Germany: Michael Ambros has been appointed as the managing director of KA Schmersal, part of the Schmersal Group. Ambros is responsible for the Administration and Sales & Marketing divisions on a global basis. Fellow managing director Michael Mandel will run the technical divisions alongside Ambros. The company’s management team includes both Ambros and Mandel, plus two managing shareholders, Heinz and Philip Schmersal. The Schmersal Group develops and produces a range of switchgear and control devices.

The changeover at the top of LafargeHolcim, with Eric Olsen standing down and with the appointment of Jan Jenisch (CEO of Sika AG), is worthy of note for a number of reasons. American/French Eric Olsen has been in charge of the merged company since its inception and has made a good job of bringing together two very different companies, while at the same time battling uneven economic growth worldwide which has seen some patchy results over the last two years. Given more time, he would undoubtedly have presided over more robust results as yet more synergies are discovered in the newly-lean company.

In fact, lean-ness is one of the four ‘strategic pillars’ that are now governing LafargeHolcim, according to the recent fascinating 2016 annual report. Alongside ‘commercial transformation,’ ‘cost leadership’ and ‘sustainability,’ the report stipulates that the company will be ‘asset light.’ The report goes on to explain that LafargeHolcim ‘will optimise our current asset base, better leveraging our industrial footprint, reducing our capital expenditure and exploring new growth opportunities with lower capital expenditure.’ It says that ‘Future growth will be focussed on low-capital intensive business models that enable us to access more of the value chain.’ Putting numbers to the words, LafargeHolcim’s capex in 2016-2017 was CHF3.5bn (Euro3.21bn), but it will plummet to CHF2bn (Euro1.83bn) from then on. As CEO, Eric Olsen’s prints are all over this plan.

The company plans to use its ‘know-how in preventative maintenance and capacity optimisation’ to reduce its ongoing capex in the cement industry, and says that ‘we outsource our fleet management whenever possible and develop alternative logistics offers to reduce capital expenditure.’ So, out with its own fleets of vehicles, and in with contractors, freeing-up capital (but possibly leading to lower retained profits). The company also says that ‘the leveraging of our global trading platform enables us to serve some markets without the need to invest in local clinker capacity.’ Alongside various statements in the annual report that suggest that the company has quite enough clinker production capacity already, we can see that it intends to stop building any new greenfield plants, and to potentially invest in clinker grinding facilities in markets where it does not have a presence, supplied by its currently under-utilised clinker-producing plants. It plans to expand into low-capital concrete markets, stating that ‘we are implementing franchise models in the ready-mix and retail segments, enabling us to reach customers in a differentiated way while keeping capital expenditure low.’

Eric Olsen’s plan is/was a sensible one: stop sending money out the door, make the current assets work a lot harder, and get into businesses with a good margin but which don’t cost a lot in which to become established. This is a plan that will take time to come to fruition, but unfortunately, Eric Olsen will not be at the helm of the company to see the benefits. He resigned at the end of April after an internal investigation at the company showed that managers at the company’s cement plant in Syria had paid-off local militias in order to stay open. As Eric Olsen stated at the time, “While I was absolutely not involved in, nor even aware of, any wrongdoing I believe my departure will contribute to bringing back serenity to a company that has been exposed for months on this case.” It seems that the chairman and the board of directors owe Mr Olsen a few beers - at least - for taking the heat off the company.

German national Jan Jenisch steps into Eric Olsen’s shoes at an interesting time then. He is coming from a company, Sika AG, that has also seen some tumultuous events in the last few years. The company’s controlling family wish to sell its 16% stake (including 53% voting rights) to multi-national building materials group Saint-Gobain, which is eager to buy, against the wishes of the company’s board, senior managers and other shareholders. So far the sale has been foiled by Mr Jenisch, but a crucial court case decision is due later in the year. Who knows, in the meantime maybe another building materials company might step-in to try to take over Sika’s attractive business? Mr Jenisch managed to increase Sika’s profit by 22% in the last full year of operation of the company, and the board of LafargeHolcim will be hoping that he can repeat the magic with his new company. If he manages it though, just remember that he has inherited Eric Olsen’s ‘cunning plan that might just work.’

Germany: Opterra, the German subsidiary of Ireland’s CRH, has announced a change of plant manager at its Karsdorf plant. Berthold Perschall, 50, will take over from Giuseppe De Donno on 1 June 2017. De Donno has been in the post since July 2015 and has left the company to pursue a new professional challenge.

Perschall has been with CRH (and Lafarge beforehand) since 2000. Before coming to the Karsdorf plant in 2009 he worked at Lafarge’s Sötenich and Wössingen plants. He was most recently the head of maintenance and production at Karsdorf.

2017 has started more uncertainly for the US cement industry than 2016 did according to the latest data from the United States Geological Survey (USGS). Cement shipment data from just two months, January and February 2017, can only present a limited impression of the state of the industry. Yet the key trend to look for in Graph 1 is the growth in Midwestern US states against a decline in the Western ones. Previously in 2016 this region’s shipments sunk below those in the West in December and didn’t overtake them until the spring. This time round they’ve stuck closely and overtaken them already in February 2017.

Graph 1: Portland and blended cement shipments by US Census Bureau region for 2016 to February 2017. Source: USGS.

The Midwest’s cement shipments jumped by 21% year-on-year to 2.2Mt for those first two months. Buzzi Unicem concurred with this picture in the Midwest with its first quarter financial results this week, reporting a boost in deliveries in the region. HeidelbergCement agreed, reporting sales volumes increases in the north of the country and a decrease in the West. In that region the USGS data shows an 8% fall in shipments to 2.2Mt. HeidelbergCement blamed heavy rain and flooding in California and Oregon as the cause of the problems. Another potential reason that the USGS hints at are increasing imports of cement that it says have been rising faster than sales. For example, imports of cement to the US as a whole grew by 23.9% year-on-year to 0.81Mt in February 2017.

Overall though the situation for the larger cement producers has been subdued. Many of them blamed good weather in the first quarter of 2016 giving them a hard quarter to measure against in 2017. For example, LafargeHolcim’s sales volumes of cement fell by 4.5% in North America although it did report sales growth off the back of cement pricing and cost controls. HeidelbergCement may have looked good on paper following its integration of the Italcementi/Essroc assets but its cement volumes only grew by 1% in the period. Cemex too reported a similar scenario with falling sales volumes of 5% but growing sales revenue.

To put this in perspective, as the Portland Cement Association’s (PCA) chief economist Ed Sullivan says in the May 2017 issue of Global Cement Magazine, cement production in the US grew in 2016 and it is expected to continue growing in 2017 and 2018. Just like the start of 2016 (see GCW251) the potential for US construction growth in the year ahead is a quietly confident one but it isn’t assured.

Cemex points out that housing starts rose by 8% in the first quarter of 2017, as did construction spending in the industrial and commercial sector. However, it says that infrastructure spending fell by 9% in February 2017. Indeed this last point is an important one given that one of the major Trump campaign pledges in the 2016 presidential campaign was to build more infrastructure. As commentators in Washington DC including the PCA have asked: where is the Bill? Rightly, the PCA are not letting the lawmakers forget this during ‘Infrastructure week’ as the issue is discussed. The US cement industry needs this.

For further information on the US cement industry take a look at the May 2017 issue of Global Cement Magazine

Italy: Paolo Zugaro has been appointed as the General Manager of Cementir Holding. He has also become the group’s chief operating officer with effect from 1 May 2017. Zugaro, aged 52 years, holds a degree in electrical engineering from Tor Vergata University, Rome. He has worked in a variety of managerial roles for both Caltagirone Group and Cementir Group since 1997. Notably he has been the head of the Nordic & Baltic Region of Cementir Group, the chief executive officer (CEO) of Aalborg Portland and CEO of Unicon. In his recent posting as the head of the East Mediterranean Region, he was the CEO of Cimentas in Turkey, Vice President of Sinai White Portland Cement in Egypt and the CEO of Recydia, a company which operates in the waste and recycling management business in Turkey and the UK.

Finland: Miikka Riionheimo has been appointed as the chief executive officer (CEO) of Finnsementti with effect from 1 June 2017. He will replace the current CEO Kalervo Matikainen when he retires. Riionheimo has worked in a variety of roles for Hella since 2004 and also worked for Sandvik. He became the chief operating officer of Finnsementti in 2016.

India: P R Ramasubrahaneya Rajha, the chairman of business conglomerate Ramco Group, has died at the age of 82 after a brief illness. He is survived by his wife and son P R Venkatarama Rajha, the vice-chairman and managing director of the group, according to the Press Trust of India. Ramasubrahaneya Rajha was the son of the group’s founder P A C Ramasamy Rajah.

Denmark: Bjarne Moltke Hansen has resigned as the Group Executive Vice President of FLSmidth. The 57-year old Danish national started his career in 1984 working for Unicon, a subsidiary of FLSmidth at the time. He subsequently held the position as chief executive officer (CEO) of Cembrit Holding for five years before taking up the position as CEO of Aalborg Portland Holding in 2000. In 2002, Bjarne took on the position as Group Executive Vice President, Customer Services Division until he was appointed Group Executive Vice President, Product Companies Division in 2015.

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.

Ukraine: The supervisory board of Podilsky Cement has appointed Leonard Barry as its supervisory board chairperson. Previously, he was the director of CRH in the country, according to the Ukrainian News Agency. Barry, aged 52 years, is an Irish national. He joined Irish Cement in 1989 as a process engineer before becoming its managing director in 2011. He trained as a chemical engineer at University College Dublin and holds an MBA from the University of Limerick.

Other personnel changes include the appointment of Declan Maguire, CRH’s chief operational director for Eastern Europe, as deputy supervisory board chairperson. Alan Connolly has also been appointed as secretary of the supervisory board.