver great value and support to builders working to improve the competitiveness of Mindanao’s economy and to all our stakeholders in the region who are united in their dreams of a better Mindanao."
Update on Egypt: September 2020
30 September 2020The one thing that the Egyptian cement industry really didn’t need this year was any more jolts. Since the gargantuan 13Mt/yr government/army-run El-Arish Cement plant at Beni Suef opened in 2018, the sector has been stuck in production overcapacity and struggling to catch up. Yet, like the rest of us, they got one nasty surprise in the shape of the coronavirus pandemic. This has added stress to the whole situation and we can see some of this in various news stories that Global Cement has covered recently.
HeidelbergCement’s local subsidiary Suez Cement has been busy in recent days making changes to its corporate structure in the form of a tender offer to buy a 100% stake in Egyptian Tourah Portland Cement. Production stopped at Tourah Cement in June 2019 due to market conditions. This follows yet more lacklustre financial results earlier in September 2020 that show the pain that it and other cement producers have been enduring. Suez Cement’s loss nearly doubled year-on-year to Euro38m for the first half of 2020 and its sales fell by 18% to Euro145m. This was blamed on production overcapacity and a coronavirus-related lockdown. Other producers, both multinational and local, have experienced a similar situation.
Suez Cement also announced in mid-September 2020 that its Ready Mix Beton subsidiary had secured a contract for the supply of concrete for the construction of two new monorail lines connecting the country’s new city projects. Unfortunately, as Suez Cement’s chief executive officer (CEO) Jose Maria Magrina explained in an interview to Daily Egypt News in July 2020, “the New Administrative Capital (NAC) is a very big project, but in the end it has not offset the decrease in informal buildings that have been stopped.” Despite Suez Cement being a major supplier and the proximity of its plants to the site, overall sales have gone down.
Graph 1: Cement consumption in Egypt. Source: Cement Division of the Building Materials Chamber of the Federation of Egyptian Industries.
Magrina’s gloom is shared by other industry figures with a general assumption that perhaps up to a quarter of the country’s 20-something cement plants may have to close in the next year or so. Coronavirus has only deepened this view as the government’s response was to cease issuing construction licences for private buildings in Greater Cairo, governorate capitals and major cities from late May 2020 for six months. Solomon Baumgartner Aviles, the CEO of Lafarge Egypt, said in July 2020 that local cement demand fell by 6.5% year-on-year in the first half of 2020. He added that coronavirus had ‘strongly’ impacted the building materials sector with a big effect on the individual market, and with the licence halting exacerbating the situation further. As data from the Cement Division of the Building Materials Chamber of the Federation of Egyptian Industries shows above in Graph 1 demand peaked at 56.5Mt in 2016 and has since declined to a low of 48Mt in 2019. By month the sector recovered in January and February 2020 respectively with growing cement sales on a year-on-year basis but this has since declined with losses in most months subsequently. This is set against a production capacity of 81.2Mt/yr in 2018, giving an excess of 30Mt/yr and a utilisation rate of 59%.
One story that was mentioned in the local press this week is that Arabian Cement Company (ACC) had started negotiations with the European Bank for Reconstruction and Development and the Commercial International Bank – Egypt to secure new loans worth over US$20m. The ACC has denied this publicly in a statement to the Egyptian Exchange but it’s a sign of the trouble that is expected in the sector given the current circumstances.
All of this leaves cement producers scrabbling to hold on until the market picks up again, takes action in other ways or the government intervenes. Some analysts expect the market to stabilise in the medium to longer term as work on large infrastructure projects like the NAC mounts. Suez Cement’s Jose Maria Magrina has said that, “the government must, within the law, dictate norms that will rationalise the market, while making sure that companies survive since current prices do not cover the costs of production.” Local press has since reported that the Ministry of Trade and Industry has started trying to help cement companies, including measures such as limiting production to balance supply and demand, and decrease the surplus in the market. Another option is a coordinated export subsidy programme in coordination with the government but nothing appears to have happened yet after several years of discussion. Unhelpfully for any export aspirations, Egypt finds itself in a very cement export-heavy part of the world, wedged as it is between North Africa, Turkey and Southern Europe.
Hope springs eternal though as, almost unbelievably, Egyptian Cement Group’s CEO Ahmed Abou Hashima surfaced last week to remind everyone that his company still plans to inaugurate its new integrated cement plant in 2021. The project to build a new 2Mt/yr unit in Sohag has been brewing since 2017 when it was announced with China-based Sinoma on board as the engineering partner. It was originally scheduled to open in the first half of 2020 but it was delayed by coronavirus. Let’s hope the picture looks better when it finally opens.
Egyptian Cement to open new plant in Sohag in 2021
23 September 2020Egypt: Egyptian Cement Group’s chief executive officer (CEO) Ahmed Abou Hashima says that the company plans to inaugurate its new cement factory in 2021. The plant is located in Sohag and has a total investment cost of US$285m, according to the Hapi Journal. The 2Mt/yr project was originally scheduled to open in the first half of 2020 but was delayed due to the coronavirus pandemic.
Lafarge Africa donates US$1.29m to battle against Covid-19
23 September 2020Nigeria: Lafarge Africa has made a donation of US$1.29m to the battle against Covid-19 in Nigeria. Business Day news has reported that the money will go towards “various initiatives aimed at fighting the pandemic.” Lafarge Africa previously gave the use of three of its facilities and donated personal protective equipment (PPE) for the isolation and treatment of Coronavrius patients in April 2020.
Fitch Ratings predicts Indian cement demand fall
22 September 2020India: Credit rating agency Fitch Ratings has forecast a 15% year-on-year decline in domestic cement demand in the 2021 financial year, which ends on 30 March 2021 due to “weak property demand and a sluggish construction cycle.” Fitch Ratings gave the reasons for the decline as “low consumer confidence caused by business uncertainty and unemployment concerns,” causing “underlying appetites of financial institutions to lend to the construction sector to remain weak” in spite of the Reserve Bank of India’s temporary funding relief measures to the sector, which include “loan restructuring, moratoriums and relaxed lending limits.”
Fitch Ratings reported that steel demand will also fall by 10% in the 2021 financial year.
Breedon Group issues trading update
22 September 2020UK: Breedon Group says that it has “continued to deliver an encouraging trading performance since demand began to return in early May 2020 after the Covid-19 lockdown,” recording eight-month sales of Euro580m over the period that ended on 31 August 2020, down by 15% from Euro681 over the corresponding period of 2019. The group says that the figure includes the contributions of its newly acquired Cemex ready-mix and aggregates assets for August 2020.
As a result of this performance, the board reinstated its 2020 guidance, with underlying earnings before interest and taxation (EBIT) for the second half of 2020 anticipated to be in line with that in the second half of 2019. It added, “We continue to be reassured by the UK government's restated commitment to investment in the UK's infrastructure and to encouraging demand from the UK housing market, complemented by similar trends in the Republic of Ireland.”
Fortune names Cemex in 2020 Change the World list
22 September 2020US: Fortune has named Cemex amongst socially impactful companies on its 2020 Change the World list. It gave the reasons for the company’s inclusion as “its efforts in social impact business models. One such initiative was the rapid deployment of solutions to meet the current challenges caused by the Covid-19 pandemic. Working with the Mexican Institute of Social Security and in coordination with more than 20 multi-sectoral partners in Mexico, Cemex built mobile hospitals with highly durable precast antibacterial concrete modules in a record time of two weeks per medical facility. This effort in Mexico will be replicated in other countries where Cemex has operations to contribute to global challenges positively.”
Chief executive officer (CEO) Fernando González said, “Once again, we are honoured by Fortune’s recognition of our efforts to improve the well-being and quality of life of the population. By living our purpose of building a better future and working with our stakeholders, we seek to develop innovative solutions while promoting a sustainable and resilient future.”
Cementos Portland Valderrivas donates furniture to Molinos de Guadaíra Special Education Centre
22 September 2020Spain: Cementos Portland Valderrivas helped make the Molinos de Guadaíra Special Education Centre (MGSEC) in Alcalá de Guadaíra, Seville Province suitable for socially-distanced teaching with a donation of desks and chairs. MGSEC director Nuria Gómez Pascual said that the materials "allow us to improve teaching, facilitating the distribution of students and enabling a greater distance between them,” in accordance with educational and health authorities’ recommendations against Covid-19.
Cementos Portland Valderrivas Alcalá de Guadaíra plant head of environment Pedro Lanagrán said, “The company is committed to the population of Alcala, and especially to the education sector – key to the proper development of our town.”
Cemex gets resilient
16 September 2020Cemex’s transition from a multinational building materials producer to a regional one continued this week with the launch of its ‘Operation Resilience’ strategy. The plan is a stew of coronavirus response, earnings growth, debt reduction, portfolio sharpening and sustainability measures. Yet the intent to “construct a portfolio more weighted towards the US and Europe” marks a public confirmation of the company’s direction in recent years.
Chart 1: Geographic breakdown of Cemex’s revenue in the first half of 2020. Source: Cemex.
This direction of travel for the company has at least two threads that can be seen in the announcements surrounding its new strategy. The first covers the geographical spread of its current portfolio of assets. European countries and the US represented a little under half of Cemex’s revenue in the first half of 2020 as can be seen in the chart above. So focussing on these territories makes sense from an existing portfolio perspective, especially if growth has continued throughout the coronavirus crisis, as is the case in the US. In the general information accompanying its new strategy it broke down revenue by business line so far in 2020 as cement (42%), concrete (41%) and aggregates (17%).
To be fair to Cemex, its decision to focus on certain geographical regions mirrors recent moves at other multinational producers like LafargeHolcim and CRH. The former (mostly) sold its operations in South-East Asia in 2018 and 2019. Albert Manifold, the chief executive officer (CEO) of the latter, memorably favoured the safe and stable earnings of investing in assets in Europe or North America over doing so in somewhere ‘more exotic’ in an earnings meeting in 2019. However, Cemex doesn’t seem overly wedded to sticking to assets in Europe and/or the US either. It recently decided to mothball its South Ferriby integrated cement plant in the UK and sold a plant owned by its Kosmos Cement subsidiary in the US earlier in the year. Fernando A González, the chief executive officer (CEO) of Cemex, confirmed this in the questions and answer session after the strategy launch on 10 September 2020. When asked whether the company was considering selling assets in Asia and Latin America he replied that Cemex was open to divestments in Latin America or in the Mediterranean or in Asia but that driving down debt was the motivator, not coronavirus.
Debt is the other factor that has been persuading Cemex to focus on the US and Europe. It has been the smell clinging to its decisions over the last decade since its poorly timed acquisition of Rinker in 2007. The company stuck out with a high debt to earnings ratio when this column looked at the state of the major cement producers as the coronavirus lockdowns started in Europe: hence all the talk of paying down debt in its ‘Operation Resilience’ strategy. The company now hopes to whittle its net leverage down to at most 3x by 2023. At the same time as this market-calming announcement, it is in the process of changing some of its credit agreements such as extending a US$1.1bn loan from 2022 to 2025. It has also priced another US$1bn worth of senior secured bonds this week in its ongoing drive to raise more funds. This reliance on loans may explain why Cemex has shrunk back towards ‘safe’ markets over the last decade.
Cemex isn’t alone in cooing out market-calming noises as the coronavirus crisis continues. Buzzi Unicem has done the same thing this week for example. Yet, these announcements are instructive because they show what’s on the minds of these companies at least, or what they think investors want them to be thinking about. In Cemex’s case it could be summarised as: make more money more efficiently, cut debt and try to factor sustainability into all of this. Note, however, that as dominance in both industry and geopolitics heads east, Cemex is sticking to the west.
Buzzi Unicem announces crisis-proofing strategy
15 September 2020Italy: Buzzi Unicem says that it has implemented a number of measures to enable it to deal with any economic downturn resulting from the financial impacts of the coronavirus outbreak. The Il Sole newspaper has reported that the company’s strategies fall under two headings, namely increasing efficiencies and improving products and services. As such, the company is targeting a medium-term increase of Italian cement plant capacity utilisation of 70 - 75% from 55 - 60%, while also increasing its product range to offer custom concrete blends “to best suit the needs of the customer.”