Global Cement Newsletter

Issue: GCW353 / 16 May 2018

Headlines


Votorantim shone a glimmer of hope for the Brazilian cement industry with the release of its first quarter financial results this week. Increased sales volumes in Brazil, Turkey, India and Latin America led to an 11% rise in revenue to US$682m in the period. Admittedly back home in Brazil, most of this came from concrete and mortar sales, but after the slump Brazil’s had they’ll take whatever they can get. This compares to a 14% drop in sales revenue in the same period in 2017 due to falling cement consumption.

Graph 1: Accumulated 12 months local sales in Brazil. Source: SNIC.  

Graph 1: Accumulated 12 months local cement sales in Brazil. Source: SNIC.

SNIC, Brazil's national cement industry association, preliminary figures for April 2018 show a similar trend. Cement sales for April 2018 rose by 8.9% year-on-year to 4.35Mt from 4Mt. Sales for the first four months of the year dipped slightly by 0.2% to 16.9Mt although this is an improvement on the first quarter figures showing the benefit a strong April has had. Improvements are driven by growth in the central and southern parts of the country. SNIC’s graph of accumulated sales (Graph 1) definitely shows a slowing trend of decreasing cement sales with April 2018 being the only the second month in over two years where sales have risen.

Paulo Camillo Penna, the president of SNIC, even went as far as to speculate that the three months from April to June 2018 might see the first sustained period of improvement since 2015 and that sales could even grow by 1% for the year as a whole. This is a far cry from Penna’s description of his industry at the start of 2017 as, “One of the worst moments in its history.”

Votorantim reported that some regions of Brazil were starting to show a positive trend in the second half of 2017. Unfortunately it wasn’t enough to stop the cement producer’s overall sales falling for the year. LafargeHolcim didn’t release specific figures for its Brazilian operations in 2017 but it did say that its cost savings programme had, ‘provided for material improvement versus prior year both in recurring earnings before interest, taxation, depreciation and amortisation (EBITDA) and cash flow.’ It reckoned that despite the market contracting, it had managed to increase its market share. Meanwhile, on the supplier side RHI Magnesita said in a first quarter trading update that its cement and lime business was flat due to continuing low capacity utilisation rates in China and Brazil.

If this truly is the end of the Brazilian cement market slump then it seems surprising that there haven’t been more mergers or acquisitions. Mineração Belocal, a subsidiary of Belgium’s Lhoist, said this week that it had purchased L-Imerys, a lime producer that operates a plant at Doresópolis in Minas Gerais. Local refractory producer Magnesita merged with RHI in mid-2017.

The big deal that hasn’t happened is the sale of InterCement, the country’s second largest cement producer. Owner Camargo Corrêa was reportedly selling minority stakes in the company in 2015. Then in early 2017 local press said that it was aiming for a price of US$6.5bn for the whole company with Mexico’s Cemex as a potential bidder. Since then nothing has happened publicly although the initial public offering of InterCement’s Argentine subsidiary Loma Negra in November 2017 for US$954m may have bought Camargo Corrêa the time it needed to wait for the market to improve. Rumours of a public listing of InterCement’s European and African operations have followed.

In its World Economic Outlook in April 2018 the IMF forecast a 2.8% rise in gross domestic product (GDP) in Brazil in 2018. If SNIC’s forecast for 2018 is correct then Camargo Corrêa may have survived the worst of the slump to live to trade another day. The price for InterCement at this point can only rise, as should the prospects of the Brazilian industry.


US: LafargeHolcim has appointed of Jamie M Gentoso as the chief executive officer (CEO) of its US cement operations. She succeeds John Stull, who was recently appointed as the CEO of Holcim Philippines.

Gentoso joins LafargeHolcim from Construction Specialties, an architectural building products manufacturer, where she held the position of vice president of Sales and Marketing and, prior to this, she was senior vice president of Concrete at Sika US. She began her career at Holcim as a technical service engineer and Architectural and Engineering market manager, with a focus on specialty cements, Ordinary Portland Cement, slag cement and fly ash.

Gentoso received her Masters of Business Administration from the University of Michigan and holds a Bachelor of Science in Civil Engineering, also from the University of Michigan. She has sat on the board of directors for several industry organisations and intends to continue to her involvement.


India: Shree Digvijay Cement has appointed Vikas Kumar as its chief financial officer with effect from 1 May 2018. He succeeds MV Ramaswamy who has resigned from the company.


Pakistan: Gharibwal Cement has started commercial operation of a 250t/hr vertical cement mill for grinding cement. It says it is the single largest cement grinding mill in the country. The cement producer operates a 2.1Mt/yr integrated plant at Ismailwal in Chakwal.


Sri Lanka: Tokyo Cement has launched resource-planning software across its business. The software was developed by Abas and implemented by Providence Global, according to the Daily News newspaper. The software is being deployed across all of Tokyo Cement’s operations, including its cement plant at Trincomalee, its ready-mix concrete plants, and its bulk cement import terminal and biomass power generation units. The new software is intended to fully integrate supply chain management and warehouse operations.


Saudi Arabia: GE has struck a deal with Saudi Cement to upgrade three GE 6B gas turbines at Saudi Cement’s Hofuf plant with its Advanced Gas Path (AGP) product. The AGP upgrade is intended to increase the combined output of the three turbines by 16.9%. The upgrade should help Saudi Cement increase power output and efficiency while reducing the need to draw power from the local power grid. No value for the deal has been disclosed.


Barbados: Trinidad Cement and its Barbadian subsidiary Arawak Cement have taken legal action against the Government of Barbados over allegedly breaking the Caribbean Community Single Market and Economy. The complaint relates to accusations that the country broke import duties on cement, according to Barbados Today. The government has been accused of reducing import tariffs to 5% from 60%.

Arawak Cement and competitor Rock Hard Cement have battled for the local market since the entry of the latter company in the market in 2015. Trinidad Cement has also taken action against Turkish cement importers previously.


Ivory Coast: Morocco’s Ciments de l'Afrique (CIMAF) has started work on a 0.3Mt/yr cement plant at Bouake. The company has acquired land for the project and is currently preparing the necessary permits to begin construction, according to the African Press Agency.

CIMAF built its first 0.5Mt grinding plant in Abidjan in 2013. The production capacity at this unit was then increased to 1Mt/yr in 2016. In late 2017 the cement producer started building a second 1Mt/yr plant at San Pedro. The latest project at Bouake will be its third plant in the country.


Ghana/Portugal: Cimpor and ETE Group have collaborated to export 55,900t of clinker from Portugal to Ghana. The clinker was transferred via barges from the river terminal of Cimpor’s Alhandra cement plant before being loaded into a bulk carrier at the Port of Lisbon, according to CE NoticiasFinancieras.


Bangladesh: Two workers have been killed at the cement grinding plant at Paschim Muktarpur in Munshiganj operated by Crown Cement. The workers died after being struck by falling material when entering a room at the site to clean it, according to the New Nation newspaper. Another worker was critically injured in the incident.


Italy/Switzerland/Turkey: Turboden has released information on its latest waste heat recovery (WHR) projects using its ORC turbogenerator for cement plants in Turkey, Switzerland and Italy.

In Turkey CTP Team and CTN Group have signed an order with Turboden for the supply of a 7MW ORC WHR unit with air cooled condenser to be installed in Çimko Çemento Narli’s plant. Turboden says that since the plant is located in an area where there is no water available for the cooling system, the ORC technology offer advantages over steam technology.

In Switzerland CadCime SA and LafargeHolcim have ordered a 1.3MW WHR unit that recovers heat from the existing pressurised water circuit, used for the district heating network. The order is the third from LafargeHolcim for an ORC unit from Turboden.

In Italy a 2MW WHR plant with direct heat exchange is being installed at Cementi Rossi’s plant. Start-up is schedule for the second quarter of 2018. This project received an award from the European Commission under the framework of Horizon 2020, whose main objective is to develop new solutions to recover waste heat in energy intensive industries such as cement, glass, steelmaking and petrochemical and transform it into electric energy.


Canada: CSL Group has agreed to buy 50% of Eureka Shipping, SMT Shipping agreement for CSL to acquire 50% of Eureka Shipping, SMT’s pneumatic cement vessel business. The new joint venture will allow Eureka and CSL to expand services to customers in the seaborne cement powder and fly ash transportation markets around the world. CSL’s Australian cement shipping business is not included in the joint venture.

“The joint venture represents an important step in CSL’s strategy to increase its presence in the global construction material sector,” said Louis Martel, President and chief executive officer (CEO) of CSL Group.

The companies say that the partnership is a strong strategic fit, leveraging the companies’ respective strengths in the shipping and handling of dry bulk cargos. There will be no change in the day-to-day management and operation of vessels in the Eureka fleet. The transaction is subject to regulatory approval and is expected to be completed by the end of June 2018.

Eureka Shipping operates a fleet of self-unloading cement carriers in the Baltic Sea, the Atlantic Ocean, the Mediterranean Sea, the Caribbean and Asia. SMT Shipping Group has, over the past 30 years, built a fleet of about 45 vessels through a number of joint venture companies operating in various bulk commodities markets, focusing on geared bulk carriers, floating storage/transhipment terminals and belt-unloaders.


France: Sherpa and the European Center for Constitutional and Human Rights (ECCHR) have argued that Lafarge should be indicted for complicity in crimes against humanity. The non-government organisations (NGO) have made the argument for the accusation in a memorandum to investigative judges examining Lafarge Syria’s conduct. Despite the indictment of several Lafarge executives the NGOs want to the charges to apply to Lafarge itself as a company. The cement producer allegedly paid extremist groups to keep a cement plant operational after the outbreak of war in the country.

“Companies have the means to fuel armed conflicts by doing business with regimes or armed groups who commit war crimes and crimes against humanity. The fight against multinationals’ impunity will necessarily imply holding them to account, in particular in countries where parent companies operate and control their subsidiaries’ activities worldwide. Access to justice for thousands of victims of armed conflicts depends on it,” said Sandra Cossart, director of Sherpa.


Brazil: Votorantim’s sales from its cement business have grown due to increased sales volumes in Brail, Turkey, India and Latin America. Higher prices in North America and Europe, Asia and Africa also contributed to the result. Votorantim Cimentos’ sales revenue grew by 11% year-on-year to US$682m in the first half of 2018 from US$613m in the same period in 2017. Local sales in Brazil grew by 13% to US$417m due to concrete and mortar sales. Its adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 28% to US$65.3m from US$50.8m.


Colombia: Cementos Argos’ sales have fallen due to decreased cement sales volumes in Colombia and the US. It blamed poor weather in the US and a large number of holidays in Colombia for the situation. Its sales revenue dropped by 8.2% year-on-year to US$677m from US$737m. However, its adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 2% to US$107m from US$104m.

“The growth of EBITDA throughout all our regions is proof that the strategy we established is beginning to reap the benefits of the best efficiency programme and to focus our initiatives in continuing to provide the best experiences to our clients,” said Juan Esteban Calle, president of Cementos Argos.

Cement sales volumes fell by 4.1% overall to 3.69Mt. Volume drops were noted in Colombia and the US but in the rest of the world they rose by 11%.


Uruguay: Production has resumed at the Administración Nacional de Combustibles, Alcoholes y Portland’s (ANCAP) Minas and y Paysandú cement plants following a strike, according to the El Espectador newspaper. The disruption ended following negotiation between management, the union, the Ministry of Industry, Energy and Mining and the Ministry of Labor and Social Security. In April 2018 it was reported that production at the Minas plant had stopped for two months due to union action.


Pakistan: Dewan Cement has rejected a takeover bid by Mega Conglomerate to buy a 87.5% stake in it. Chairman Dewan Mohammad Yousuf Farooqui turned down the offer following a valuation of the company, according to the Pakistan Today newspaper. The valuation reported that the value of the cement producer was below the initial offer made by Mega Conglomerate due to low capacity utilisation rates at Dewan’s plants and the need for investment at the sites. Dewan Cement has claimed that negotiations are still on going.


Uganda: Local cement producers are facing challenges meeting the specification required for cement being used by the Standard Gauge Railway (SGR) project. Project coordinator Kasingye Kyamugambi said at a procurement conference in Kampala that the project was facing issues with cement, reinforcement steel and sand, according to the Daily Monitor newspaper. Hima Cement is producing one specific product for the project following discussions with the SGR. However, the railway needs eight different types of cement.

Kyamugambi has called for legal cover for the infrastructure project to bypass local product sourcing laws. He has asked that new legislation be introduced to cover projects with a lifecycle of over a century.

The SGR is being built by China’s China Harbour Engineering Company. The project is intended to link up to Kenya’s railway project at Tororo with proposed links to Rwanda and South Sudan. The Democratic Republic of Congo has also expressed interested in the line.


Japan: Sumitomo Osaka Cement’s net sales rose by 4.6% year-on-year to US$2.24bn in the financial year that ended on 31 March 2018 from US$2.14bn in the same period of the previous year. It attributed the increase to higher sales volumes of cement. However, its operating income fell by 15.6% to US$92m from US$113 due to higher coal prices. The company said that overall local demand in the country rose by 0.2% to 42Mt during the reporting period. Exports rose by 2.4% to 11.8Mt.


Japan: Taiheiyo Cement’s sales rose by to 9.1% year-on-year to US$7.98bn in the financial year that ended on 31 March 2018 from US$7.30bn in the same period of the previous year. Its domestic sales volumes increased by 2.4% to 14.7Mt and its export sales fell by 2.7% to 2.3Mt.


Italy: Buzzi Unicem’s sales fell by 8.4% year-on-year to Euro539m in the first quarter of 2018 from Euro589m in the same period in 2017. Its cement sales fell by 1.6% to 5.1Mt from 5.2Mt. It blamed poor weather and reduced working days in the reporting period. Sales volumes in Eastern Europe performed well due to favourable trends in the Czech Republic and Russia. Sales in Italy improved due to the consolidation of Cementizillo into the group.


Italy: Cementir’s sales and earnings have fallen following the divestment of its local business. Its sales dropped by 1.6% year-on-year to Euro242m in the first quarter of 2018 from Euro246 in the same period of 2017 when adjusted for the divestment. Earnings before interest, taxation, depreciation and amortisation (EBITDA) fell by 12.4% to Euro241m from Euro27.5m. Cement sales volumes increased by 4.1% to 2.08Mt from 2Mt.

“The exit of Cementir Italia group from the perimeter of consolidation and the improvement in Turkey and China offset the deterioration of results in Egypt caused by the curfew introduced in February 2018, the effects of harsh weather conditions in Scandinavian countries, and the fewer number of working days due to the early Easter holidays, which resulted in lower earnings in Norway and, to a lesser extent, in Belgium, Denmark, Sweden and Malaysia,” said the company in a results statement.

The group’s board of directors has also approved a business plan for 2018 to 2020 to recognise changes in its portfolio. In 2020 the group forecasts that the Nordic and Baltic countries and the US will generate about 72% of the group's revenue, while the Eastern Mediterranean area, including Turkey and Egypt, will generate 20% and the Asia Pacific area, including China and Malaysia, will account for around 6%.


Pakistan: The Peshawar High Court has stopped construction of a cement plant by Fecto Cement at Palai in Malakand. Opponents of the project cited environmental and health concerns, according to the News International newspaper. Fecto Cement announced plans for its new 6000t/day plant in February 2018.


France: Jacob Waerness, the former security chief at Lafarge Syria, has been arrested in Paris. He was taken into custody in early May 2018 while transferring between planes at the Charles de Gaulle airport, according to Le Monde newspaper. He was arrested on charges of financing terrorism. Waerness worked as the head of security for Lafarge in Syria from 2011 to 2013. He published a book about his experiences in 2016.


Vietnam: A joint venture between Vinaconex Engineering Construction and Investment and Lilama will supply equipment for the Tan Thang cement plant in Nghe An province. The contract is worth US$66m, according to the Viet Nam News newspaper. The new plant will have a cement production capacity of 2Mt/yr. Vinaconex and Lilama will join European companies Bedeschi and FLSmidth on the project.


Kyrgyzstan: Data from the National Statistics Committee data shows that local cement producers manufactured 1.5Mt of cement in 2017. Previously, the country produceds 1.3Mt in 2016 and 1.5Mt in 2015, according to the Central Asian News Service. The top three cement companies in terms of tax payments were South-Kyrgyz Cement, Kant Cement and the Southern Combine of Building Materials.


Angola: Fabrica de Cimento do Kwanza Sul (FCKS) has started selling its Yetu cement product in Luau, Moxico province. 400t of the product has been transported via the Benguela railway as part of a sales expansion drive, according to the Angola Press Agency. Huambo and Bié will be targeted next.

FCKS plant shut down in November 2017 and reopened in April 2018. The unit is planning to increase its production capacity to 10,000t/day from 5000t/day in the next stage of its improvement scheme.


Qatar: Alkhalij Cement, a subsidiary of Qatari Investors Group, has reached three years or 3.5 million hours without accidents, at its plant in Umm Bab. The company said that achievement showed that its employees had followed safety rules with dedication and reliability, according to the Qatar Tribune newspaper. Alkhalij Cement operates an integrated plant with a clinker production capacity of 6000t/day.


Switzerland/Uganda: LafargeHolcim has been criticised by two Swiss non-governmental groups (NGO) over alleged child labour issues in Uganda. The Protestant Church group Bread For All the Catholic Lenten Fund have accused the multinational of delaying compensation to alleged child labour victims, according to the Swiss Broadcasting Corporation. LafargeHolcim has denied the accusations. The NGOs have published video statements by children testifying that they previously worked for suppliers to Hima Cement, a local subsidiary of LafargeHolcim.

A report published in 2016 claimed that around 150 Ugandan children had worked for 10 years in quarries that supplied Hima Cement with pozzolana. Both Hima Cement and its parent company denied the claims. Later, Hima Cement subsequently announced that it would stop buying raw materials from small-scale miners and only source them from mechanised quarries that employ adults. At the same time LafargeHolcim commissioned an investigation that concluded that there was no evidence that children had worked for Hima Cement or for any of its other suppliers.