Global Cement Newsletter

Issue: GCW558 / 25 May 2022

Headlines


More mergers and acquisition news emerged this week in the shape of potential buyers for Sika’s US admixtures business. Reporting from Bloomberg revealed that Holcim, HeidelbergCement and Turkey-based Sabancı Holding had all made it, amongst other unnamed companies, to a second round of bidding for the assets. Sika then confirmed this to the Finanz und Wirtschaft newspaper and added that the sale would also relate to Canadian assets as well. The intention here is to bypass the risk of a lengthy competition investigation in the US.

Switzerland-based Sika announced in November 2021 that it had signed a deal to buy MBCC Group from Lone Star Funds, a global private equity firm, for Euro5.2bn. At the time of the announcement Sika said that the transaction was subject to regulatory approval but it added that it was ‘confident’ that all required clearances would be obtained with closure planned for the second half of 2022. Known competition probes are now pending in the UK, Australia and New Zealand. A previous piece from Bloomberg suggested that internal analysis by Sika found that the company might need to divest operations with annual sales of around US$160m with a value of US$400m. However, the latest update suggests a value of up to US$1bn. The US represented US$1.71bn or 18% of Sika’s total group sales in 2021. Sika’s information to shareholders to let them know about the MBCC acquisition in November 2021, showed that MBCC had sales of around US$966m in the Americas in 2021 with 36 production plants. Overall, not just in the US, the deal is expected to change Sika’s technology mix from 40% concrete and cement systems to 49%, with most of the additions coming from concrete applications.

Divestments were always likely in an acquisition this large between competitors with shared geographies. What is interesting here to the cement sector is that the three named interested parties are all cement producers. Holcim is perhaps the least surprising given its size, pivot towards light building materials and the fact that its current head, Jan Jenisch, used to run Sika. If anyone knows how much an admixture company is worth, it’s the guy who ran one five years ago! HeidelbergCement does not have such a large light building materials business footprint but it is demonstrably interested in making heavy building material production more sustainable. Also, as the world’s second largest western multinational cement producer it is likely to be interested in an input market for some of its end products. Sabancı Holding is the outlier in this grouping with a more regional grey cement business based in Turkey, an international white cement business and a diverse set of business interests including finance and energy. Although, even as the smallest of the bunch, it still reported sales revenue of over US$9bn in 2021. One notable absence from the potential contenders list for Sika USA is Cemex. Its Urbanisation Solutions division, which produces admixtures among other products, reported sales of US$1.9bn in 2021 or 13% of the group’s total revenue. US$558m of this was made in the US.

The wider context in the North American admixture market is that the announcement of Sika’s deal with MBCC in November 2021 was followed about a month later when Saint-Gobain said it had entered into a deal to buy GCP Applied Technologies. This followed Saint-Gobain’s acquisition of Chryso in October 2021. However, Saint-Gobain said that the GCP deal would strengthen its position more in North America. Readers can find out more about Saint-Gobain’s ambitions here.

The final word at this stage should go on Lone Star Funds, the current owner of MBCC. Lone Star Funds bought the construction chemicals business from BASF for Euro3.17bn in September 2020. At the time the acquisition closed Saori Dubourg, a member of the board of executive directors of BASF, said “Lone Star has been a professional partner in this transaction and is committed to the future success of the business.” If the reporting is correct, Lone Star Funds is now selling the same business for over Euro5bn. There are two takeaways to consider at this point. One is that the perceived value of products that make cement and concrete more sustainable are growing. The other is that Lone Star Funds timed its acquisition of MBCC from BASF very well.


India: Ramco Cements has appointed MF Farooqui as its chair. Previously PR Venketrama Raj had served as both the company’s managing director and chair. However, the company has decided to split the positions. Venketrama Raj will continue as managing director until mid-2027.

Farooqui, aged 67 years, has worked for over 35 years as a civil servant in the Indian government with roles including Secretary for the Department of Telecom and Heavy Industries, Special Secretary & Additional Secretary for the Ministry of Environment and Joint Secretary for the Department of Economic Affairs.

For the government of Tamil Nadu, he has worked as Principal Secretary for the Industries Department, Member Secretary for the Chennai Metropolitan Development Authority and Deputy Secretary in the Finance Department. He had also served as chair of Repco Bank, Titan Company and Tamilnadu Newsprint & Papers Limited. He holds a master’s degree in physics and business administration. He has been on the board of the Ramco Cements as an independent director since 2017.


Germany: HeidelbergCement has accelerated its specific CO2 emissions reduction target to 2030 to 400kg CO2/t CEM compared with 1990 levels. This represents a 30% cut compared to 2021 levels and a 47% cut compared to 1990 levels. The previous target was 33% compared to 1990 levels. The company said that in the next eight years to 2030 its CO2 emissions are set to decrease more strongly in percentage terms than in the last three decades.

The building materials producer made the announcement as part of a new set of medium-term sustainability and financial targets entitled ‘Concrete Promises’ that were presented at its Capital Markets Day event in late May 2022. The group plans to generate half of its revenue from sustainable products by 2030. Carbon capture, utilisation, and storage (CCUS) projects that have already been launched are expected to achieve a cumulative reduction of 10Mt CO2 by 2030. By 2025, more than 70% of its debt will be covered by sustainable financial instruments. Among other things, the group plans to use a bond programme that it says is the first in the industry to be aligned with the climate goals of the European Union taxonomy.

Dominik von Achten, chair of the managing board of HeidelbergCement, said “We have the ambition, speed, knowledge, technologies and partners to lead the necessary change process in our sector. Our focus is on expanding our portfolio of sustainable products, reducing our CO2 emissions quickly and significantly, proving that CO2-free products are possible on a large scale, and creating a circular economy by consistently applying the principles of circularity. Our new sustainability targets for 2030 illustrate this ambition.”


India: Grasim Industries' full-year consolidated sales were US$12.3bn in the 2022 financial year, up by 25% year-on-year from US$9.85bn. Its net profit rose by 60% to US$1.44bn from US$901m.


India: Cement producers and analysts say that a government cut to fuel duty may reduce the price of cement. The reduction may be minimal but it will stand out amongst inflation on other input costs for cement production, according to sources quoted by the Business Standard newspaper. Shree Cement hopes to pass on any reduction in costs from transportation to consumers but UltraTech Cement and JSW Cement are yet to announce a price cut. Most cement producers raised their prices by 8% month-on-month in April 2022 with a similar increase expected in May 2022.


India: Dedicated Freight Corridor Corporation of India Limited (DFCCIL) says that it will inaugurate the 82km Punjab section of the upcoming Eastern Freight Corridor railway before the end of 2022. The line will form part of the 175km Punjab - Uttar Pradesh section and connect Western Indian cement plants and other industries by high-speed link with Central markets. Workers will divert the existing railway between Mandi Gobindgarh and Sirhind to make way for the line.

DFCCIL previously inaugurated the corridor's central Bhaupur - Khurja section in Uttar Pradesh in January 2021.


China: Tangshan Jidong Cement plans to launch a share buyback scheme by mid-2023. Reuters News has reported the value of the planned scheme as US$39.9 - 55.8m.


Saudi Arabia: Najran Cement recorded sales of US$37.3m in the first quarter of 2022, down by 24% year-on-year from US$49.2m. The producer's net profit was US$6.21m in the quarter, down by 61% from US$16.1m. During the quarter, the production costs increased for the company.


Chile: Melón has inaugurated a new 0.25Mt/yr grinding plant in Punta Arenas. The project had an investment of US$45m, according to the El Pingüino newspaper. In its first year of operation an output of 80,000t is planned. It is the first cement plant in the Magallanes Region. Spain-based Cemengal supplied a Plug&Grind Xtreme grinding unit for the project.

Jorge Eugenín, the chief executive officer of Cementos Melón, attended the event and said, “For us Magallanes has always been an interesting market. Its consumption is comparable to cities in developed countries.” He added that the region has a per capita cement consumption level of 550kg/yr compared to the Chilean mean of 280kg/yr.

The cement producer previously announced plans to double the production of the plant by building a second grinding mill if the market supported it. Eugenín commented that the announcement of a large-scale hydrogen project in the region by Total Eren in late 2021 could add further momentum to expansion plans for the new cement plant.


US: Drake Cement & Materials has inaugurated a new finish mill at its integrated plant at Paulden in Arizona. Chief executive officer Enrique Rozas and Ricardo Rizo Patron, the chairman of parent company Skanon Investments, attended the event. Drake Cement & Materials is a subsidiary of Peru-based UNACEM.


France: Germany-based IKN says it successfully commissioned a new Pendulum Cooler at Lafarge France’s Martres cement plant earlier in the year. The 2500t/day cooler was supplied for the new production line at the unit. It is also equipped with a single grate Dynamic Linear Drive and a roll crusher with three rolls at the cooler end as well as a bypass. It is designed to be used with an alternative fuels thermal substitution rate of up to 85%. IKN thanked Lafarge France and China-based CBMI for their cooperation on the project. The new production line was commissioned in January 2022.


Russia: SibCem’s first vice president Gennady Rasskazov says that the local production cost of cement is expected to rise by 30% year-on-year in 2022 due to the new ‘economic circumstances’ the country faces. He added that, due to economic sanctions, the price of coal rose by 76 - 86%, goods and materials by 55%, diesel by 30%, oils and lubricants by 83% and transport and logistics costs by 14 - 24% in the first quarter of 2022. The average growth in worker pay at SibCem will rise by 30% in 2022 as the company has implemented indexed salaries. Rasskazov made the comments at a meeting with cement producers, consumers and local officials at the Novosibirsk State University of Architecture and Civil Engineering.


UK: The South Downs National Park Authority has published its Area Action Plan for the site of the former Shoreham cement plant in West Sussex. The plan will guide the development of the site into a new mixed-use development. The Sussex Express newspaper has reported that the authority will hold a public consultation from 7 June 2022 to 2 August 2022, at which it will set out detailed policies for planning applications. Their scope will include biodiversity and ecology, landscape and design, recreation and tourism, the economy and jobs, new homes, cultural heritage, transport and climate change.


India: Ramco Cements’ earnings before interest, taxation, depreciation and amortisation (EBITDA) in the 2022 financial year were US$169m, down by 17% year-on-year from US$204m in the 2021 financial year. The producer’s profit after tax also rose by 17%, to US$115m from US$98m.

The Hindu Business Line newspaper has reported that the company attributed its full-year earnings decline to increased fuel costs and reduced cement prices. In the fourth quarter of the 2022 financial year, power and fuel costs rose by 88% year-on-year to US$60.1m from US$31.9m.


Uzbekistan: United Cement Group (UCG) has successfully completed the modernisation of the grinding units at its Kuvasay cement plant in Fergana. The work consisted of installation of protective armour on the inner surface of mill drums and mill ends and the replacement of bar partitions between chambers with sectional partitions. This increased the total mass of the cylpebs to 43t from 39t and improved the mills’ efficiency. UCG also upgraded the units’ dust removal equipment, replacing their original electrostatic precipitators with RIF–0500–03 K and FRKI 360 bag filters. The group carried out the modernisation in collaboration with the Uzsanoatkurilishmateriallari Association and the Fergana Regional Committee for Environmental Safety.


Egypt: Arabian Cement more than doubled its consolidated sales year-on-year to US$57.4m in the first quarter of 2022 from US$23.4m in the first quarter of 2021. During the quarter, the producer recorded a profit of US$3.19m, compared to a US$343,000 loss in the corresponding quarter of 2021.


Brazil: The Falcão Bauer Quality Institute (IFBQ) has certified LafargeHolcim Brasil’s CP III-32 blast furnace slag cement for all construction applications. The certificate confirms that the product offers 50% reduced CO2 compared to the average cement on the Brazilian market.

The Jornal Dia Dia newspaper has reported that sustainability manager Bruno Hallak said “The IFBQ is an institution recognised by the market and this certification confirms that we are on the right track. The production processes and methodologies evaluated can even be reproduced in other units, according to their local characteristics, increasing the gain for the environment.”

LafargeHolcim Brasil previously obtained IFBQ certification for its CP III-40 blast furnace slag cement, which offers a slightly less reduced clinker factor than CP III-32 cement, in 2021. It was the first cement of its type in Brazil to receive the certification. The company produces both cements at its Vitória grinding plant in Espírito Santo.


Mexico: GCC has announced its plan for a 100% Portland limestone cement (PLC) transition of its Samalayuca, Chihuahua, cement plant. The producer says that the plant will complete its transition in July 2022. It said that the move is part of its CO2 emissions reduction roadmap.


India: Shree Cement recorded standalone sales of US$1.84bn in its 2022 financial year, corresponding to a rise of 13% year-on-year from US$1.63bn in the 2021 financial year. Profit after tax for the year was US$306m, up by 2.8% from 298m.

In the fourth quarter of the 2022 financial year, Shree Cement’s energy costs rose by 10% year-on-year and equalled 26% of its sales, while transport costs fell by 1.1% to 23% of sales. Raw materials costs equalled 6.6% of the quarter’s sales.


India: Nuvoco Vistas recorded full-year consolidated sales of US$1.2bn in its 2022 financial year, up by 24% year-on-year. The group’s earnings before interest, taxation, depreciation and amortisation (EBITDA) remained level year-on-year at US$198m. Its profit after tax also remained level at US$4.12m.

The Pioneer newspaper has reported that Nuvoco Vistas’ Chittor cement plant achieved an alternative fuel (AF) substitution capacity of 23% during the 2022 financial year. The group says that it remains focused on increasing its proportion of blended cement products, in addition to AF and waste heat recovery (WHR) projects.


India: The board of JK Cement has recommended a proposal for the company to seek to raise US$64.4m via non-convertible debentures (NCDs). Under the proposal, the cement producer would issue the NCDs on a private placement basis in one or more tranches.


Cameroon: The Cameroon Minister of Trade Luc-Magloire Mbarga has authorised cement producers and importers to begin importing more cement from Congo and the Democratic Republic of Congo (DRC) in order to combat a local shortage. The Business in Cameroon newspaper has reported that Mbarga said that authorisation will operate temporarily, until high cement prices drop.

In 2021, Cameroon produced 4.5Mt of cement. Its domestic consumption was 4Mt, up by 14% year-on-year from 3.5Mt in 2021.


US: Holcim US’ Lafarge Ravena cement plant in New York State has launched a celebration of six decades’ successes on the occasion of the 60th anniversary of the plant’s groundbreaking ceremony. 1000 people attended the ceremony on 19 May 1961, where New York Governor Nelson Rockefeller broke ground on the then Atlantic Cement Company’s new US$64m facility.

Addressing the crowd, Rockefeller said “The enormous production capacity of this plant will undoubtedly draw many large and small companies to the environs, and, as a result, employment will rise considerably.”

Today, the Lafarge Ravena cement plant directly employs 160 local people.


US: Eagle Materials has recorded consolidated sales in its 2022 financial year of US$1.9bn, up by 15% year-on-year. The group’s adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) was US$657m, up by 15%. Full-year cement sales totalled US$1bn, up by 7%, with operating earnings of US$260m, up by 11%. The group’s cement volumes rose by 1% to 7.5Mt.

President and CEO Michael Haack said "As we look back on another extraordinary year, I am extremely proud of our team's ability to deliver record operating and financial results despite multiple external challenges, including transportation disruptions, supply chain constraints and, of course, continuing to navigate the Covid-19 pandemic.” He added "As we begin our new fiscal year, Eagle is well-positioned, both financially and geographically, to capitalise on the underlying demand fundamentals that are expected to support steady and sustainable construction activity growth over the near and long term. We expect that infrastructure investment should increase in the latter part of our fiscal year, as federal funding from the recently enacted Infrastructure Investment and Jobs Act begins in earnest. And, despite recent interest rate increases, housing demand remains strong across our geographies, outpacing the supply of homes. Nonresidential construction activity is also picking up."


Ghana: Heidelberg said that it has signed an agreement with CBI for the acquisition of 50% of the latter’s shares. CBI is the parent company of CBI Ghana, which operates the 0.6Mt/yr Tema grinding plant in Accra. It is in the process of establishing a calcined clay plant at the facility. HeidelbergCement says that it and CBI will explore the possibility of further calcined clay projects in West Africa. Other investors in CBI Ghana include Denmark-based Investeringsfonden for Udviklingslande (IFU) and Norway-based Norfund.

HeidelbergCement’s existing Ghanaian susbidiary Ghacem operates 3Mt/yr-worth of grinding capacity at two plants in Accra and Takoradi.

HeidelbergCement managing board member Hakan Gurdal said “Characterised by high sustained market growth rates, Ghana is one of HeidelbergCement’s core markets in Africa. The new flash calciner in Ghana will be the largest worldwide, with a calcined clay production capacity of more than 400,000t/yr. Start of production is planned for 2024.” Gurdal concluded “We are committed to lowering our CO2 footprint also in emerging markets.”


Vietnam: Three new integrated cement lines are expected to raise Vietnam’s total installed cement capacity by 8% to 115.4Mt/yr in 2022, from 106.6Mt/yr at the beginning of the year. VNDirect Securities has calculated that the upcoming lines – Dai Duong 1, Long Thanh and Xuan Thanh 3 – have a total capacity of 8.8Mt/yr. They are situated in Northern Vietnam’s Ha Nam Province and Central Vietnam’s Thanh Hoa Province, both of which already have cement overcapacity.

Viet Nam News has reported that Vietnam exported 4.31Mt of cement and clinker in April 2022, down by 7.6% month-on-month. The products’ total value was US$171m, down by 2.9% month-on-month.


US: Bloomberg has named Germany-based HeidelbergCement, Switzerland-based Holcim and Turkey-based Sabancı Holding as possible bidders for some of Sika’s US admixtures assets. Sika is seeking to divest the assets in order to obtain competition authorities’ approval for its US$6bn acquisition of Germany-based construction chemicals company MBCC from Lone Star Funds.


Argentina: Holcim Argentina has published its 10th Sustainable Development Report, detailing its sustainability progress in 2021. That year, it reduced its CO2 emissions per tonne of cementitious material by 4.2% compared to 2017, to 505kg/t from 527kg/t. It sourced 43% of all electricity used in its operations renewably and achieved 8.4% alternative fuel (AF) substitution in its cement production. During the year, Holcim implemented ECO-labels to designate products with at least 30% CO2 emissions reduction.

Holcim Argentina’s CEO Christian Dedeu said “This decade of reports demonstrates our strong commitment to sustainability and governance that considers economic, social and environmental impacts. The conviction of the importance of reviewing performance and being accountable for our impacts made it possible.”


India: JK Lakshmi Cement’s full-year consolidated sales were US$697m in its 2022 financial year, up by 14.6% year-on-year from US$608m in the 2021 financial year. The group’s net profit was US$61.5m, up by 13.4% from US$54.2m.

The producer said "Despite unabated increases in petcoke and diesel prices, which are hovering at all-time high, JK Lakshmi Cement was able to achieve healthy profitability through continuous improvements in operational efficiencies, energy costs, better product mixes and higher volumes."


Zimbabwe: Livetouch Investments plans to invest US$100m in the construction of an integrated cement plant. The Herald Zimbabwe newspaper has reported that the group plans to establish the new facility in phases, with the first phase costing US$15 – 20m. The phase will include the exploration of possible locations for the plant with suitable limestone resources, which could then also supply its Redcliff grinding plant. The grinding plant currently imports 4000t/yr of Zambian clinker and also buys raw materials from Lafarge Zimbabwe.

Managing director Kyle Wang said “We are still limited by the limestone resources in the country.” He said that the company has identified ‘good limestone deposits’ in Rushinga, Nyamapanda, Bulawayo and Masvingo, however “The problem with some of the limestone is the quality.”


Kuwait: Kuwait Portland Cement more than doubled its sales year-on-year in the first quarter of 2022, to US$107m from US$45m in first quarter of 2021. The company’s net profit also rose, by 69% to US$7.18m from US$4.24m.


France: The Court of Appeals has confirmed a charge of complicity in crimes against humanity against Lafarge, now part of Holcim. The company will now appeal the decision to the Supreme Court. The confirmation establishes the scope of the charges that Lafarge will face, if unsuccessful in its appeal.

Global Cement previously reported that Lafarge allegedly made indirect payments to terror organisation ISIS between 2011 and 2014 in order to keep its Jalabiya cement plant operational during the Syrian Civil War. French prosecutors opened an investigation into the company’s activities in the country in June 2017, leading to its indictment for complicity in crimes against humanity on 28 June 2018.


Germany: The World Economic Forum and US State Department have welcomed HeidelbergCement as the newest member of the First Movers Coalition. Founded in 2021, the coalition brings together companies across multiple industrial sectors to coordinate the creation of demand for emerging reduced-CO2 production technologies. As part of its membership, HeidelbergCement commits to purchasing zero-emission vehicles for 30% of new heavy-duty truck purchases and 100% of medium-duty truck purchases by 2030.

US Special Presidential Envoy for Climate John Kerry said “I welcome HeidelbergCement to the First Movers Coalition, and its commitment to purchasing zero-emissions trucking solutions that the world must focus on scaling up over this critical decade. The First Movers Coalition is a critical pillar of the world's efforts to advance breakthrough zero emissions technologies to decarbonise many of the largest sectors of the global economy and to put us on a track to achieve net zero emissions by 2050.”


India: Dalmia Bharat Foundation has signed a memorandum of understanding with Bokaro Steel Plant for the training of 600 new young people from Bokaro every year. Under the initiative, the partners will run short, placement-based courses at the DIKSHa (Dalmia Institute of Knowledge and Skill Harnessing) centre.

Dalmia Bharat Foundation CEO and Dalmia Bharat group head - corporate social responsibility Vishal Bhardwaj said “Since our inception in 2009, we’ve witnessed our role gradually transform from being a resource provider to a key enabler for positive change in society. While we’ve created a legacy of development and change for the better, we continue to strive to ensure that we meet newer economic and environmental needs and close wider societal gaps as much as possible.”