Global Cement Newsletter

Issue: GCW480 / 04 November 2020

Headlines


Eurocement changed owners this week when Sberbank took control of the company’s parent organisation. Due to a ‘difficult financial situation’ the state-owned bank said it had consolidated 100% of the shares of Eurocement’s parent company GFI Investment Limited. It’s uncertain quite how difficult this situation is but in 2016 the cement producer owed the bank Euro700m. Local media agency RosBiznesConsulting (RBC) reported in September 2020 that the ‘problem borrower’ that had caused a record increase in overdue debt at Sberbank in July 2020 was none other than Eurocement. Whilst Sberbank has said so far that it does not have operational control of the group, it is seeking a strategic investor for the asset.

This is a major story given that Eurocement is Russia’s largest cement producer and it operates 19 cement plants Russia, Ukraine and Uzbekistan. It said it produced 16.5Mt of cement domestically in 2019 but this compares to a production capacity of around 50Mt/yr suggesting a considerably low utilisation rate of just one third! The producer has embarked on a modernisation programme in recent years but many of its plants are old and use wet-process production lines.

2019 finally saw the Russian cement market turn around following decline since 2015. Unfortunately, CM Pro reports that cement production in Russia as a whole fell by 5% year-on-year to 25.1Mt in the first half of 2020. Cement shipments fell by a similar rate. This trend appears to have carried on through July and August 2020. Cement consumption has fallen fairly uniformly in most regions with the exception of the Northwestern Federal District, which has seen a modest increase. In the middle of the year, Soyuzcement - the Union of Russian Cement Producers, was expecting wildly different scenarios ranging from falls of up to 10% in a negative situation to rebound of up to 3% in a positive one. It was pinning its hopes on government support for the construction industry in various ways. With the trend to August 2020, record breaking numbers of new coronavirus cases in early November 2020 and the onset of winter, it seems unlikely that Soyuzcement’s positive thinking will come to pass.

With this in mind who might want to buy into Eurocement? No doubt various private equity firms and local producers are watching the oil price carefully while they plan their next move. Internationally, LafargeHolcim seems the obvious western multinational contender with a presence in the country. Yet it seems unlikely it would want to take the risk, following its departure from certain regions like South-East Asia in recent years and persistent rumours about other divestment targets. HeidelbergCement’s balance sheet, credit lines and appetite for risk might not yet withstand a major investment in Russia. Buzzi Unicem has actually been expanding recently with an acquisition in Brazil but whether it’s prepared to bet on another market disrupted by coronavirus is unknown. China National Building Materials Group Corporation (CNBM) was reportedly planning on becoming a shareholder of Eurocement Group in 2016 but this may have just been bluster surrounding geopolitical links between Russia and China, and general cooperation between the companies on upgrading Eurocement’s old production lines. However, Russia is the next location in China’s Belt and Road initiative so it’s not ridiculous. Whoever steps up can expect the Russian government to take a keen interest, depending on how much control Sberbank wants to offer up of Eurocement. The story continues.


Saudi Arabia: Southern Province Cement has appointed Aqeel bin Fateis bin Saeed Kadsa as its chief executive officer (CEO). He was assigned to the position in July 2020. He holds a degree from the King Fahd University of Petroleum & Minerals and joined Southern Province Cement in 1997. Most recently he worked as the Executive Vice President for Manufacturing Services.


France: Vicat recorded net sales of Euro2.07bn in the first nine months of 2020, up slightly from Euro2.06bn in the first nine months of 2019. Sales rose in Africa by 23% to Euro198m from Euro161m, in Europe (excluding France) by 8% to Euro317m from Euro294m and in the Americas by 7% to Euro471m from Euro442m.

Cement sales constituted 51% of sales at Euro1.05bn, up by 5% from Euro991m. Cement volumes rose by 8% to 18.0Mt from 16.7Mt, while concrete volumes fell by 2% to 6.65Mt from 6.78Mt.

Chair and chief executive officer (CEO) Guy Sidos said, “The impact of the Covid-19 outbreak on the group's operating profit was eliminated by the end of July 2020. The good momentum observed since then, particularly in the group's most recent operations in India and Brazil, leads us to envisage that operating profit may increase significantly at constant scope and exchange rates in 2020. Nevertheless, the group is continuing its efforts to reduce structural costs, signified by the relocation on 1 October 2020 of its head office to l’Isle d'Abeau in Isère.”


Pakistan: Lucky Cement chief executive officer (CEO) Muhammed Ali Tabba has praised the government’s decision to lift coronavirus lockdown restrictions on the export of products. As a result, he predicted that the rate of export growth would increase in 2020. The Balochistan Times newspaper has reported that Tabba also welcomed the end of restrictions on construction, and thanked the State Bank of Pakistan for subsidising payrolls during the on-going national coronavirus lockdown and the Ministry of Finance for releasing business refunds quickly.

Tabba said, “The country has benefited greatly from the way the Pakistan Tehreek-e-Insaf (PTI) government has won the war against a pandemic like Covid-19.”


India: Dalmia Bharat subsidiary Dalmia Cement has awarded a contract to payment solutions specialist Paytm for digitisation of its payment processes. United News of India has reported that Paytm will enable customers to use Paytm Wallet, Unified Payments Interface (UPI) and other cashless means in purchasing Dalmia Cement’s products from over 30,000 dealers and retailers across 22 Indian states and union territories, according to the producer.

Head of marketing and executive director Pramesh Arya said, “Dalmia Cement's emphasis on being digital first has helped our dealers and retailers carry out their day-to-day business transactions easily. Paytm has always stood for ease of use and convenience in the world of digital payments. Through this partnership, we aim to help our dealer community accept contactless and secure payments using Paytm Wallet, UPI, debit or credit card and online banking.” He added, “The idea is to maintain social distancing, reduce cash handling and minimise the risk of coronavirus exposure. This partnership is yet another step in Dalmia Cement's pursuit to bring Future Today - our brand credo - to life.”


Spain: LafargeHolcim España has signed an agreement with Carbon Clean, ECCO2 and gas systems specialist Sistemas de Calor for the installation of a carbon capture and storage (CCS) unit at its Carboneras integrated cement plant in Almeria. The company say that the installation will start in 2022 to capture 10% of CO2 emissions with the eventual potential to capture 0.7Mt/yr of CO2 and achieve 100% decarbonisation at the plant. The producer will supply the captured CO2 to Sistemas de Calor for use in agricultural greenhouses, reducing the soil and water intensity of crop production.

Chief executive officer (CEO) Isidoro Miranda said, “Within the framework of our Ecological Transition Strategy, we are tackling climate change through innovative initiatives that allow us to develop low-carbon products and solutions. In our journey towards carbon neutrality, these types of collaborations are key. We hope that, working with our partners Carbon Clean, ECCO2 and Sistemas de Calor, we can develop this innovative circular model with the potential to revolutionise the cement sector and agriculture.”

On 20 November 2019 LafargeHolcim España committed a budget of around Euro20m to upgrades to reduce its cement plants’ CO2 emissions by 90,000t/yr.


Nigeria: Dangote Cement truck drivers have used their vehicles to block entries to the company’s Obajana cement plant and a public road in protest to alleged illegal employment practices. The Daily Independent newspaper has listed the drivers’ alleged grievances as: salary deductions, including for damage to cement bags; arrests for no reason; and the sacking of 6000 drivers since 2016. The drivers are demanding the removal of National Director Transportation Juan Carlos Rincos and his deputy Babadinga Mohammed.

In response to the situation Dangote Cement said that, “the issues have been resolved.”


Russia: Sberbank has acquired a 100% stake in GFI Investment Limited, owner of Eurocement. RosBusinessConsulting News has reported that the acquisition followed an increase in GFI Investment Limited’s overdue debt to Sberbank in mid-2020. Sberbank in turn reported the largest increase in its overdue corporate loans in its history in July 2020. The bank says it does not have operational control of the group. However, it is reportedly “Looking for a strategic investor” for the asset.

Eurocement is the largest cement producer in Russia operating 10 plants domestically and abroad.


India: Ramco Cements recorded sales of US$301m in the first half of the 2021 financial year, down by 15% year-on-year from US$354m in the first half of the 2020 financial year. Its profit was US$46.4m, down by 4% from US$48.4m.

The company said, “Business operations were severely disrupted during April 2020 in view of lockdown imposed by the government due to Covid-19. After relaxation of restrictions by the Government, business recovered gradually and is continuing with weak demand, especially in urban/semi-urban markets. The company continues to comply with the various operating guidelines issued by the relevant regulatory authorities from time to time. As per the current assessment of the company, there is no material impact on the carrying values of trade receivables, inventories and other financial/non-financial assets.”


Nigeria: LafargeHolcim subsidiary Lafarge Africa recorded sales worth US$471m in the first nine months of 2020, up by 10% year-on-year from US$427m in the corresponding period of 2019. Its recurring earnings before interest and taxation (EBIT) increased by 15.7% to US$108m from US$93m.

Chief executive officer (CEO) Khaled El Dokani said, “Our robust results for the first nine months reflect the strong recovery of the demand in the third quarter and the successful implementation of our ‘Health, Cost & Ccash' initiatives.” He added that this was despite the impact of coronavirus and negative local currency effects.


Mexico: Cemex has signed an agreement with Canada-based Carbon Upcycling Technologies to “improve the processing of residue or by-products of industrial processes to produce nanomaterials.” Carbon Upcycling Technologies’ equipment increases the cementitious properties of residues such as fly ash and steel slag by physical processing them into nanomaterials and adding captured CO2, enabling the partnership to produce concrete additives with “greater reactivity and a lower carbon footprint” than their raw materials.

Cemex Ventures Head Gonzalo Galindo said, "This agreement with Carbon Upcycling Technologies is yet another example of our determination to deliver net-zero CO2 concrete products globally by 2050. Our roadmap to achieve this global ambition involves continuing to innovate our technology internally while continuing to seek complementary innovation outside of Cemex through investments in start-ups, consortia, and high-value collaboration agreements such as the one reached with Carbon Upcycling Technologies."


Denmark: FLSmidth has continued to report disruption to order intake, revenue and earnings due to the coronavirus pandemic. Its nine-month revenue from cement sector supply and service contracts were US$680m, down by 28% year-on-year from US$940m in the first nine months of 2020. The cement division’s loss before interest, taxation and amortisation (LBITA) was US$14.1m, compared to earnings before interest, taxation and amortisation (EBITA) of US$50.7. Its gross order intake fell by 39% to US$569m from US$932m. However, order intake in the third quarter of 2020 improved from the second quarter of the year.

The company said, “Across regions, around 95% of cement plants were back in operation at the end of the third quarter of 2020, but many plants continue to run at reduced capacity. As economic growth is one of the most important drivers for cement demand, our customers are highly sensitive to market fluctuations and typically respond through hesitation and cash preservation.” It added, “We are taking additional steps to simplify our cement business and adjust our cost structure. These activities include less in-house manufacturing and more sourcing from local suppliers as well as a reduction of the project organisation.”


China: China National Building Materials (CNBM) recorded operating sales of US$27.2bn in the first nine months of 2020, down by 1% year-on-year from US$27.4bn in the first nine months of 2019. Net profit rose to US$2.82bn, up by 22% from US$2.31bn.

The group said, “On 17 April 2020, the Company became the first batch of first-tier mature enterprises of the National Association of Financial Market Institutional Investors, and carried out unified registration of debt financing instruments (TDFI) (including but not limited to super short-term commercial paper, short-term commercial paper, medium-term debentures, perpetual debentures, asset-backed notes, green debt financing instruments) in the China inter-bank bond market, which were issuable in different types and separate tranches, with a registration term of two years.”


Thailand: Siam Cement Group’s sales in the first nine months of 2020 were US$9.73bn, down by 9% year-on-year from US$10.7bn in the first nine months of 2019. Profit rose by 8% to US$891m from US$826m. Its cement and building materials business recorded revenues of US$4.22bn, down by 6% from US$4.49bn. The group attributed this to coronavirus-related lockdown measures. However, its earnings before taxation, interest, depreciation and amortisation (EBTIDA) rose by 9% to US$574m.


US: Eagle Materials recorded sales of US$875m in the six months between 1 April 2020 and 30 September 2020, the first half of its 2020 financial year, up by 16% year-on-year from US$756m in the first half of the 2019 financial year. Net earnings were US$192m, up by 70% from US$113m. Total cement shipments rose by 28% to 4.27Mt from 3.33Mt.

President and chief executive officer (CEO) Michael Haack said, “We are pleased to have delivered another quarter of record revenue and net earnings growth while further strengthening our balance sheet. Our end markets remain resilient as Covid-19-related uncertainty persists: the housing market continued its strong rebound, cement demand remained robust, despite wet weather in the first half of September.” He added that the company shipped a record 2.2Mt of cement during the quarter.


Rwanda: Kenya-based National Cement has begun selling its Simba brand cement on the Rwandan market. The New Times newspaper has reported that the company is aiming to compete against importers from further afield with cement produced at its Nakuru cement plant in Salgaa, Nakuru County in Kenya, thereby alleviating supply chain bottlenecks.

National Cement reportedly selected the market due to the “pace of development and infrastructure establishment,” and is offering its cement at a promotional price.


Spain: Cementos Portland Valderrivas has renewed its Alcalá de Guadaíra integrated cement plant’s registration to the European Environmental Management System (EMAS). The company says that EMAS registration “encourages transparency in plant management and provides information verified and validated by an external body” to help it to comply with controls and self-controls in its Integrated Environment Authorisation (IEA).

Environment manager Pedro Lanagrán said, “The company maintains a very demanding environmental policy and is committed to innovation to achieve continuous improvement, relying on the application of the best available technologies.” He added, “We understand social responsibility as a transversal concept and are convinced that it is essential to reconcile economic and social progress with the protection of people and nature."


Switzerland: LafargeHolcim’s like-for-like net sales fell by 2.6% year-on-year to Euro6.04bn in the third quarter of 2020 from Euro6.68bn in the same period in 2019. However, its recurring earnings before interest and taxation (EBIT) rose by 10% to Euro1.35bn from Euro1.33bn. It attributed recurring EBIT margin growth to margin increase in its cement business and cost management under the ‘Health, Cost & Cash’ action plan. For the first nine months of 2020 net sales fell by 7.9% year-on-year to Euro16.0bn from Euro18.9bn in the same period in 2019. Its EBIT decreased by 7.2% to Euro2.47bn from Euro2.88bn.

“Our third quarter results demonstrate the resilience of our business and the strength of our decentralized, empowered operating model,” said chief executive officer (CEO) Jan Jenisch. “In addition, the Group saw an increase in revenues from its branded products, which are sold across its broad distribution and retail network. For example, the company recorded a volume increase of 5% in its cement bag sales.”

Third quarter sales and earnings were either stable in improved in most regions with the exception of North America and Middle East Africa. In North America volumes were reduced by coronavirus and a slowdown in the oil and gas industry in western Canada. Overall sales fell in Middle East Africa but earnings were aided by sales volume growth in Nigeria. Elsewhere, cement market recovery was noted in Mexico and Brazil and weaker markets mentioned in the Philippines and Australia.


India: Cement production fell by 18% year-on-year to 209Mt in the first nine months of 2020 from 255Mt in the same period in 2019. Data from the Ministry of Commerce and Industry shows that production in the third quarter of 2020 dropped by 11% year-on-year to 69Mt from 78Mt. Monthly production has consistently fallen year-on-year since March 2020 when coronavirus-related lockdown measures started.


Egypt: Cement sales rose by 10% month-on-month to 3.8Mt in September 2020, the highest figure since April 2020. However, year-on-year sales for the month fell by 12.5%, according to the Daily News Egypt newspaper. Naeem Research said that cement demand remains 15% below where the market should be due to the coronavirus pandemic. The local cement production capacity utilisation rate is estimated to be 56%.


Algeria: The Ain El Kebira (SCAEK) cement plant near Setif, part of the Industrial Cement Group of Algeria (GICA), has launched an operation to export 40,000t of clinker to the Dominican Republic. The company has already been marketed its products in Senegal, Ivory Coast, Guinea, Peru and Brazil, according to the Algeria Press Service. SCAEK has already exported 0.55Mt of clinker to countries in Africa and South America. The cement producer plans to export 0.75Mt of clinker in 2020.


Togo: The government has granted two mineral exploration permits to Dangote Cement to assess carbonate phosphate reserves in Kpomé Apéyémé, Zio prefecture and Akoumapé, Vo prefecture. The licences are valid for three years with options for renewal, according to the Liberté newspaper and Agence Ecofin. If suitable deposits are found then they could support plans by the cement producer to build a plant in the country. Dangote Cement received government clearance to build a 1.5Mt/yr grinding plant for US$60m in late 2019.


Tajikistan: Data from the Ministry of Industry and New Technologies (MOINT) shows that Tajikistan exported 0.99Mt of cement in the first nine months of 2020. 0.56Mt of cement was exported to Uzbekistan, 0.39Mt to Afghanistan and 43,000t to Kyrgyzstan, according to Asia Plus. Local cement companies produced over 3.2Mt in the same period. The country has 16 registered cement plants with a total production capacity of 5.6Mt.


Mexico: Cemex plans to launch its net-zero CO2 Vertua concrete product worldwide following its release in Europe. It said that customers in several European countries are using Vertua in infrastructure projects and climate-friendly building projects.
“We believe that climate change is one of the biggest challenges of our time, and we are committed to doing our part to address it. Vertua is clear evidence that we can transition to a carbon-neutral economy, where concrete is an essential component in the development of climate-friendly urban projects, sustainable buildings, and resilient infrastructure,” said Fernando A Gonzalez, chief executive officer (CEO) of Cemex.

Vertua uses a geopolymer binder solution created by Cemex’s Research and Development Center in Switzerland. This solution has a reduced carbon footprint of up to 70%, The compensation of the remaining CO2 is achieved by participating in reforestation projects, among other initiatives.


Italy: The pilot plant for the Cleanker project was inaugurated at Buzzi Unicem’s Vernasca cement plant in early October 2020. The purpose of the calcium looping technology project is to demonstrate a technology for capturing carbon dioxide (CO2) in cement plants. Tests will be run for around 10 months with a total actual operating time of one month at most.


Vietnam: Tan Thang Cement has commissioned a control system package supplied by Switzerland-based ABB for a new cement plant in Nghe An province. The order included an ABB Ability System 800xA DCS (Distributed Control System), which integrates control, electrical and communication systems, ABB Ability Knowledge Manager and ABB Ability Expert Optimizer products which are integrated with the DCS, and basic communication and electrical system infrastructure and equipment.

"This was a challenging project many years in development and we delivered the control system package within our customer's timeframe. We used remote support and provided all necessary training to ensure that the plant team could complete the commissioning accurately and safely," said Nguyen Hoang Giang, Division Manager for Process Industries, ABB Vietnam.

On the electrical side, ABB provided a 110kV air insulated substation, with a SCADA (Supervisory Control and Data Acquisition) system based on ABB Ability System 800xA for Power Control, as well as telecommunications, and high voltage primary and secondary equipment to support the electrical infrastructure. ABB also delivered power transformers, distribution transformers, a motor control centre, auxiliary control centre, emergency diesel generator, DC power supply, various field devices, and related commissioning services.


China: Huaxin Cement’s sales in the first nine months of 2020 were US$3.04bn, down by 9.2% year-on-year from US$3.35bn over the corresponding period of 2019. Net profit also dropped by 17% to US$660m from US$800m.


Colombia: Cemex subsidiary Cemex Latam Holdings (CLH) recorded net sales of US$571m in the first nine months of 2020 were down by 24% year-on-year from US$752m in the corresponding period of 2019. Operating earnings fell by 14% to US$69.0m from US$87.0m, while consolidated cement volumes fell by 20% to 3.92Mt from 4.89Mt.

Jesus Gonzalez, chief executive officer (CEO) of CLH said, “Our operations could run relatively normally during the third quarter in Colombia, Guatemala, Nicaragua and El Salvador, while restrictions impacted in Panama and to a lesser degree in Costa Rica.” He added that the company improved its operating earnings before interest, taxation, depreciation and amortisation (EBITDA) by 19% on a like-for-like basis to US$51m in the third quarter of 2020.


Myanmar: Thailand-based Siam Cement Group (SCG) and Pacific Link Cement Industries (PLCI) joint-venture Mawlamyine Cement has suspended production at its integrated cement plant in Kyaikmayaw, Mon State amidst a dispute between its owners. SCG says it has resorted to arbitration to resolve the matter and that PLCA has filed a lawsuit against it. In a statement SCG said that, “MCL continues to work with distributors and customers to alleviate the supply shortage due to the temporary suspension.”


Cameroon: Cimencam has donated 2000 Covid-19 test kits, 15 respirators and 10 reanimation beds to the Ministry of Public Health to help in its fight against the Covid-19 outbreak. The Journal du Cameroun newspaper has reported that chair Pierre Moukoko Mbonjo formally handed over the supplies, worth US$179,000, to Minister of Public Health André Mama Fouda at a ceremony in the Cameroonian capital of Yaounde.


France: Milling and process equipment supplier Fives has acquired Dufieux, a “high-tech machine-tool designer and manufacturer” and developer of the Milling Mirror System (MMS). The company says that Dufieux’s activities complement Fives’ machine-tool offerings for the cement and general industry markets, which are sold through the Forest-Liné, Liné Machines, Giddings & Lewis and Cincinnati ranges. No amount for the acquisition has been disclosed.

High-precision machines division president Raphaël Constantin said, “Despite a difficult situation, we are continuing our efforts to develop effective, innovative and more environmentally friendly solutions which are better suited to future production requirements. Dufieux’s offering supplements our range of high-performance machine-tools, which already includes an unrivalled portfolio of technologies. This will also strengthen our capacity for innovation and industrial flexibility.”