Australia: Len Buckeridge, Australia's 19th richest person, died of a heart attack at the age of 77 on 11 March 2014. The billionaire owner of Buckeridge Group of Companies (BGC), was a well-known and long-standing character in the Australian construction industry. The group has interests in gypsum wallboard, bricks and cement as well as residential construction.
Buckeridge built up BGC, which turns over US$2.25bn/yr, from humble beginnings in the 1960s following his training as an architect at Perth Technical College. Hard-but-fair in business, his determined approach saw him amass a personal fortune of over US$1.5bn via the group. Despite his success he retained a down-to-earth approach to the company's day-to-day operations, latterly running the business from the dining room table in his house at Mosman Park, near Perth.
His hard-nosed stance, which helped him in some aspects of his business life, also made him a controversial figure. Buckeridge was involved in a number of deeply-entrenched confrontations with construction unions in Australia. He also attempted to sue the Government in the Supreme Court over a stalled private port project. Upon his death, Buckeridge was described by former construction union boss Kevin Reynolds as 'a formidable opponent.' "People will remember Len as a person who was prepared to take on anyone and everyone whether it would be the unions, government, other employer groups or other builders," said Reynolds. "If Len believed in something he would take them on."
Buckeridge, who had been contemplating succession plans for BGC without coming to a conclusion prior to his death, owned 100% of the group. The Australian business world and the global cement and gypsum industries is awaiting news on how the future ownership of the company will look. Buckeridge is survived by his wife, six children and eight grandchildren.
Cement cartels (or at least cases of cartel-like behaviour) have reared their ugly heads this week... again. In two different markets, Australia and Brazil, competition authorities are at various stages of taking major action against large proportions of their respective cement industries. In another, Europe, it is the cement producers that are taking on the authorities.
This week, the Australian Federal Court has found five producers guilty of agreeing anti-competitive contracts with regard to fly-ash supply contracts from power stations in the state of Victoria. Only Cement Australia Holdings was not accused. Penalties are to be determined at a later date – watch this space.
As drastic as the Australian situation may be, it is Brazil's anti-trust authority Cade that looks set to make the biggest 'splash' in a cement industry in 2014. On 13 March 2014 it was reported that a US$1.32bn fine, split over six cement producers, has been put on hold after the producers disputed a ruling that would see them lose an average 24% of their cement assets each. So big is this fine that it actually eclipses the US$1.1bn fine seen in India in 2012. In light of the amount of influence that they look set to lose, it now looks extremely likely that the producers will appeal. This sets the scene for indeterminably long waits for legal proceedings and more evidence to be collected. Whatever happens in Brazil, there will be major implications for its increasingly-concentrated cement market.
Elsewhere, in a strange inversion of the normal situation, in Europe it is the cement producers that are taking action. This week the European Court has rejected an appeal from eight major cement producers including Holcim, HeidelbergCement and Cemex subsidiaries with respect to the European Commission's handling of an anti-cartel investigation that began in 2008. That case saw anti-trust investigations start in 2010. Proceedings continue.
As stated previously in this column, cartel-like behaviour is not necessarily indicative of a formal cartel. There are innumerable factors that make every case different and, in each, proving actual collusion is very hard indeed. In the cement industry however, it appears that 'convictions' in cartel cases are easier to spot than in other sectors.
"The first thing for any new competition regulator is to go out and find the cement cartel. My experience of this subject is, it is always there, somewhere," wrote Richard Whish, a Professor of Law at King's College London in 2001. "The only countries in which I had been unable to find the cement cartel is where there is a national state-owned monopoly for cement."
The authorities will keep looking and producers, guilty or not, will continue to wait for their call.
Moldova: Nicolas Valdinoci has become the new director of Lafarge Moldova. He replaces Louis de Sambucy who has moved to Lafarge Algeria. Valdinoci worked for three years in Lafarge's department of strategy and in 2010 he became the financial director of the concrete and aggregates division in Lafarge Algeria. In 2012, he was appointed as deputy director of sales at Lafarge Algeria.
Dangote Cement let everybody know this week that it is now producing 52.5MPa grade cement in Nigeria. The move was a response to building pressure from professional and civil groups in the country which have reacted in recent months to the high incidence of building collapses in the country. With the 42.5MPa grade looking likely to become the new legal standard, Dangote's adoption of an even higher standard looks like canny marketing.
The background to this tussle lies in the spate of building collapses that have plagued Nigeria in recent years. A widely cited paper in the Global Journal of Researches in Engineering from 2010 reported at least 26 incidents in Nigeria between 1975 to 1995 with 226 fatalities. Later figures from 2004 to 2006 reported at least 10 incidents with 243 fatalities, a significantly higher prevalence than in the earlier period. The paper recommended adopting standards for building materials such as cement among other measures. Since the publication of this paper news reports have been hard to collate. Commentators placed the toll at 15 collapses with 30 fatalities for the first eight months of 2013 alone.
The Standards Organisation of Nigeria (SON) reacted to the latest outcry over building collapses by saying that they were caused by poor application, such as a using the wrong quality of cement for a particular task, not poor standards. According to the SON, 32.5MPa grade cement is recommended for activities such as plastering, flooring, block moulding, culvert making and building simple domestic houses. 42.5MPa grade is designed for the construction of tall buildings, bridges and load bearing columns.
Adopting a national standard of 42.5MPa grade is intended to stop misuse of lower grade cement being used for the wrong applications. One example commentators have mentioned is how to help illiterate builders select the right kind of cement for a given task. Choosing an overall higher standard is one solution to this problem. Education is another.
One fact that has emerged from the debate is that, according to Dangote Chief Executive Officer DVG Edwin, the SON imposed 42.5MPa grade as the minimum for imports before most imports were stopped in late 2012. Edwin used this as an argument for the SON enforcing the same standard for domestic cement production. Anything that can cut the number of building collapses can only be a good thing.
Denmark: FLSmidth has appointed Lars Vestergaard as its new Chief Financial Officer and member of Group Executive Management. Vestergaard succeeds Ben Guren who has decided to leave the company due to personal reasons. Vestergaard will take up the position as CFO on 1 April 2014. Brian Iversen, Vice President Corporate Finance, FLSmidth will be acting CFO until Vestergaard starts.
Vestergaard, aged 39 and a Danish citizen, holds a Master of Science in Business Management and brings with him international experience in the role as CFO as well as international experience in change management, IT management and treasury from his various management positions in Carlsberg (2004 - 2014) and the global facility service provider ISS (2000 - 2004).
France: The Vicat board of directors has appointed Guy Sidos as the new chairman, in addition to his current position as chief executive officer. The board also appointed Jacques Merceron-Vicat as honourary chairman.
Sidos, aged 51, is the son-in-law of outgoing chairman and former CEO Jacques Merceron-Vicat. His appointment is intended to continue Vicat's independent outlook. Sidos is a graduate engineer of France's Navy School. After joining the Vicat Group in 1999 he held a number of operational positions, particularly in the US, before being appointed COO in 2004, then CEO in 2008. He will henceforth hold this position alongside that of chairman after the annual general meeting on 6 May 2014.
Algeria has been steadily building up cement industry interest over the past few months. In late 2013 Lafarge opened its fourth world research laboratory in Algiers. Then this week South African producer PPC confirmed its intention to enter the local market with a new plant and German construction firm ThyssenKrupp announced an order to build a cement plant for Groupe Industriel des Ciments d'Algérie.
According to United States Geological Survey (USGS) data, Algeria saw its cement production more than double from 9Mt/yr in 2002 to 20Mt/yr in 2011. At present Global Cement Directory 2014 figures places the country's cement production capacity from 21Mt/yr with 30Mt/yr a reasonable estimate for 2017. Throw in similarly rising gross domestic product per capita, US$7500 in 2013, with infrastructure investments of US$286bn planned and Algeria appears to be a promising investment for the cement market.
Lafarge, which holds minority stakes in two cement plants in the country, reported that market demand was high in 2012. Its cement sales rose by 9% year-on-year in 2013. The other major foreign player, ASEC Cement, reported in its 2012 financial report that Algeria consumed 21Mt of cement in 2012 but that it had to import 3Mt that year. ASEC was planning to build a 3.16Mt/yr plant at Djelfa to plug that market gap. Yet news reports in early 2013 reveal that the project was paused due to financial issues at ASEC with the suggestion of a possible downgrade to a 1.5Mt/yr production capacity instead.
The decision by PPC to build in Algeria is the first big project by one of Africa's international sub-Saharan cement producers north of the Sahara. It steps away from PPC's expansion strategy so far of building projects out from South Africa. Hodna in Algeria is a long way from Johannesburg! It will also cause tension between PPC and whoever is supplying imported cement to Algeria, most likely indebted southern European producers. Both PPC and its Nigerian competitor Dangote are used to fighting foreign imports to their core markets. Data from the Algerian customs office show that the value of cement imports to Algeria in 2013 rose by 26% year-on-year to US$395m. That's a market worth fighting for.
Switzerland: Holcim's board of directors plan to nominate Jürg Oleas for election as a new board member at the company's annual general meeting on 29 April 2014.
Oleas, aged 56 and a Swiss national, holds an MSc in mechanical engineering from the Swiss Federal Institute of Technology in Zurich. He is the CEO of GEA Group AG, a Dusseldorf-based mechanical engineering company listed on Germany's MDAX stock index. Before joining the GEA Group, he spent nearly 20 years with ABB and the Alstom Group, where he held several management positions.
The Holcim board of directors also intend to propose the election of Wolfgang Reitzle as the new chairman. He will be proposed to succeed Rolf Soiron, who has been the chairman for the past 11 years and a member of the board of directors for 20 years.
Cement and the Association of Southeast Asian Nations Economic Community
Written by Global Cement staffThere has been an interesting knock-on effect from further economic integration of the Association of Southeast Asian Nations (ASEAN) this week. Holcim Philippines may delay the construction of a 2.5Mt/yr cement plant in Bulacan province due to a drop in import tariffs in 2015. Vietnam or Indonesia were named as possible sources of clinker due to their excess capacity.
The ASEAN group comprises 10 countries including Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand, Vietnam, Laos, Myanmar and Cambodia. Their respective cement production capacities range from 0.3Mt/yr at a clinker grinding plant in Singapore to Indonesia's integrated cement production capacity of 45Mt/yr. In total the ASEAN countries have a production capacity of around 220Mt/yr for a population of about 600m with national gross domestic products (GDP) per capita ranging from US$900 (Laos) to US$52,000 (Singapore).
One scenario for cement producers in the ASEAN countries is that they might be swamped by exports from places like Vietnam. That country had a production capacity of 73Mt/yr in 2013 with cement sales predicted to rise to 63Mt in 2014. Assuming the government released figures are correct, that leaves at least a 10Mt of cement production-sales gap that could torpedo a neighbouring country's cement industry in the free trade area.
Indonesia, the other potential source of clinker that Holcim Philippines mentioned, has seen construction growth slow and production capacity grow. Holcim reported in its nine-month report in November 2013 that, while national cement sales had risen by 5.3% to 41.6Mt, supply capacity had risen by 9% to 59Mt/yr. Assuming equal sales distribution throughout this suggests a capacity gap of 4Mt.
Some politicians in the region have complained that impending free trade area will create winners and losers. At a recent ASEAN meeting in Yangon, Myanmar a Myanmar planning minister raised the issue of a development gap within the ASEAN region calling for renegotiation for countries like Myanmar, Cambodia and Laos.
Meanwhile both the cement industries in Vietnam and Indonesia have clearly anticipated the implications of the ASEAN Economic Community. The Vietnam National Cement Association expects to remain competitive within the ASEAN region and against Chinese imports after 2015. In Indonesia State Enterprises Minister Dahlan Iskan stated this week that the cement industry was ready for the ASEAN Economic Community thanks to the government's strategy to consolidate its major cement producers within one company, Semen Indonesia. Consistent cement industry growth in South East Asia may be about to change.
Ireland: The Board of Cement Roadstone Holdings (CRH) has announced that Henk Rottinghuis has been appointed as a non-executive director of the company.
Rottinghuis, aged 58, is a Dutch citizen with a background in distribution, wholesale and logistics. He was until 2010 Chief Executive Officer at Pon Holdings BV, a large, privately held international company that is focused on the supply and distribution of passenger cars, trucks and equipment for the construction and marine sectors.
Rottinghuis is currently the Chairman of the Supervisory Board of Stork Technical Services which provides asset management services to the oil and gas, power and chemical industries. He is also a member of the supervisory boards of the Royal Bank of Scotland NV and the retail groups Blokker Holding BV and Detailresult Groep.