Displaying items by tag: inflation
First half 2022 update on multinational cement producers
10 August 2022Second quarter results have been released for many of the European-based cement producers, so we’ll take a look at how they are doing so far in 2022. The general trend for the companies sampled here is that revenue is up, cement sales volumes are down and earnings are varied. Added to this, ready-mixed concrete (RMC) and aggregate sales volumes have risen for most of these organisations. Each producer did well in the US, less well in Europe and differently elsewhere. Concurrently, input costs for raw materials, energy and logistics have been rising and this has been passed on to consumers fairly consistently as price rises.
Graph 1: Sales revenue for selected European-based multinational cement producers in the first half of 2022. Source: Company financial reports.
Graph 2: Cement sales volumes for selected European-based multinational cement producers in the first half of 2022. Source: Company financial reports.
Graph 3: Ready-mixed concrete sales volumes for selected European-based multinational cement producers in the first half of 2022. Source: Company financial reports.
Holcim is currently in a state of transition with responses from regulators on big divestments in India and Brazil expected in the second half of 2022 alongside its diversification into light building materials. Both North America and Europe did well for the group in the first half of 2022, particularly the former, where cement sales volumes rose, unlike the other regions. Asia Pacific was more problematic with inflation and pricing issues reported. Cement demand was also said to be ‘softer’ in China and the Philippines compared to the first half of 2021. The region’s recurring earnings before interest and taxation (EBIT) also fell.
HeidelbergCement’s half-year results were less upbeat with cement sales volumes down by 2.6% on a like-for-like basis, RMC sales volumes stable and aggregates sales volumes up by 1.7%. One point to note here is that HeidelbergCement divested its business in the western US in late 2021 and the graphs above do not show like-for-like changes. However, one reason for the dour tone was that higher input costs had led to a 11.4% drop in the group’s result from current operations before depreciation and amortisation (RCOBD) to Euro€1.53bn. It blamed this on its inability to raise prices sufficiently to counter ‘significantly’ higher costs of energy and transport.
Cemex benefitted from its strong presence in the Americas but even this wasn’t enough to shield it from the negative effect upon earnings of higher energy costs and supply chain disruptions. So, net sales increased in Mexico and the US but operating earnings before interest, taxation, depreciation and amortisation (EBITDA) fell. In Mexico this was blamed on a higher base for comparison in 2021. In the US a declining EBITDA margin was attributed to higher energy costs and supply chain headwinds from maintenance, imports and logistics. Interestingly though, Cemex managed to raise both sales and earnings in its Europe, Middle East, Africa and Asia despite cement sales volumes slipping. It said it was able to do this due to well executed price rises.
Buzzi Unicem reported growth in sales revenue and earnings despite falling cement sales volumes. It attributed this to a ‘strong’ increase in prices. However, it noted that the mounting energy costs had contributed to a decline in its EBITDA margin. Deliveries for the half-year grew in the US, Central Europe, Poland and the Czech Republic. They fell in Italy and, unsurprisingly, Ukraine. Also, despite the growth in deliveries in Poland and the Czech Republic in the reporting period, Buzzi Unicem said that a slowdown in Europe had become evident in the second quarter of 2022 and was particularly evident in Italy, Poland and the Czech Republic. In Ukraine the group reported that activity had resumed at its Volyn plant in the north-west of the country following the Russian invasion in February 2022. The Nikolayev plant, in the south, though continued to remain idle. Sales volumes halved in the country year-on-year. Given the circumstances it seems amazing that they didn’t fall by more frankly.
Finally, Vicat had a tougher time of it than some of the other companies featured here. Its sales revenue grew significantly, as a result of higher prices, but earnings tumbled. The latter was blamed on a high base for comparison in the first half of 2021 and the energy situation. A few non-recurring capital intensive projects at various plants, including the start-up of the Ragland plant’s new kiln in the US, didn’t help either.
Much of the above leaves an uncertain outlook for the second half of 2022. All of the cement producers here expect to increase their sales revenue and raise their prices. Most of them though are rather more circumspect or downright pessimistic about what the state of their earnings will be. The companies covered here are multinational but with a focus on Europe and the US. We have omitted plenty of regional producers elsewhere around the world in this roundup that have already published their results, such as India-based UltraTech Cement or Nigeria-based Dangote Cement. The other big market that is missing is China, where the producers are mostly yet to publish their half-year results. We will return to cover these topics in future weeks.
Tokyo Cement Group increases first-quarter turnover as volumes drop so far in 2023 financial year
09 August 2022Sri Lanka: Tokyo Cement Group increased its turnover to US$45.2m in the first quarter of it 2023 financial year, up by 53% year-on-year from first-quarter 2022 financial year levels. A shortage of imported raw materials and the country’s on-going fuel crisis hampered local cement demand. The group’s cement sales volumes declined during the quarter, while its cost of sales increased by 24% year-on-year. ‘Steep’ currency depreciation compounded the effects of the increase in expenses. Nonetheless, the company recorded a profit of US$1.48m.
The producer said “Tokyo Cement has taken many proactive measures to minimise the impact of economic downturn on the group's performance. Anticipating a challenging environment, the group has reforecasted demand, rescheduled sourcing and production plans, and adjusted cash flows accordingly. The group has deployed drastic cost saving measures, streamlined operations, and postponed capital expenditure. While the short to medium term economic landscape remains uncertain, Tokyo Cement has a proven track record of resilience and resurgence, and is committed to rebuilding the nation, stronger than ever before.”
Siam City Cement donates to Sri Lankans in crisis
04 August 2022Thailand/Sri Lanka: Siam City Cement has despatched US$111,000-worth of medical supplies and monetary donations to Sri Lanka as humanitarian aid amid the on-going financial crisis in the country. Year-on-year inflation was 61% in July 2022.
The Nation newspaper reported that the Thai government has donated a total of US$158,000-worth of supplies to the country. It said “The donations reflect the close and cordial ties as well as the goodwill between Thai and Sri Lankan people.”
Spain: Cementos Molins increased its first-half 2022 consolidated sales by 35% year-on-year to Euro608m and its earnings before interest, taxation, depreciation and amortisation (EBITDA) by 4% to Euro132m. The group said that its implementation of operational efficiency plans successfully offset cost inflation. Its net profit was Euro57m, in line with that in the first half of 2021.
Chief executive officer Julio Rodríguez said "Despite the markets growth slowdown and the uncertain global context, at Cementos Molins we continue to move confidently towards achieving the objectives of our strategic plan 2020-2023.”
Germany: HeidelbergCement’s sales revenue rose by 11% year-on-year to Euro9.95bn in the first half of 2022 from Euro8.94bn in the same period in 2021. Its cement and clinker sales volumes dropped by 4.8% to 58.8Mt from 61.8Mt, while its profit for the period attributable to shareholders dropped by 28% to Euro542m from Euro755m. During the reporting period, the producer reduced its net debt by 8.9% to Euro6.79bn from Euro7.45bn.
Chair Dominik von Achten said "The first half of 2022 was characterised by the strong increase in energy and raw material prices. In this persistently difficult market environment we were again able to significantly increase our revenue.” He continued, “In view of the unprecedented increase in energy prices in recent weeks, the second half of the year remains challenging. For the full year, we continue to expect a significant increase in revenue, while for the result from current operations we now anticipate a slight decline on a comparable basis compared to the strong previous year.”
Mexico: Cemex’s consolidated sales grew by 9% year-on-year to US$7.85bn in the first half 2022 from US$7.2bn in the same period in 2021. It sold 32.1Mt of cement, down by 4% from 33.6Mt. Its cement sales volumes rose by 4% in its US and by 1% in Europe, the Middle East, Africa and Asia, but fell by 10% in Mexico and by 3% in South and Central America and the Caribbean. The group says that record levels of alternative fuel usage and a lowered clinker factor helped it to reduce its total CO2 emissions by 3% year-on-year in the reporting period.
Chief executive officer Fernando González said “I am pleased that our pricing strategy is yielding results and has fully offset inflationary costs in the second quarter of 2022. With improved supply chain dynamics and continued success of our pricing and cost containment strategies, we remain confident we can recover 2021 margins.
Spain: Cement consumption grew by 2.5% year-on-year to 7.49Mt in the first half of 2022. Data from the Spanish cement association Oficemen also shows that exports fell by 21% to 2.91Mt. It said that this is the first time since 2011 that Spanish cement exports have fallen below 3Mt in the first half of the year. The association has warned of potential threats to the sector such as inflation and a recession in the second half of 2022.
Aniceto Zaragoza, the general manager of Oficemen, said “Since the Iberian Mechanism began to be applied, there has been a drop in the average price of electricity for industry, although much less significant than expected. The mechanism is capable of moderating the price of the wholesale market, but the lack of wind generation caused by the heat wave and the consequent increase in the use of combined cycles, together with the increase in the price of gas, makes a global reform necessary of the European electricity market.”
Cheetah Cement workers strike
25 July 2022Namibia: 200 Cheetah Cement employees have gone on strike to protest low wages and lack of pensions and medical aid. The Namibia Press Agency has reported that salaries have fallen behind inflation, having remained level for four years.
Cheetah Cement general manager Kevin Lee called strikers’ demands ‘unrealistic’ and said that the producer had done everything in its power, but now ended in a ‘deadlock’ with workers.
China: Fitch Ratings expects West China Cement to record a first-half sales decline of 10% in 2022, due to ‘sluggish’ residential construction, on-going Covid-19 restrictions and high coal costs due to the Russian invasion of Ukraine. The rating agency predicted a ‘mid-single digit’ full-year sales decline in 2022, with a gross profit margin for the group of 28%, compared to 30% in 2021. This probability results from higher costs arising from overseas investments during the year.
Four Vietnamese cement line projects cancelled
13 July 2022Vietnam: High costs have resulted in the cancellation of four planned new integrated cement lines by a local cement producer. Viet Nam News has reported that the producer in question presently faces costs of US$59.9 - 64.1/t cement, with a net loss of US$8.55 - 10.30/t. Coal prices are US$237/t, more than triple those at the start of 2022 of US$85.5/t. Gypsum and diesel prices rose by 50% over the first half of 2022. The producer reportedly attributed the coal price rise to the effects of the Covid-19 conflict and the Russian invasion of Ukraine.