Global Cement News

India: Prism Cement Limited has appointed Vivek Krishan Agnihotri as a director following the resignation of the previous director. The Board has also appointed Agnihotri as the executive director of cement, effective from 17 August 2015.

Take a moment to spy on the Citeureup cement plant in Indonesia. It's gargantuan! The Indocement site is one of the largest cement factories on the world. It has nine production lines with a cement production capacity of 11.9Mt/yr.

The news this week that Indocement intends to stop production at three cement production lines at its Citeureup plant strikes an uncertain tone. The decision underpins the impression of a readjusting Indonesian cement market despite the HeidelbergCement subsidiary saying that the capacity will be replaced by a new 4.4Mt/yr line at the site at the end of 2015. Temporarily reducing production capacity by 35% may not seem much on a industrial site that can produce more cement than many countries! However, a single factory this massive is likely to be particularly vulnerable to market changes.

Zooming out to the national picture, Indocement reported that its revenue dropped by 6.6% year-on-year for the first half of 2015. Domestic sales volumes of cement fell by 8.1% as domestic cement consumption in the country generally fell by 4.2%. The cement producer blamed the falls on economic stagnation and delayed government spending on infrastructure projects.

In its outlook Indocement lamented the loss of subsidies on electricity and fuels in Indonesia. Back in 2014 the government raised electric prices via a tariff under the previous administration before lowering them slightly. Then the new government raised fuel prices in November 2014 by removing subsidies with the intention of siphoning the savings to infrastructure spending. At the time a Semen Indonesia representative told the Jarkata Post that he expected cement sales to rise by 6% in 2015. This estimate had already followed a downward adjustment of predicted sales in 2014 due to familiar sounding delays in infrastructure projects (due to an election year) and a slowing economy.

In addition to this the government also imposed price cuts on cement on state-run producers in January 2015. Semen Indonesia then saw its domestic sales volumes fall by 5.3% in January – May 2015 to 9.91Mt. Subsequently Semen Indonesia saw its net profit drop by 21% year-on-year to US$163m for the first half of 2015. Around a month before its mid-year results it reported to local media that it was concentrating on exports in 2015. Reported exports have risen by over 700% to 0.18Mt in January – May 2015. Other producers such as LafargeHolcim have also reported 'challenging' market conditions. Nationally, cement demand dropped by 3.8% year-on-year to 22.9Mt for the first five months of 2015 according to Indonesian Cement Association data. This was the biggest fall since 2009.

All in all it sounds like the good times may be gone for the Indonesian cement industry, at least for now. The local economy as a whole is in a recession following two consecutive quarters of declining growth in gross domestic product (GDP). Yet cement producers are still forlornly hoping for infrastructure spending to kick in. Throw in worries about the effects of a US interest rate rise on Indonesian borrowing and the situation is looking dicey. Indocement's Citeureup complex may seem even more outsized in a year's time.

UPDATE:  A reader has pointed out that we linked the aerial photo at the start of this article to the smaller of the two cement plants in the area. This has now been changed. Note the trucks queuing to enter the plant.

India: Mangalam Cement Limited has announced that Anil Kumar Mandot has resigned from the post of CFO. The board of directors has appointed Yaswant Mishra as CFO with effect from 7 August 2015. This is in addition to his present designation of president (corporate).

A member of the Global Cement LinkedIn group recently posed a question about the relative sizes of LafargeHolcim and Nigeria's Dangote Cement in the African cement market. The correspondent wanted to get a handle on their relative sizes and how the situation would change as a result of the merger. Would Dangote lose its position as Africa's number one producer? If so, would its aggressive expansion allow it to regain its position at the number one spot?

As both one of the most rapidly-growing markets in the world for cement and the one with the most potential for future gains, Africa has been discussed in this column on many previous occasions. However, we have previously considered Africa's different regional markets, be it Dangote-dominated West Africa, North Africa, rapidly-growing East Africa or the far south, where PPC is looking to counter Dangote's growing strength.

However, the formation of LafargeHolcim and the news that HeidelbergCement will acquire Italcementi (starting with an immediate 45% stake), has massively consolidated the African market. In conjunction with Dangote's rapid development, these deals have transformed the African cement sector from one with a large number of small national and regional markets into a far more homogeneous entity. A number of key players, namely LafargeHolcim, Dangote Cement, HeidelbergCement and PPC, are present in numerous important markets all over the continent.

In answer to the aforementioned LinkedIn group member, the Global Cement Lafarge-Holcim Merger Report, states that LafargeHolcim controls 47.1Mt/yr of capacity in Africa. The new group is present in markets as diverse as Egypt, Morocco, Nigeria, South Africa and Zimbabwe. It is currently Africa's largest cement producer.

The second-largest producer at the moment is Dangote Cement, the only African-based large multinational cement producer. According to its website, it has 31.2Mt/yr of capacity currently active in Africa. The group is rapidly expanding. "We hope to commission four other cement plants in Senegal, South Africa, Cameroon and Tanzania before the end of 2015," said Aiko Dangote, Dangote Group President this week.

The new Dangote capacity that we can identify adds 4Mt/yr. This takes Dangote's total to 35.2Mt/yr. This is close to the 37.1Mt/yr of African capacity that LafargeHolcim actually owns, but Dangote is always planning its next move. Indeed this week it was rumoured to have been looking at purchasing Italcementi itself, hence HeidelbergCement's rapid movement.

In its press-release, HeidelbergCement suggests that the purchase of Italcementi will give it a position as strong as Dangote in the African market at around 30Mt/yr. It will add strong positions in Morocco and Egypt to its existing strengths on the West African coast. For its part, South Africa-based PPC currently has around 8Mt/yr of capacity in South Africa (4Mt/yr), Botswana, Zimbabwe and Ethiopia. It is currently installing capacity in the Democratic Republic of Congo and as far afield as Algeria, where it is involved in a joint venture with a local group.

Between them, these 'Big Four' share approximately 116Mt/yr of capacity in Africa. According to the Global Cement Directory 2015, this is just over half of Africa's 225Mt/yr of cement production capacity. This proportion will only increase as Dangote and PPC enlarge their presences.

The multinational players will likely not expand as rapidly, even in Africa. At the launch of LafargeHolcim, Group CEO Eric Olsen was pretty clear that the company does not plan any 'capital-intensive' expansions in the coming years. HeidelbergCement's future actions are less predictable, especially as we are yet to hear about any divestments that may be required from HeidelbergCement and Italcementi in order to satisfy competition authorities around the world.

Whatever happens in the future, it is clear that the African cement industry has undergone a significant transformation in the past few weeks. With per-capita cement consumption far lower than on other continents, there will be plenty of room for growth as well as for more acquisitions, divestments, mergers and expansion projects from the 'Big Four' and others in the coming years.

UK: Investment boutique Perella Weinberg Partners has hired LafargeHolcim co-chairman Wolfgang Reitzle as an advisory partner.

Reitzle, also a former chief executive of the German gas maker Linde and chairman of the supervisory board of German car supplier Continental, will provide counsel in a senior role to the investment firm and its clients, especially in Europe, according to Perella Weinberg. He will continue in his role at LafargeHolcim.

Reitzle has had previous dealings with Perella Weinberg Partners; Holcim appointed Perella Weinberg banker Dietrich Becker to renegotiate the terms of its merger with Lafarge. "Reitzle has an exceptional track record of successfully managing growth across a variety of industries," said Joseph Perella, co-founder and chairman of Perella Weinberg Partners.