Global Cement Newsletter

Issue: GCW635 / 22 November 2023

Headlines


The Hunter cement plant in Texas looks set to become one of the most expensive integrated units in the world following the announcement this week that CRH is preparing to buy it for US$2.1bn. The Ireland-headquartered company said that it has agreed to acquire the plant at New Braunfels near San Antonio from Martin Marietta Material. The deal also includes four cement terminals around and near to Houston and 20 ready-mixed concrete (RMX) plants near to San Antonio and Austin. It is expected to complete in the first half of 2024 subject to regulatory approval.

Assessing the value of this deal is tricky given the various RMX plants and terminals in strategic locations. However, solely based on integrated cement production capacity, this one works out at US$1000/t given that the Hunter plant has a production capacity of 2.1Mt/yr. The value of terminals and RMX plants in the right locations cannot be overstated, but it still appears to price the cement plant dearly. CRH bought Ash Grove in 2018 for US$350/t. Five years later and the price it is paying for cement production capacity in the US has nearly tripled.

Other more recent purchases in the US include US$395/t for UNACEM’s acquisition of the Redding cement plant in California earlier in November 2023, around US$525/t for the valuation of Argos North America’s four integrated plants in September 2023, or just over US$310/t for the proposed purchase of the Redding cement plant by CalPortland from Martin Marietta Materials in March 2022. The Argos North America valuation is another awkward one given that it is part of the proposed merger between it and Summit Materials and it also includes two grinding plants, 140 ready-mix concrete plants, and a distribution network of eight maritime ports and 10 inland terminals.

Figure 1: Map of CRH production assets in Texas. Source: CRH earnings presentation. 

Figure 1: Map of CRH production assets in Texas. Source: CRH earnings presentation.

In a statement, CRH’s chief executive officer Albert Manifold highlighted the usual synergy benefits but he also mentioned the expected “self-supply opportunities.” He added that the company believed that there was “significant potential to unlock additional growth opportunities across an expanded footprint in this attractive growth market.” If the acquisition completes, the company will become the largest cement producer in the state, based on integrated production capacity, at around 3.2Mt/yr. Plus, as the company pointed out in its third quarter earnings update, it also operates the Foreman cement plant in Arkansas, just across the state border to the north-east. This then gives CRH and its subsidiary Ash Grove a cement plant and/or terminals in the main population areas in Texas, namely: Houston; San Antonio and Austin; and Dallas and Fort Worth.

One reason why CRH may have gone all out for a cement plant in Texas is because it is one of the few states in the US where cement shipments have actually increased so far in 2023. Data from the United States Geological Survey (USGS) shows that shipments of Portland and blended cement fell by 2% year-on-year to just under 71Mt in January to August 2023. Yet Texas comprehensively bucked this trend with shipments rising by 10% to 8.04Mt. The only other states with this kind of growth were Maine and New York. At the start of 2023 the Portland Cement Association (PCA) predicted a 3.5% decline in cement consumption in 2023 and based on the January to August 2023 data from the USGS it isn’t far off at present.

Meanwhile, selling its cement assets in Houston and San Antonio nearly brings Martin Marietta Materials’ decade-long excursion into the sector to an end. It purchased its cement plants in Texas in 2014 when it acquired Texas Industries (TXI). Plants in California were soon sold to CalPortland but Martin Marietta Materials later picked up two more cement plants in the state when it bought the US West Region of Lehigh Hanson from Heidelberg Materials in 2021. Then, once again, the plants were sold, this time to CalPortland and UNACEM, respectively. This now leaves Martin Marietta Materials with one integrated cement plant, Midlothian, and two terminals. The size of the Midlothian plant, at 2.4Mt/yr, still gives the company a decent presence in the state.

With US cement consumption expected to bounce back to growth in 2024 and the Texas market ahead of this, CRH’s decision to buy big from Martin Marietta Materials seems like a logical move given its focus on North America. The price may seem high, but the investment seems as close to a steady bet as it gets. The day after the Texas announcement CRH revealed that it was selling its lime business in Europe to SigmaRoc for US$1.1bn. The key bit though was that these assets generated earnings of around US$137m in 2022 but, by comparison, the new units in Texas are expected to earn US$170m in 2023. This suddenly makes the price agreed for Hunter seem more reasonable. Let’s check back in a couple of years to see how well CRH’s acquisition in Texas works out. In the meantime all eyes are likely to be on what Martin Marietta Materials does next with the Midlothian plant.


UK: Aggregates Industries has appointed Kaziwe Kaulule as Group Strategy and Commercial Growth Director.

Kaulule previously worked as the chief executive officer (CEO) of Lafarge Industries South Africa from 2020 to July 2023. Prior to this he was the CEO of Lafarge Cement Zimbabwe from 2018 to 2020. He has worked for Holcim Group since the mid 2000s holding audit roles for Lafarge in France before moving on to management positions in Zamabia. He holds a master of business administration (MBA) from the University of Oxford's Saïd Business School, a bachelor’s degree in commerce and a bachelor’s of science from the University of Cape Town.


Malaysia: UEM Group, a subsidiary of the Malaysian sovereign wealth fund, has revealed that it has shortlisted prospective buyers for Cement Industries of Malaysia (CIMA). The Edge Malaysia newspaper has reported that the list is comprised of four local entities, one entity based in China, one in Germany and one in the Philippines. None of the bidders is reportedly an existing competitor of CIMA in the Malaysian cement sector.

CIMA operates the 1.3Mt/yr Bahau cement plant in Negeri Sembilan. UEM group announced that it was seeking a buyer for the business in February 2023, at which time it was seeking a valuation of US$230m for it.


Europe: Ireland-based CRH has agreed to sell its European lime business to UK-based SigmaRoc for US$1.1bn. The business controls 16 sites across the Czech Republic, Germany, Ireland, Poland and the UK. CRH says that the first phase of the transaction, which is scheduled for completion in early 2024, will hand over control of the Czech Republic, Germany and Ireland businesses to SigmaRoc, while control of the Poland and UK business will pass over in two subsequent phases.

CRH chief executive officer Albert Manifold said “The decision to divest at an attractive valuation follows a comprehensive review of the Business and demonstrates CRH’s active approach to portfolio management. The proceeds from the divestment will provide us with significant additional capital allocation opportunities to deliver further growth and value creation for our shareholders.”


Spain: The Supreme Court of Spain ruled in favour of tax authorities in their pursuit of Cemex España for its accounting of reported losses in the 2006 – 2009 financial years on 21 November 2023. The authorities imposed a Euro456m fine on the company following an audit in July 2011.

Mexico-based Cemex said that is has ‘sources of liquidity’ available to pay the fine, which it now anticipates that it will do before the end of June 2024.

Cemex ‘categorically’ disagrees with the imposition of the penalty. The group maintains that the losses Cemex España declared were not used and since 2012 have not been accounted for in its financial statements.


Bolivia: The Federation of Private Entrepreneurs of Santa Cruz (FEPSC) and the United Nations Development Programme (UNDP) awarded the Sustainability Seal to Itacamba on 11 November 2023. Local press has reported that the award recognises the successes of the producer’s upgrade to the grinding unit at its Yacuses cement plant. The upgrade reduced the energy footprint of the plant’s cement by 1.5kWh/t and eliminated 0.3% of its total CO2 emissions.


India: ACC has received a renewed licence for its Rajasthan limestone mine, allowing it to increase its extraction of limestone there to 1.5Mt/yr. Local press has reported that the mine presently produces 1Mt/yr of limestone for use at the company’s 1.5Mt/yr Lakheri cement plant in Bundi District.


Bolivia: Sociedad Boliviana de Cemento (SOBOCE) has successfully completed and launched its new brand redesign. The Periódico La Patria newspaper has reported that the company’s new logo comprises two circles forming an S, a ‘harmonious image’ which also implies the infinity symbol. The colour palette is green, because of its association with sustainability.

SOBOCE chief executive officer, Francisco Shwortshik said "SOBOCE has accumulated almost a century of history, in which time it has contributed significantly to the construction of this country, from its monumental works to the homes in which families have invested their dreams. But it also represents the future, a future marked by innovation and sustainability, and we wanted all this to be reflected in our new corporate image.”


France: Cemex’s venture capital unit Cemex Ventures has invested in construction value chain CO2 emissions monitoring software developer Vizcab. Vizcab aims to help enable built environments to conform to stricter environmental regulations.

Head of Cemex Ventures Gonzalo Galindo said “Vizcab's exhaustive solution enables cooperation between different stakeholders to manage carbon strategies throughout a project's lifecycle, a critical challenge in our complex and interconnected industry. This solution also implements the use of building materials with sustainable attributes, such as Cemex's Vertua portfolio of products.”


US: Ireland-based CRH has concluded a deal for the acquisition of Martin Marietta Materials’ South Texas business. This includes the 2.1Mt/yr Hunter cement plant, a network of cement terminals on the Gulf of Mexico and 20 ready-mix concrete batching plants. The value of the transaction is US$2.1bn.

CRH chief executive officer Albert Manifold said “The acquisition of these high-quality assets further strengthens our market leading position in Texas and increases our exposure to attractive, high-growth markets. Our ability to leverage our cement expertise and technical capabilities will enable us to enhance and optimise our existing footprint in Texas, resulting in significant synergies and self-supply opportunities. This transaction reflects our disciplined approach to capital allocation as well as our commitment to deliver further growth and value creation for our shareholders. We also believe there is significant potential to unlock additional growth opportunities across an expanded footprint in this attractive growth market.”


Malaysia: Cahya Mata Sarawak has appointed China-based Sinoma Industry Engineering to provide technical consultancy services for an expansion and upgrade at its Kuching cement plant. Bernama Daily Malaysian News has reported that Sinoma Industry Engineering will help the producer to upgrade the plant’s 1Mt/yr Line 1 and build its planned 1.9Mt/yr Line 2.


Ireland: CRH reported consolidated sales of US$26.3bn during the first nine months of 2023, up by 8% year-on-year from nine-month 2022 levels. The group also grew its earnings before interest, taxation, depreciation and amortisation (EBITDA) during the period, by 14% to US$4.8bn. CRH noted ‘positive’ underlying demand across its key markets and continued progress along its commercial strategy.

Chief executive officer Albert Manifold said ‘‘I am pleased to report another strong performance for our business. Our integrated solutions strategy continues to deliver superior growth, while our strong cash generation and disciplined approach to capital allocation enables us to create additional value for our shareholders.” He added “Looking ahead to the remainder of the year, we are raising our guidance and expect to deliver full-year EBITDA of approximately US$6.3bn.”


Egypt: Arabian Cement Company has hired consultancy A³&Co. to help develop a decarbonisation roadmap for its 5Mt/yr Sokhna cement plant. The roadmap will include the implementation of an integrated environmental, social and governance (ESG) business model, Science-Based Targets Initiative (SBTi)-verified targets, carbon market trading and EU carbon border adjustment mechanism (CBAM) registration. Arabian Cement Company will execute projects to achieve its goals via a strategic partnership with A³&Co and the European Bank for Reconstruction and Development (EBRD).

Arabian Cement Company CEO Sergio Alcantarilla said “We are excited about this partnership with EBRD and A³&Co., which showcases our commitment to environmental stewardship and sustainable development. By embracing cutting-edge solutions and adopting greener processes, we are not only reducing our carbon footprint but also setting new benchmarks for the industry.”

A³&Co. CEO Amr Nader said “Through our collective expertise, we are confident that we can drive meaningful progress towards decarbonisation and the production of green cement, setting a precedent for responsible business practices in the region. The renewed cooperation between Arabian cement and A³&Co. is an additional milestone in our successful collaboration over the past two years. A³&Co. will also develop a Climate Corporate Governance (CCG) framework for Arabian Cement Company, which is the cornerstone for a fully-functioning ESG system in line with international norms.”


Norway: Heidelberg Materials Northern Europe inaugurated its Slemmestad cement terminal in Asker on 17 November 2023. The terminal’s equipment includes 12,000t-capacity cement silos. It cost US$13.3m to build and has a loading rate of 390t/hr.


Kazakhstan/Kyrgyzstan: The government of Kazakhstan’s Jambyl Region says that investors have come forward to support construction of a proposed railway between the region and Kyrgyzstan. Central Asia News has reported that a major cement plant construction project is underway in Jambyl Region. Regional governor Yerbol Karashukeyev said that Kyrgyzstan is undergoing a ‘building boom,’ including in the major market of Bishkek, 20km from the border with Jambyl Region.

Karashukeyev said “In view of the rapid development of the market in Kyrgyzstan and the production of large volumes of construction materials in Kazakhstan, it is worth developing cooperation.”


Rwanda: Kenya-based Devki Group subsidiary National Cement signed a deal to acquire CIMERWA from International Holdings Proprietary Limited, a subsidiary of South Africa-based PPC, and minority shareholders on 17 November 2023.

KTPress News has reported that CIMERWA’s chair, Regis Rugemanshuro, said “We look forward to welcoming National Cement as our new shareholder. We are confident that they have the financial and technical resources required to support CIMERWA’s growth and expansion in line with our vision and their ambitions in the region.”

Narendra Raval, chair of Devki Group, said “We are committed to a long-term strategic partnership with CIMERWA. We believe in the potential for this business and its people and are excited by the opportunity to support infrastructure development in the region in line with our strategic expansion ambitions.”


South Africa: PPC recorded consolidated sales of US$335m during the first half of the 2024 financial year, up by 21% year-on-year from US$277m during the first half of the 2023 financial year. Meanwhile, its earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 47%, to US$58.1m from US$39.6m. The group increased its cement sales volumes by 4%, and currency effects further helped to offset a 16% rise in its cost of sales. Cement volumes fell in South Africa, however PPC noted a locally ‘resilient performance’ despite a challenging market there and in Botswana, a ‘strong recovery’ in Zimbabwe and a ‘continued positive trajectory’ in Rwanda, via its subsidiary CIMERWA.

PPC said “The key focus for PPC will remain on its southern Africa businesses, including South Africa, Botswana and Zimbabwe. This includes continuing to improve its profitability and enhance returns through further operational efficiencies and cost containment measures. Without a significant increase in infrastructure spending and South African gross domestic product, South Africa's cement demand is expected to remain subdued and sustainability is therefore dependent on both capital discipline and margin management. Notwithstanding, PPC South Africa remains well positioned to benefit from an increase in cement demand, with additional capacity readily available to capture an upswing in demand without significant additional capital expenditure being required.”


Philippines: Filinvest-ENGIE Renewable Energy Enterprise (FREE) has won a contract with Cemex Philippines for the construction of a 10.1MW solar power plant. The Business Mirror newspaper has reported that the plant is comprised of a ground-mounted array of solar panels at Cemex Philippines’ Apo cement plant in Cebu. The solar power plant will eliminate 10,000t/yr of CO2 from the Cebu cement plant’s emissions. Additionally, the producer has signed a memorandum of understanding (MoU) with FREE for future collaborations on renewable energy and efficiency-increasing projects around the nearby city of Naga.

Cemex Philippines president and CEO Luis Franco said “This solar energy partnership is another milestone under Cemex’s Future in Action programme, as we progress closer to our goal of reducing Scope 2 CO2 emissions to less than 24kg/t of cementitious product by 2030.” He added “We are proud to partner with FREE, a company that shares our vision to address climate change through sustainable projects. This is a win not only for Cemex, but also for the planet as we take concrete steps in making renewable energy the future of the industry.”


Colombia: Cementos Argos has launched an offer to repurchase shares up to a value of US$4.92m, comprising up to US$4.14m-worth of common shares and up to US$787,000-worth of preferred shares. The producer stated that the move aims to increase the liquidity of its shares on the Colombian stock exchange.


Egypt: Sinai Cement’s sales were US$104m in the first nine months of 2023, up by 99% from US$52.4m in the corresponding period in 2022. As such, it succeeded in reducing its net loss by 31%, to US$3.93m from US$571m.


Malaysia: Hume Cement Industries recorded US$65.5m in sales during the first quarter of the 2024 financial year (beginning 1 July 2023). This represents 48% year-on-year growth from US$44.2m one year previously. The producer’s profit was US$10.3m, against a US$2.57m loss in the first quarter of the 2023 financial year.

Bernama Daily Malaysian News has reported that Hume Cement Industries expects domestic cement demand to rise throughout the 2024 financial year. Nonetheless, the company said “The board remains cautious, as the uncertainties arising from geopolitical pressures continue to challenge the cement industry's input costs. The group is increasing its focus on developing sustainable construction materials in this growing economy, while continuing its efforts to enhance operational excellence.”


UAE: The first nine months of 2023 brought sales growth of 39% year-on-year for National Cement Company, to US$36.8m from US$26.7m. Meanwhile, the company reversed nine-month 2022 losses of US$5.45m to record a net profit of US$13.7m during the first nine months of 2023.


India: ABG Shipyard plans to sell Vadraj Cement, which owns a decommissioned clinker unit and grinding unit, as well as quarries and a jetty, in Kutch, Gujarat. The National Company Law Tribunal took over winding up proceedings for the former cement producer in September 2023. The Economic Times newspaper has reported JSW Cement, Adani Group and steel producer ArcelorMittal Group as potential buyers for the business. It expects Vadraj Cement to attract a price of US$240 – 300m, against debts of US$841m.


Spain: Cementos Molins has renewed a Euro75m loan and Euro225m credit line with lenders. The renewal extends the company’s financing buffer until the end of 2028. Expansión News has reported that Cementos Molins plans to use the total Euro300m renewed financing towards advancing its investments in sustainability, and possibly for other corporate purposes.


South Korea/Egypt: The South Korean government’s 72% ‘anti-dumping duty’ on imports of white cement from Egypt entered force on 17 November 2023. Yonhap English News has reported that the measure will remain in force for four months, until 17 March 2023.

Egypt exported 9240t of white cement to South Korea in 2022, up by a factor of nine from 2021 levels.


North Macedonia: Titan Cement Group subsidiary Cementarnica USJE has secured the approval of its shareholders to take two new loans. In a submission to the Macedonian Stock Exchange, the company said that it plans to take one loan of between Euro9m and Euro18m from Titan Global Finance, and another of not more than Euro9m from Sharrcem Kosovo.


India: JSW Group subsidiary JSW Infrastructure has won a contract to build a new deep-water port at Keni in Karnataka on a public-private partnership (PPP) basis. India Blooms News Service has reported that the port will support export terminals for local cement plants and limestone mines, alongside other industries.


Vietnam: Siam Cement Group Vietnam’s sales dropped by 30% year-on-year in the first nine months of 2023, to US$901m. Việt Nam News has reported that this corresponds to 8.4% of Siam Cement Group (SCG)’s consolidated sales. Vietnam is SCG’s main overseas market, ahead of Indonesia, where it recorded US$760m (7.1%) of sales.


India: ICICI Bank has made an invocation of Jaiprakash Associates’ shares in relation to its debts. The Economic Times newspaper has reported that the producer owes US$360m to the bank. ICICI Bank is part of a consortium of banks owed a total of US$3.52bn by Jaiprakash Associates.


Denmark: The first nine months of 2023 brought 1.8% year-on-year growth in FLSmidth’s consolidated sales, to Euro767m. The contribution from its cement business declined by 17%, however, to Euro188m, 24% of total sales. The division’s order intake dropped by 24% to Euro164m.

The group said “Our cement business continued to be adversely affected by the global slowdown in market demand. Consequently, we continue to take the steps necessary to preserve the long-term profitability of the business, including a significant rightsizing of the organisation. Further, our pure play strategy is progressing according to plan, and the ongoing operational and legal separation of the cement business is expected to be finalised towards the end of 2023.”


Zimbabwe: The government has enacted new rules according to which companies and individuals may import up to 100 50kg bags of bagged cement without an import licence. The Chronicle newspaper has reported that the measure aims to alleviate an on-going shortage. The government previously indicated that it would ease restrictions on cement imports for the first time since 2021 after prices doubled year-on-year on 7 November 2023.


Mexico: The Chamber of Deputies of the Mexican parliament has approved a resolution exhorting the state government of Hidalgo to take ‘urgent action’ to help restore the Tula cement plant to its owner, Cooperativa La Cruz Azul. Local press has reported that the chamber determined that the situation had arrived a critical point, as those illegally occupying the plant were looting and dismantling the plant.