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India: According to local media, the Jammu and Kashmir State government has ordered an enquiry of the managing director of JK Cement regarding the alleged embezzlement in the purchase of polypropylene bags. According to the allegations, US$156,857 was to be shared by JK Cement's managing director and a few of his trusted lieutenants.
JK Cement had placed an order to purchase cement bags from a factory outside of the state at exorbitant rates. The company had earlier ordered 3 million bags at a price of US$0.156/bag (US$469,052 total), of which 33% was to be supplied by Gopinath Enterprises Ahmedabad. The remaining supply was yet to be determined. The managing director of JK Cement later allegedly approved the purchase of 4 million bags from Bihar Raffia at a rate of US$0.18/bag (US$720,000 total). The former supplier, Gopinath Enterprises, was asked to stop the supply.
Sri Lanka: Nearly 500 contract workers at two Holcim Lanka cement plants in the towns of Puttalam and Galle in Sri Lanka have been on strike since 19 May 2014 demanding job permanency, better wages and improved working conditions. The striking workers and their families are occupying the cement plant premises. The Inter Company Employees Union (ICEU) called the strike.
The protesters at the Puttalam plant have blocked the main gate, halting the transport of cement. The company and contractors are trying to break the picket with the help of Sri Lanka's president Mahinda Rajapaksa. The government is determined to end the strike and has deployed police and the riot squad. The police are threatening to arrest union leaders and activists.
On 1 June 2014 the striking contract workers and their families at the Puttalam and Galle plants were attacked by hired thugs with swords and clubs, allegedly organised by the local ruling party politicians. At the Puttalam plant nine people, including an eight year old girl, were injured and sent to hospital. Four are still hospitalised. Protestors asked for police protection, who were present during the attack, but their appeals were allegedly refused. At the Galle plant one protester was injured.
The mother of the eight year old girl who was injured said that her daughter had been thrown to the ground by the thugs. "I'm afraid for my husband, who has been working for eight years as a contract worker. That's why we joined the protest."
Holcim established its Sri Lankan operations after the privatisation of the state-owned Puttalam Cement Corporation in 1996 under former president Chandrika Kumaratunga. After Holcim took over, the workforce was cut from 1500 to less than 900, with only 370 permanent workers. Some of the contract workers have worked for the company for more than 20 years. Keeping workers on contract basis is a means employed to deny the rights they would have as permanent employees and to subject them to harsher working conditions.
Workers in the production and transport sections are employed on a 12 hour shift system. Their basic monthly wage is less than US$115. In the loading section, six workers have to load 4500 cement bags during a 12 hour shift with the assistance of a conveyor belt. The workers on 'general duties' work nine hour shifts and are on daily wages of US$16.02.
Holcim Lanka dominates has more than 40% of the local market. In the recent period, it has increased the price of a 50kg bag of cement several times and profits have soared, even after paying the government's increased taxes.
Big blow for Brazilian cement producers
Written by Global Cement staff
04 June 2014
The Brazilian cement industry took a knock last week when the competition watchdog Cade (Administrative Council for Economic Defence) confirmed its intention to issue the sector with fines worth a combined US$1.4bn.
Under the terms of the ruling, Votorantim will have to pay US$672m, Cimpor will pay US$133m, InterCement Brasil will pay US$108m, Itabira will pay US$184m, Holcim will pay US$227m and Itambé will have to pay US$39.4m. The companies involved will be forced on average to sell 24% of their assets. Votorantim, for example, will be compelled to divest 35% of its cement assets or 11Mt/yr of production capacity. In addition a fine of nearly US$2m is to be imposed on the cement associations ABCP and SNIC.
To give these figures some context, Votorantim reported a net profit of US$105m in 2013 across all its business lines including cement, metals, mining and pulp. The fine Cade wants to impose is over six times greater than this! A fine of this size will be a serious setback for Votorantim if it goes through. Votorantim's net revenue for its cement business in 2013 was about US$5.5bn. This places the fine at just over 10% of company annual turnover, a common upper limit for fines imposed by anti-competition authorities around the world. 10% of turnover, for example, is the maximum percentage fine that European Union competition regulators can impose.
Although hard to compare with the other Brazilian cement producers due to differences in financial reporting, the proposed fines seem equally tough on the other companies. Before the acquisition of Cimpor inflated its financial figures, InterCement reported a net revenue of US$1.2bn in 2011. This places its fine at 9% of annual turnover. Holcim's net sales in its Latin American region as a whole, including operations in Brazil, totalled US$3.73bn in 2013.
Both Holcim and Cimpor have issued corporate rebuttals to Cade insisting that they followed and still follow all the necessary competition laws. Both companies intend to fight the decision. Votorantim went further in its response saying that it considering the fine 'unjust and unprecedented' and it warned that the ruling would cripple any investments in the Brazilian cement sector. The ruling also forbids the company from opening new factories within the next five years, places limits on the company taking out new loans and prevents it from consolidating its market share.
Internationally, the Cade fine surpasses the US$1.1bn Competition Commission of India penalty imposed against 11 producers in India in 2013. Other recent anti-trust fines against the cement industry include a Euro80m fine in Poland that was upheld on appeal in 2013 and the US$19.3m Lafarge was charged in South Africa in 2012.
The prosecutors pointed out that work on public roads had been inflated by nearly US$8m. Overall they reckon that the cartel cost the Brazilian economy US$6.3bn. Examples likes this are unlikely to gain sympathy for the accused cement producers from a Brazilian public already angry about the amount of public money spent on building excessive sports stadiums and the like for the Football World Cup later in June 2014 and the Olympic Games in 2016. In the meantime though – over to the lawyers.
Raysut Cement appoints new CEO
Written by Global Cement staff
04 June 2014
Oman: Raysut Cement has appointed Salem Alawi Mohammed Baabood as chief executive, the company announced in a bourse statement. The cement producer is the largest company by market value in Oman with a cement production capacity of 3Mt/yr at its Salalah plant.
Zimbabwe: Lafarge Cement Zimbabwe plans to increase its cement production capacity to 0.5Mt/yr once a current plant upgrade is complete, according to an official. At present Lafarge reports a 70% capacity utilisation rate at its Manresa cement plant, producing 0.37Mt/yr.
"Capital to the tune of US$15m has been earmarked to eradicate bottlenecks and to boost volumes," said Lafarge Zimbabwe chief executive Amal Tantawi in an interview reported by the Herald newspaper. Lafarge has spent about US$5m on plant refurbishments over the past five years and it is now focusing on improving the cement production capacity of its existing plant.
Lafarge Zimbabwe is also in the process of conducting feasibility studies to establish a new manufacturing plant to complement the existing one. Tantawi added that Lafarge Zimbabwe was still keen on exporting cement despite a decline in export volumes in 2013. The company has been focusing on the local market since 2013 due to increased demand. Despite high demand for cement Tantawi highlighted liquidity issues with the local economy as the biggest challenge facing Lafarge. To tackle this Lafarge is rolling out different incentives to encourage its customers to make cash payments.
Lafarge Zimbabwe has also launched Supaset cement in the country following its use on other African states. The product is as a fast setting solution for the block making and precast segments of the construction industry.