Global Cement News

Portugal: Cimpor has reported that its net loss grew by 52.5% year-on-year to Euro26.7m in the third quarter of 2015. The quarterly loss follows a general trend for the year as a whole. Sales volumes, revenue and profit are all down for both the third quarter and the year. The InterCement subsidiary has blamed the result on the slowdown of the Brazilian economy.

Cement and clinker volumes fell by 9.7% year-on-year to 7.07Mt in the third quarter of 2015. Sales revenue fell by 11.8% to Euro625m. Earnings before interest, taxes, depreciation and amortisation fell by 32.5% to Euro116m. For the first nine months of 2015, cement and clinker volumes fell by 7.2% to 21.1Mt. Sales revenue fell slightly by 1.2% to Euro1.93bn. EBITDA fell by 14.2% to Euro396m. Net loss grew by 90.2% to Euro33.7m.

By geographical area, Cimpor suffered from reduced demand for cement in Brazil due to the poor economy, along with increased competition and higher thermal costs. Elsewhere, some slowing has been observed in Africa in the third quarter as a result of one-off situations in Egypt, where an intensification of competition has lead to a fall in market prices, and Mozambique, where profitability was restricted by local energy limitations and the increase of costs pegged to the dollar.

Ethiopia: Dangote Cement is to invest US$450m to double its current production capacity to 5Mt/yr at its Oromia Plant. The Nigerian cement producer has already received a 36ha plot of land from Oromia State, near the plant's site in Mugher, Adebern Wereda.

The company requested the land from Oromia Investment Commission in September 2015. Now it is processing right of way issues at Wereda level. The new plant will employ 1300 people when it is completed, according to All Africa. The company also intends to open a bag factory to supply packaging for Dangote and others.

Ethiopia is estimated to have a cement production capacity of 15.1Mt/yr yet actual production is only 10Mt/yr. Cement production capacity is expected to reach 27Mt/yr by the end of country's second Growth and Transformation Plan.

People matter in cement companies. Just ask Bruno Lafont, the originally proposed CEO of LafargeHolcim before the merger plans between Lafarge and Holcim changed in mid-2015. Another example is Zhang Bin, the chairman of Shanshui Cement. Some of the shareholders at Shanshui Cement are working hard to remove him. The next attempt has been scheduled for 1 December 2015.

Shanshui Cement, one of the biggest Chinese cement producers, called for the liquidators this week possibly in response. It decided to apply for provisional liquidation after determining that it would default on onshore debt payments due on 12 November 2015. Earlier in the month it had announced doubt whether it could pay its debts.

The scale of this liquidation is monumental for the cement industry. It is broadly similar to a producer at least the size of Dangote going bust. Shanshui Cement is one of China's top ten cement producers. It defaulted on a US$314m onshore debt payment on 12 November 2015.

Based on Global Cement Directory 2015 data, Shanshui Cement is the seventh largest cement producer in the country with 15 cement plants and a cement production capacity of 30.5Mt/yr. Shanshui Cement itself reports that it has a production capacity of 102.6Mt/yr making it the country's fourth largest cement producer. In its 2014 annual results Shanshui Cement reported sales revenue of over US$2.4bn. Its net profit was over US$48m. Sales and profits were down year-on-year in 2014 compared to 2013 and its interim report for 2015 reported the same downward trend. Sales revenue fell by a third to US$793m year-on-year for the first half of 2015. In 2014 its total debt was reported to be US$2.5bn with a gearing ratio of 56.9%, a relatively high figure leaving it vulnerable to decreasing profits.

As the Wall Street Journal and others have reported, the situation has as much to do with corporate politics as it does with over-borrowing. Hot on the heels of Shanshui's liquidation announcement came an offer of help to pay the debts from local rival Tianrui Group if its attempts to change the board of Shanshui were finally successful. Tianrui became the largest shareholder of Shanshui in April 2015 when it increased its stake to 28%. In the process it beat China National Building Material Company and Asia Cement Corporation, who hold 16.7% and 20.9% stakes in Shanshui respectively.

The heart of the Shanshui debacle is the 'key man' clause as reported by Reuters. Borrowing to the company is dependent on current chairman Zhang Bin retaining his position. As soon as he leaves it triggers the repayment of offshore bonds worth US$500m. Normally not due for payment until 2020, the bonds contain a clause that forces the company to sell them within 30 days should Zhang Bin depart.

Shanshui seems likely to be able to pay its debts judging from its sales revenue, assets and the strength of its main shareholders. However, it has chosen to default for the moment. The question for analysts watching this from outside China is whether it masks deeper problems in the Chinese economy as growth continues to slow and industrial overcapacity lingers. Shanshui is the sixth mainland Chinese company known to have defaulted on a bond this year, according to Bloomberg. It's also likely to be operating at a cement production utilisation rate of around 50%.

If the Shanshui Cement situation is more to do with markets than personalities, then it may represent an alarming acceleration of the slowdown of the Chinese economy for the cement industry. If personalities matter more, then the situation is a battle comparable to the politics on the television show 'Game of Thrones.'

Vietnam: Thailand's Siam Cement Group (SCG) is considered partnering with Hanoi-based Viglacera Corporation to expand its operations in Vietnam. The two companies plan to jointly carry out a project to produce medium- and high-end construction materials for domestic sales and export.

Russia: LafargeHolcim's plant in Kolomna, Moscow has begun production of a new cement base for mortars under the Kelma brand. It is characterised by high strength, fine adhesion to surfaces and a long retention of mobility that provides for the mortar's plasticity necessary for construction works without adding extra water. The product is being sold in 50kg bags.