Global Cement Newsletter

Issue: GCW607 / 10 May 2023

Headlines


Eagle Materials announced this week that it had completed the acquisition of Martin Marietta’s cement import business in the north of California. A key part of the deal includes the sale of a cement terminal at Stockton. No value for the transaction has been disclosed.

The agreement prompts discussion for two immediate reasons. Firstly, it continues the enlargement of Eagle Materials’ cement business with its second terminal in California. The company operates its cement business in a band running almost right across the US. It runs seven cement plants in seven different states and jointly operates, with Heidelberg Materials, a plant in Texas too. It also runs a network of 25 cement terminals, including the new acquisition, stretching from California in the west to Pennsylvania in the east.

Eagle Materials’ focus on the cement sector also harks back to its previous plans to separate its various businesses. In 2019 it approved a plan to split its heavy materials and light materials businesses into two publicly-traded entities. The decision was made in response to pressure by shareholder Sachem Head Capital Management to make the company, in its view, more valuable. A strategic portfolio review followed but the planned separation was subsequently delayed due to the Covid-19 pandemic and poor market conditions, amongst other reasons. The board of the company then cancelled the proposed separation in 2021 citing the financial benefits of a diversified business, opportunities for strategic growth and the divestment of its oil and gas proppants business.

The other talking point is that the Eagle Materials transaction follows a positive response by the Federal Trade Commission (FTC) in response to the abandonment of CalPortland’s attempt to buy the Tehachapi cement plant in southern California and two related terminals from Martin Marietta. CalPortland’s parent company Taiheiyo Cement said in late April 2023 that it had terminated the acquisition agreement originally announced in mid-2022 due to its inability to obtain approval from the FTC in a timely manner. Whilst the FTC did not say if it had directly tried to block the proposed deal it did say, “The abandonment is a victory for consumers and preserves competition for a key component of Southern California’s construction and infrastructure industries.”

The FTC argued that the transaction would have reduced the number of cement suppliers in Southern California from five to four, further concentrating an already concentrated market, and was “presumptively illegal.” It noted that the Tehachapi plant was only about 20km away from CalPortland’s Mojave cement plant. It went on to say that, if the deal had gone ahead, CalPortland was poised to own half of the cement plants serving the Southern California market. It added that it would have been well-placed to raise its prices and that, “the transaction would have also increased the likelihood for coordinated action between the remaining competitors in this concentrated market.”

The de-facto block by the FTC of the Tehachapi sale now opens up the question of who Martin Marietta might try to sell it to next. Cemex, Mitsubishi Cement and National Cement (Vicat) are the obvious contenders given that they each also run integrated plants in the state. Of course another company, especially one with some form of existing distribution network, may express interest. Given its enlarged presence in Northern California, Eagle Materials springs to mind. Other potential buyers are, of course, available.


Brazil: Votorantim Cimentos has appointed Osvaldo Ayres Filho as its global chief executive officer (CEO). He succeeds Marcelo Castelli in the post, who is becoming a member of the board of directors.

Ayres Filho holds over 25 years of professional experience working for companies such as Avon, Fibria and Ciba Chemicals. He joined Votorantim Cimentos in 2012 and has held the positions of financial director for the Europe, Asia and Africa region, operations director for the Southeast region in Brazil, financial director for the Brazilian business and global chief financial officer and Investor Relations Officer, with additional responsibility for the areas of strategy, information technology, mergers and acquisitions and global procurement. He became the company’s chief operations officer in 2021 with responsibility for cement, logistics and adjacent businesses. Ayres Filho holds a degree in business administration from Mackenzie Presbyterian University and a postgraduate degree in administration from the Getulio Vargas Foundation.


Germany: Heidelberg Materials recorded sales of Euro4.9bn during the first quarter of 2023, up by 13% year-on-year. Its earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 42% to Euro557m from Euro394m. The producer said that energy prices in the quarter eased slightly, but remained ‘volatile’ and were still well above previous years. Heidelberg Materials upgraded its outlook for 2023 to a ‘moderate’ rise in sales, with earnings of Euro2.5 - 2.65bn, compared to Euro2.35bn - 2.65bn in its previous outlook.

During the quarter under review, Heidelberg Materials expanded its circularity offering through the acquisition of demolition waste recycling company SER Group in Germany and of fly ash recycling company SEFA Group in the US. It linked its financing to its climate targets through the issue of a sustainability-linked loan in January 2023.

Chair Dominik von Achten said “We have had a good start into 2023. In the first quarter, we were able to achieve a strong increase in revenue and results. Our operations in North America and Europe made a particular contribution to this success –we can keep building on this during the rest of the year. We are optimistic about the full year 2023.”


India: Birla Corporation recorded sales of US$1.06bn throughout the 2023 financial year, up by 16% year-on-year from 2022 financial year levels. The company’s cement segment contributed US$1bn in sales, up by 17% and corresponding to 95% of group sales. Group net profit was US$4.94m, down by 90% year-on-year from the previous financial year.


India: Nuvoco Vistas’ sales rose by 14% year-on-year during the 2023 financial year, to US$1.29bn. The group’s cement sales volumes were 18.8Mt, up by 5%. It recorded a profit after tax of US$1.95bn.

In 2023, Nuvoco Vistas achieved a cement alternative fuel (AF) substitution rate of 12%. Its emphasis on developing blended cements enabled it to achieve an industry-leading cement to clinker factor of 55%. It operations during the year relied on over 20% renewable energy.


India: Jaiprakash Associates has defaulted on loans worth US$482m, which were due for repayment on 30 April 2023. The producer has total borrowings of US$3.57bn, repayable by 2037. It informed the National Stock Exchange of India (NSE) that the outstanding debt is subject to on-going restructuring, but will reduce by US$2.21bn upon transfer of property belonging to Jaiprakash Associates to a shareholder-approved special purpose vehicle (SPV).


Iraq: Pakistan-based Attock Cement has scheduled an extraordinary general meeting in late May 2023 to approve the sale of a cement grinding plant at Khor Al-Zubair in Basra for around US$23m. It is preparing to sell a 60% share in the unit to a joint venture comprising Abdul Lateef Mohsin Al Geetan, an Iraqi national, and Lamassu Babylon General Trading Company, an organisation based in Dubai, UAE.


Nigeria: Lafarge Africa has opened a bag manufacturing unit at its Ewekoro cement plant in Ogun State. It has a bag production capacity of 105m/yr. The company says it is the first of its kind in the country. It is intended to increase the availability of bags through large-scale production locally. The project is a joint-venture run with MDV Industries.

Khaled El Dokani, the country chief executive officer for Lafarge Africa, said “We are using the best technology that produces the most efficient and durable bag in Nigeria. It is a very great day for us at Lafarge Africa.”


Tanzania: The government has defended its support for the acquisition of a majority stake in Tanga Cement by a subsidiary of Heidelberg Materials. In 2021 Scancem International, a subsidiary of Heidelberg Materials, agreed to buy a 68% share of Tanga Cement from AfriSam for around US$59m. The Fair Competition Commission (FCC) provisionally approved the deal but the Fair Competition Tribunal (FCT) blocked it in late 2022 following lobbying by Chalinze Cement and the Tanzania Consumer Advocacy Society on the grounds that it would potentially reduce market competition, according to the Citizen newspaper. However, Scancem International applied again to the FCC in December 2022 to push through the agreement. This motion was then approved in February 2023.

During a parliamentary debate on the issue in early May 2023 Ashatu Kijaji, the Minister for Industry and Trade, defended the decision to re-approve the deal on the grounds that the approved merger application was different from the one rejected by the FCT. However, other members of parliament were sceptical about the decision.


Cape Verde: Portugal-based Cimpor has signed a deal with the government of Cape Verde to develop and exploit a pozzolan deposit over the next 30 years. Exploration of the site is expected to begin by late 2024. The immediate location has reserves of around 0.5Mt in an area of 108 hectares. However, the scheme also has the option to expand the site to 790 hectares, increasing the estimated pozzolan reserves to 4Mt. The project has an investment of Euro3m and is expected to create around 80 jobs.

Cimpor’s parent company OYAK Cement previously said in 2019 that it was planning to invest in pozzolan extraction in Cape Verde.


US: Swede-based Bruks Siwertell has received a conveyor system order for use at the integrated Capitol Aggregates cement plant in San Antonio, Texas. The order has been placed by Borton, a construction company.
Three new conveyor systems will modify the site’s existing material transport system and the addition of a new storage silos. They are all standard widths of 91cm. The C-810 type conveyor will be 148m in length and will transfer clinker to a bucket elevator at a rated capacity of 150t/hr. The 84m long C-940 type conveyor will have a rated capacity of 200t/hr and will transfer clinker to the silo reclaim, while the C-975 type conveyor will be 40m long and connect to an existing conveyor. It will also have a rated capacity of 200t/hr.

The conveyors are being fabricated in Mexico and will be delivered to the operator later in 2023.


Poland: UK-based John King Chains has opened a new warehouse at Bydgoszcz to support the Central European market. The company said that the investment manufacturing and stock was confirmation its commitment to developing the market in continental Europe. It noted that the site will stock conveyor and transmission chains and would have a rapid response team to respond to customer demand.

John King Chains Group is a fifth-generation family-owned business, with the head office and principal manufacturing in the UK, along with a presence Africa, Asia Pacific, Central Europe, North America and South America.


India: Orient Cement has laid the foundation stone of an expansion to its Devapur cement plant in Telangana's Mancherial District. The Hindu Online News has reported that the project will increase the plant's capacity by 60% to 8Mt/yr. Orient Cement will reportedly participate in the establishment of the nearby Belampalli skill development centre to help train local youths.


India: The state government of Assam signed memoranda of understanding (MOUs) worth over US$974m on 9 May 2023. The MOUs include three new planned cement plant projects. Agreements have been signed with Calcom Cement India, Star Cement and Taj Cement Manufacturing.

The Economic Times newspaper has reported that the government said “There are another US$852 - 974m investment proposals in the pipeline. Investors are touring Upper and Lower Assam, scanning for locations for investment projects.”


Argentina: Loma Negra recorded sales of US$197m during the first quarter of 2023, up by 2.9% year-on-year from first-quarter 2022 levels. The company's earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 5.8% year-on-year to US$63m. Its net profit fell by 19% year-on-year to US$22.9m. Throughout the quarter under review, Loma Negra sold 1.54Mt of cement, up by 4.3% year-on-year.

Chief execuive officer Sergio Faifman said “We started the year in a very good shape, with solid operating result and cash flow generation, together with a very robust financial position. Despite the challenging macro scenario and the economic disorder in Argentina, cement demand remains strong, posting 3.1% growth in spite of the high base of comparison, and Loma Negra showed even higher growth figures." Faifman continued "We also completed our first issuance of corporate bonds with high success and with great support from the market, which demonstrates the confidence that investors place in our company. This gave us the possibility of refinancing our short-term debt in Argentinian Pesos and further strengthening our balance sheet. For the remainder of the year, we are cautiously optimistic that we will continue to see healthy dynamics in our markets, although at slower rates as we approach the presidential elections.”


New Zealand: Golden Bay Cement has signed a deal with Genesis Energy for a supply of bottom ash from Huntly power plant for use in cement production at its Portland cement plant in Northland. Genesis Energy generates 20,000t/yr of bottom ash at the Huntly plant, situated in Waikato, 260km south of the Portland cement plant. The plant currently uses 15,000t/yr of fly ash from the Huntly power plant in its operations. The producer was previously investigating the use of volcanic ash in cement production in 2022. It currently uses waste tyres and wood waste as alternative fuels (AF) to produce its EcoSure low-carbon general-purpose cement.

Golden Bay Cement's general manager Gian Raffainer said "We are driven to decarbonise and achieve 30% less carbon by 2030. Contributing to waste reduction at a large scale for the benefit of all New Zealanders is incredibly exciting. It is a win-win for the environment and for Kiwis who want to use more environmentally friendly products."


Fiji: A court has ordered Pacific Cement, Tengy Cement and haulage contractor RPA Group to pay damages to Fiji Fish Marketing Group for creating a nuisance. The Fiji Times newspaper has reported that the court found that the cement importers emitted dust during the unloading of clinker, which caused Fiji Fish to incur a loss. The damages amounted to US$900,000.


US: CalPortland and Martin Marietta Materials have cancelled a deal under which CalPortland was set to acquire the Tehachapi cement plant and other assets worth US$350m in Southern California. The US government's Federal Trade Commission (FTC) described the cancelled deal as 'presumptively illegal.'

FTC Bureau of Competition director Holly Vedova said “Following an in-depth investigation by FTC staff of the Mergers Division and Bureau of Economics, along with the California Attorney General’s Office, CalPortland and Martin Marietta have announced that they have abandoned their planned transaction. The transaction would have reduced the number of cement suppliers in Southern California from five to four, further concentrating an already concentrated market." Vedova concluded "The abandonment is a victory for consumers and preserves competition for a key component of Southern California’s construction and infrastructure industries."


Spain: Cementos Molins' consolidated sales were Euro342m during the first quarter of 2023. This corresponds to a rise of 25% year-on-year from first-quarter 2022 levels. Its earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 47% to Euro86m, while its profit rose by 70% to Euro37m.

At the end of the period, Cementos Molins had financing lines amounting to Euro642m, 61% with maturity after 2026. It reduced its net debt by 43% year-on-year and by 26% quarter-on-quarter.


Argentina: Cementos Avellaneda has signed a memorandum of understanding (MoU) with energy provider YPF Luz for the construction of a new wind farm. Local press has reported that the planned plant will have a capacity of 63MW and be situated in Olavarría, Buenos Aires Province. There, it will supply 100% of the energy used in cement production at Cementos Avellaneda's Olavarría cement plant. The cement producer will transmit any surplus energy from the wind farm to its San Luis plant at La Calera, with the longer-term aim of becoming Argentina's first 100% renewably-powered cement company.

The partners will carry out technical and economic feasibility studies in mid-2023, and publish plans and budget before the end of the year.


UK: Switzerland-based Holcim has invested in Coomtech, a developer of low-emission kinetic drying technology for raw materials. The group says that Coomtech's technology emits up to 75% less CO2 than traditional drying methods and enables increased use of recycled materials in cement and concrete. Holcim subsidiary Aggregate Industries previously collaborated with Coomtech on fly ash drying at a UK power plant.

Edelio Bermejo, head of global research and development said "At Holcim, we are continuously working to implement greener operations for a net-zero future, and to increase the use of recycled materials in our products to drive circular construction. Coomtech's low-emission drying technology helps us meet both these goals. I look forward to working with them as a key partner in our journey to decarbonise buildings."


Austria: RHI Magnesita says that its earnings before interest, taxation and amortisation (EBITA) continued to grow year-on-year during the first quarter of 2023. This was despite an 8% year-on-year drop in refractory sales during the period under review. The refractory supplier attributed its declining sales to reduced construction activity outside of China and India. It said that this slowed demand both for cement and steel. RHI Magnesita noted higher energy costs, while raw materials costs 'remained low.' During the first quarter of 2023, the company acquired India-based refractory producers Dalmia OCL and Hi-Tech. These give it a 20 - 30% market share in India. This advanced its goal of strategic growth in markets in which it is under-represented, including China, India and Türkiye.

Chief executive officer Stefan Borgas said “RHI Magnesita benefited from resilient pricing in the first quarter, as we fulfilled orders placed in the fourth quarter of 2022 during the peak inflationary period. Our improved refractory margin performance benefits from the investments we have made to rationalise our network, and leaves us well placed to meet expectations for the year. We have continued to make steady progress in mergers and acquisitions as we identify value-adding opportunities to grow our business through consolidation in key target geographies and product areas, whilst carefully managing our balance sheet."


India: Dalmia Cement (Bharat) has launched Dalmia Supreme cement, a Portland pozzolana cement (PPC), in the Eastern India market. The producer says that the cement is a is a specialised, best-in-class product formulated for all construction applications, offering better workability, higher density, chemical resistance and strength and faster setting times than ordinary Portland cement (OPC). Dalmia Cement already sells Portland fly ash cement under its Konark cement brand.

Dalmia Cement (Bharat)'s head of sales, logistics, technical services and marketing Rajiv Prasad said “We are excited to introduce Dalmia Supreme Cement in the Eastern market. In line with the company’s customer-centric approach, this new offering is to cater to the growing needs of a specialised product for 'Stronger, Faster and Better' construction."


Mexico: Cemex recorded sales of US$4.04bn in the first quarter of 2023, up by 8% year-on-year from US$3.73bn a year earlier. The producer recorded operating earnings before interest, taxation, depreciation and amortisation (EBITDA) of US$733m, up by 7% year-on-year from US$685m. This was despite a 9% year-on-year decline in group cement sales volumes to 14.4Mt from 15.8Mt. First-quarter 2023 cement volumes fell by 3% in Mexico, by 19% in the US, by 10% in Europe, the Middle East, Africa and Asia and by 8% in South, Central America and the Caribbean.

Cemex retained its guidance of a low single-digit year-on-year increase in operating EBITDA in 2023. It also expects its energy cost per tonne of cement produced to rise by 10%.


France: Vicat's first-quarter sales were Euro899m in 2023, up by 14% year-on-year from US$789m during the first quarter of 2022. In France sales rose by 9.6% to Euro297m. In the Americas sales rose by 9% to Euro198m. In the Mediterranean region sales rose by 94% to Euro104m and in Africa sales rose by 21% to Euro108m. Meanwhile, sales remained roughly level year-on-year in Asia and Europe (excluding France), at Euro112m and Euro81m respectively.

Chair and CEO Guy Sidos said “Vicat’s first-quarter performance demonstrates the strong resilience of demand in its main markets, which translated into a sharp increase in its consolidated sales when compared to very good first-quarter 2022 figures. Amid changeable winter weather conditions, especially in California, the group has pushed ahead with the ramp-up in its new installation in Alabama and accelerated its strategy of improving its manufacturing performance and shifting away from fossil fuels to achieve its operational, environmental and social objectives.”


US: Eagle Materials has completed its acquisition of Martin Marietta's cement import and distribution business in Northern California. The business is centred on the Stockton cement terminal in San Joaquin County. Eagle Materials hopes that the new business will enable it to extend and strengthen its reach across its heartland US cement sales network.

President and chief executive officer Michael Haack said "Our Nevada Cement operations have long-standing customer relationships in Northern California, and this acquisition will uniquely position us to better serve these and new customers with complementary imported product. Our entire cement system is currently 'sold out,' and this acquisition will enable us to more actively participate in the strong US demand environment."


Vietnam: Vietnam National Cement Association (VNCA) members produced 40Mt of cement during the first four months of 2023. The volume corresponds to a 4.8% drop from four-month 2022 levels.

Vietnam produced 116Mt of cement in 2022, up by 5.8% year-on-year from 2021 levels.


Mexico: Switzerland-based building materials group Holcim concluded a deal to acquire the Mexican roofing producer PASA on 3 May 2023. PASA employs 250 people, and generated sales of US$38m throughout 2022.

Holcim said that the deal will help to expand its products and solutions business, an area in which it has now made five acquisitions to date in 2023. Chief executive officer Jan Jenisch expects the group to acquire 30 companies throughout 2023, of which it already acquired 12 during the first quarter of the year.