Global Cement News

Austria: RHI Magnesita’s revenue from its cement and lime market fell by 12.1% year-on-year to Euro160m in the first half of 2020 from Euro182m in the same period of 2019. It said that the segment performed well in the first quarter of 2020 as producers maintained and repaired plants. Second quarter performance was negatively affected by coronavirus, “with a sharp contraction in demand in key end-markets, leading to reduced production and some temporary closures of cement plants in certain regions.” The group forecasts that its cement and lime segment will continue to follow the trend of the second quarter of 2020 although government stimulus projects, especially for infrastructure projects, may improve the situation.

Building materials manufacturer Saint-Gobain summed up the situation large companies face due to coronavirus in its second quarter results when it said that it faced, “very different situations from one country and market to the next.” Financial results are in from many of the largest multinational cement producers outside of China and the basic picture is as Saint-Gobain describes.

Sales revenue for LafargeHolcim, HeidelbergCement and Cemex are all down by around 10% year-on-year for the first half of the year. The variation between different geographical regions is large with some reporting sales declines of up to 20% and others noting rising sales, with one above 5%. Generally, recoveries were reported in June 2020 or when governments relaxed their lockdowns. There’s more variation with earnings figures although this may be down partly to the different figures each company likes to use. Around this is plenty of talk about liquidity and cost cutting programmes to sooth investors.

Figure 1: Sales of selected major multinational cement producers in first half of 2020. Source: Company financial reports.

Figure 2: Cement sales volumes of selected major multinational cement producers in first half of 2020. Source: Company financial reports.

Where it starts to become more interesting is when the companies talk about what they think will happen next. As Robert McCaffrey picked up upon in last week’s Global Cement Live there was a divergence between LafargeHolcim’s optimism for the second half of the year and HeidelbergCement’s caution. LafargeHolcim said it expected a, “Fast demand recovery with an encouraging outlook for the second half of 2020.” Instead, HeidelbergCement said, “A further wave of infections may occur at any time, which would have an impact on construction projects already started or announced in the individual countries. Against this backdrop, it is still not possible to estimate the full effect of the corona crisis on the company results for 2020.” Cemex sat on the fence with, “We expect that Covid-19 will continue to challenge our operations in new ways over the next few quarters.” Contrast this with Buzzi Unicem’s prediction, “Visibility for the second half of the year continues to be very limited and our forecasts are based on a scenario of gradual mitigation of the infections and related restrictions on economic activity.”

This difference in outlook may be subjective. Both LafargeHolcim and HeidelbergCement only had one geographical region each that reported growing sales in the first half of 2020 but LafargeHolcim’s ‘positive’ region represented a larger share of the group’s revenue. Alternatively, it may just be that the companies have different characters and this is reflected in their forecasts. Humans can be either be pessimistic or optimistic and so too can companies.

Of the large regional players, most of the Chinese cement producers are yet to release results for the second quarter of 2020 so there is little to say. Data out this week from China’s Ministry of Industry and Information Technology shows that cement output fell by 4.8% year-on-year to 1Bnt in the first half of 2020. UltraTech Cement, India’s largest producer, saw its revenue fall by 22.5% year-on-year to US$2.34bn for the first half of 2020. The worst of this was in the first quarter of the Indian financial year to 30 June 2020 with revenue falling by 33% with consolidated sales volumes down by 22% year-on-year to 14.7Mt. This coincided with the country’s ‘total’ lockdown period from late-March 2020 to 1 May 2020. Dangote Cement, a large African producer, reported growth in both sales and earnings with full or partial lockdown implemented in South Africa, Congo and Ghana in April 2020 before reopening in May 2020.

This is just a snapshot of what’s been happening with mid-year results awaited from the likes of CRH, Votorantim and, as mentioned above, the Chinese producers. Blanket lockdowns clearly damage construction markets, so future government strategies in tackling the ongoing wave of the pandemic or future waves will have consequences for the financial performance of construction material companies. In the meantime, in Europe at least at the moment, targeted regional lockdowns seem to be the public health measure of choice when outbreaks get out of control. How this translates to balance sheets will be revealed later in the year. In the meantime, while the world works out how to cope with coronavirus, expect more uncertainty.

Pakistan: Thatta Cement has appointed Khawaja Muhammad as its chairman. He succeeds Naheed Memon.

Mexico: Elementia has appointed María de Lourdes Barajas Flores as its chief financial officer (CFO). She succeeds Juan Francisco Sanchez Kramer who will leave the company to, “pursue new personal and professional opportunities.” Barajas Flores was the Director of Administration and Finance for the company’s cement division. Iris Josselin Fernandez Cruz, Elementia’s Head of Corporate Treasury will take over the responsibilities of the Investor Relations area.

Italy: Good performance in the US has helped Buzzi Unicem hold sales steady in the first half of 2020 despite falling sales volumes of cement, particularly in Italy and Eastern Europe, as the coronavirus pandemic spread. The group’s net sales remained stable at Euro1.52bn. Its cement sales volumes fell by 3.4% year-on-year to 13.4Mt from 13.9Mt in the same period in 2019. Concrete sales volumes decreased by 6.3% to 5.46Mm³ from 5.83Mm³. Its earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 8.8% to Euro314m from Euro289m. The company said that the decline in sales volumes was counteracted by growing prices and lowered production costs.

In its outlook the group said, “The outlines of the pandemic, which in some countries has not yet reached the phase of controlled circulation, as well as the intensity of global recession and the demand for building materials may be characterized by further sudden developments in the coming months. Visibility for the second half of the year continues to be very limited and our forecasts are based on a scenario of gradual mitigation of the infections and related restrictions on economic activity, in the geographical areas where the group operates.” It added that it expected its recurring EBTIDA to possibly fall by 5 – 10% year-on-year in 2020.