Displaying items by tag: coronavirus

Two fairly serious investments in Peru made the industry headlines this week. The first was Yura’s plans to upgrade its Arequipa cement plant at a cost of US$200m. The project will involve increasing the plant’s clinker production capacity as well as installing a new mill and a 4.3km conveyor. The second was the latest instalment in Cementos Interoceanicos’ long held ambition to build a plant. It has struck a deal with France-based Satarem to build a 1Mt/yr plant near Puno. The deal also includes Satarem buying a 30% stake in Cementos Interoceanicos and plans to construct two lime units as well.

Graph 1: Local cement sales in Peru, January 2020 to February 2021 compared to January 2019 to February 2020. Source: ASOCEM.

These projects follow a squeeze for the local industry due to coronavirus-related containment measures. Data from the Association of Cement Producers (ASOCEM) shows that cement sales collapsed during the lockdown to just 11,000t in April 2020 before recovering in the autumn. Total annual local sales fell by 17% year-on-year to 9.7Mt from 11.6Mt. Sales have also remained high in January and February 2021.

The experience from the larger cement producers mirror the data from ASOCEM. Cementos Pacasmayo’s sales revenue fell by 7% year-on-year to US$354m in 2020 and its earnings before interest, taxation, depreciation and amortisation (EBITDA) fell by 21% to US$86.3m. Unión Andina de Cementos’ (UNACEM) income fell by 14% year-on-year to US$467m in 2020. Despite this, UNACEM managed to sign a deal to buy Cementos La Unión Chile for US$23m in December 2020. The purchase consists of a 0.3Mt/yr cement grinding plant and a 0.34Mm³/yr ready-mix concrete business with multiple concrete plants and trucks. UNACEM described Chile as its main clinker export destination and it holds concrete and precast subsidiaries in the country.

Yura’s general manager Ramón Pizá reportedly called his company’s plans a “vote of faith in Peru.” This is not an understatement considering the market shocks caused by coronavirus in 2020. The country implemented public health measures relatively early during the pandemic but still ended up with one of the worst death rates per capita in Latin America so far. As the British Medical Journal (BMJ) pointed out earlier this month, the timing was right but tragically the application of public health measures has been found wanting. Yet, the fundamentals for the Peruvian cement market are strong. Annual sales mounted from 2017 to 2019, and were showing signs of continuing this in early 2020 before the lockdown shut the market down. This growth pattern has continued so far in 2021.

US: The Portland Cement Association (PCA) has welcomed expanded, comprehensive Covid-19 safety guidance from the Mine Safety and Health Administration (MSHA). The association said that the guidance is a valuable and flexible resource for cement facilities facing the shifting effects of the Covid-19 threat. Plants have successfully relied on the advice of the MSHA, Centers for Disease Control and Occupational Safety and Health Administration.

PCA government affairs senior vice president Sean O’Neill said, “Protecting our workforce during the Covid-19 emergency has been job number one for US cement manufacturers. The men and women of the cement industry, from our quarries to our cement plants and shipping operations, are designated as Essential Critical Infrastructure Workers. PCA and its member companies are committed to protecting miners and their families while continuing to provide critical building materials needed to maintain and improve our nation’s vital infrastructure.”

Taiwan: Taiwan Cement’s revenue fell by 7% year-on-year to US$4.02bn in 2020 from US$4.32bn in 2019. Net income grew by 4% to US$881m.

Senior vice president Edward Huang said, "In 2020, Taiwan Cement made achievements in many aspects. In additional to our sound financial performance, we also committed to the Global Cement and Concrete Association (GCCA)’s Climate Ambition aspiring to deliver carbon neutral concrete to society by 2050. Even though challenges such as Covid-19, global economic volatility and climate change remain in 2021, Taiwan Cement is well-prepared as we continue to see stable profits in the cement industry, expand our waste treatment and energy businesses and move towards our carbon emissions reduction targets."

Greece: Titan Cement’s consolidated earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 7% year-on-year to Euro286m from Euro267m in 2019. Sales remained level year-on-year at Euro1.61bn and net profit after taxes and minorities (NPAT) fell by 97% to Euro1.50m from Euro50.9m. The group attributed the profit slump to one-off charges, namely the full write-off of the Euro46.6m goodwill of subsidiary Titan Cement Egypt and the derecognition of Euro17.3m of accumulated deferred Egyptian tax assets. If not for these, the group says its consolidated NPAT would have increased by 28% to Euro65.4m.

Cement sales were 17.1Mt, up by 1% from 17.0Mt. The group called the impacts of the coronavirus outbreak ‘less severe than expected.’ Ready-mixed concrete sales rose by 3% to 5.4Mm³ from 5.2Mm³.

Construction activity continued under coronavirus lockdown in most of the group’s countries of operation. As a result, sales remained resilient across all markets. US sales fell by 2% to Euro938m from Euro952m due to negative currency exchange effects. Greece and Western Europe sales rose by 1% to Euro247m from Euro245m. Southeastern Europe sales rose by 3% to Euro938m from Euro952m and Eastern Mediterranean sales rose by 1% to Euro152m from Euro150m.

Group executive committee chair Dimitri Papalexopoulos said “In 2020, we delivered strong financial performance while taking care of our employees and those around us, ensuring high-quality, uninterrupted customer service and accelerating progress towards our digital and sustainability aspirations. In the face of uncertainty caused by Covid-19, we remained confident in our business model. We adapted to shifting market conditions and continued to pursue operational excellence while laying the groundwork to capture future growth.” The group anticipates a positive market trend in all regions in 2021.

Germany: Schenck Process reported operating sales of Euro592m in 2020, down by 6% year-on-year from Euro632m in 2019. Adjusted group earnings before interest, taxation, depreciation and amortisation (EBITDA) fell by 11% to Euro91.4m from Euro102m. New orders for the year totalled Euro619m, down by 6% from Euro659m, but rose by under 1% to Euro292m from Euro291m in the Americas region. Demand for aftermarket service also fell, partly due to reduced production output and capacity utilisation in the global cement industry. The supplier said that construction and steel were also ‘hard hit.’ It attributed the decline to the effects of the Covid-19 pandemic on markets and customer demand. Corrective actions ‘partly mitigated’ the effects of this on income.

The group said that staff reduction have led to lower personnel expenses in the first quarter of the 2021 financial year.

Several of South Africa’s cement and concrete producers joined up in early March 2021 to form an industry association called Cement & Concrete SA (CCSA). The Concrete Institute, Concrete Society of Southern Africa and the Association of Cementitious Material Producers established the organisation to, “take the lead on all matters relating to cement and concrete in South Africa.” Setting up an organisation like this takes time and it fits with the move in recent years of thinking about the whole building materials chain rather than just focusing on one part. The country is also in the first phase of its carbon tax and no doubt producers feel they need to make a renewed effort to fight their corner. Other aspects such as promoting the ‘value creation story’ of the cement and concrete industry in South Africa, research and training also makes sense.

The timing here is compelling due to the ongoing review of anti-dumping measures that were levied by the International Trade Administration Commission of South Africa (ITAC) upon imports by Pakistan-based cement producers. Local media in South Africa reported that ITAC started reviewing the tariffs in December 2020 in a process expected to take up to 18 months in duration. As reported in January 2021 (GCW 489), imports to the country fell after ITAC introduced tariffs in 2015 but they have started to edge up since then, particularly from producers in other countries such as Vietnam and China. Separately, the CCSA may have scored an early victory with the news that its application that government-based infrastructure projects should only use locally-produced cement was working its way through the government.

Looking at the general market, PPC reported ‘muted’ sales of cement in April and May 2020 due to the country’s first coronavirus-related lockdown from late March 2020. Similar to some other countries, construction projects halted and cement plants stopped producing. However, the market bounced back as the restrictions were relaxed with strong sales from June 2020 to September 2020 for the leading producer. It noted that the increase in volumes was mainly due to consumer retail although it noted that government infrastructure cement demand was also starting to be felt. PPC’s cement sales volumes fell by 5 – 10% in South Africa and Botswana from April to June 2020 but then rose by 20 – 25% from July to September 2020. The continuation of this sales momentum was also noted in October and November 2020. Dangote Cement’s operations in the country reported a similar situation, with sales up by 7% year-on-year in the first nine months of 2020 due to a surge in home improvement related demand after the first lockdown ended. Similar to PPC, it reckoned that demand increased by 25 - 30% year-on-year in the third quarter of 2020 as limitations in travel and entertainment led to some people saving money instead.

After the summer sales bounce, producers were soon complaining about rising import levels in the autumn of 2020 with volumes catching up with the amounts recorded in 2019. Hence the ITAC review is a timely reminder of the perils facing local producers.

South Africa’s general coronavirus experience has been an outlier compared to the rest of Africa with higher cases and deaths reported. Yet, it’s still reported lower per capita rates than many comparable countries in Europe and the Americas. Like the UK and Brazil, the country also holds the dubious distinction of having a coronavirus variant named after it. Its cement market appeared to snap back with pent up demand following the lifting of restrictions in common with other countries that implemented tougher public health rules. At which point the importers caught up again a few months later. The effects of South Africa’s second wave of coronavirus led to a lockdown in late December 2020. The effects upon building materials sales are likely to be less drastic than previously because this lockdown has had lighter restrictions compared to March 2020. Surrounded by all of this, the CCSA has sure picked a busy time to start work.

UK: Breedon Group’s revenue remained stable in 2020 at Euro1.08bn. Its underlying earnings before interest and tax (EBIT) fell by 34% year-on-year to Euro89.3m in 2020 from Euro136m in 2019. Cement sales volumes stayed stable at 2Mt but ready-mixed concrete sales volumes dropped by 13% to 2.6Mm³ from 3Mm³. The group reported a strong second half of 2020 following coronavirus-related disruption.

“Although we remain mindful of the ongoing impact of Covis-19, with the worst of the pandemic now hopefully behind us and some welcome clarity on Brexit, I believe the prospects for Breedon and for our industry are increasingly positive,” said Pat Ward, Breedon Group’s chief executive.

India: Ramco Cements says that its 16Mt/yr installed production capacity will increase to 20Mt/yr during its 2022 financial year that starts in April 2021 with the completion of a new plant at Kurnool in Andhra Pradesh and a third production line at its Jayanthipuram plant. The original plan to complete the work by the end of March 2021 was delayed by the coronavirus pandemic, according to the Hindu newspaper. The new integrated plant at Kurnool will have a clinker capacity of 2.25Mt/yr and a cement production capacity of 1Mt/yr. The third production line at the Jayanthipuram plant will have a production capacity of 1.5Mt/yr, increasing the plant’s total to 4.5Mt/yr.

The producer also plans to complete Phase 3 of the installation of a waste heat recover (WHR) unit at the Jayanthipuram plant. Phase 1 (9MW) was commissioned in September 2020, Phase 2 (9MW) in February 2021 and Phase 3 (9MW) is scheduled for after the third line is complete. So far the first two stages have reduced the cement plant’s power consumption from a thermal power plant by 15MW. The project has cost around US$30m.

Ramco Cements has spent US$345m out of its planned US$470m capital expenditure in the 2021 financial year, which ends on 31 March 2021.

Iraq: Lucky Cement has started commercial cement production at its 1.2Mt/yr integrated Samawah cement plant. The News International newspaper has reported that the plant brings the company’s overseas installed cement production capacity to 4.1Mt/yr. It operates the 1.7Mt/yr Basra grinding plant in Iraq and a 1.2Mt/yr integrated cement plant in the Democratic Republic of Congo.

The company said, “Despite the impacts of Covid-19 pandemic, the project has successfully achieved its milestones on time.”

Argentina: Loma Negra’s consolidated adjusted earning before interest, taxation, depreciation and amortisation (EBITDA) grew by 3% year-on-year to US$146m in 2020 from US$143min 2019. Sales fell by 13% to US$458m from US$526m and net profit rose by 107% to US$125m from US$60.6m. Consolidated cement, masonry and lime sales fell by 6% to 5.2Mt from 5.5Mt, but rose by 27% in the fourth quarter of 2020 to 1.6Mt from 1.3Mt. The company noted a fourth-quarter increase in bulk cement sales of 7%. Bagged cement also made a ‘robust recovery’ from the negative effects of the strict Covid-19 lockdown in the second quarter of 2020, according to the company. It attributed the rise to the partial lifting of lockdown for private works. Throughout the year, the group decreased its net debt by 81% to US$22.8m from US$119m.

In 2020 the producer continued with its L’Amali cement plant expansion and divested its Paraguayan asset. All detailed engineering is reported complete and all equipment and materials supplies have been delivered to the site. Commissioning and start-up has been completed at the crushing section and a new primary crusher is fully operational. Commissioning and start-up at raw mill department and clinker line are in progress.

Chief executive officer Sergio Faifman said, “We finished the year in a very good way when considering the unprecedented scenario that we were presented with from the beginning of the year. At that point in time, the fragile macroeconomic environment in the country was impacted by the emergence of the Covid-19 pandemic, making the future uncertain and blurred. More than ever, it was in that challenging context that we lean on our competitive strengths.” He added, “At the beginning of the crisis, we focused on managing our cash position and cash generation, and we sought to optimise our productive structure. As the market began to pull in demand, we relied on our value chain to speed up sales, especially of bagged cement. All of this allowed us to expand our profitability, and enhanced our already solid balance sheet.”