Global Cement News

US: The US House of Representatives has introduced the Cement Sector Regulatory Relief Act of 2011 (H.R. 2681). The proposal directs the Environmental Protection Agency (EPA) to develop 'achievable and workable standards' for the nation's cement manufacturing facilities and replace a series of complex rules affecting the sector that are projected to impose significant cost increases, forcing plant shutdowns and job losses. The bill was offered by a group of both Republican and Democrat Representatives from across the US.

Members introducing the Cement Sector Regulatory Relief Act of 2011 issued the following statement, "Cement is essential for the construction of our nation's buildings, roads, bridges, tunnels and crucial water and wastewater treatment infrastructure. This is a sector that provides jobs here at home, jobs we could lose in the face of regulations that are technically or economically unachievable."

"The EPA's current rules threaten to shut down 20% of the nation's cement manufacturing plants in the next two years, sending thousands of jobs permanently overseas and driving up cement and construction costs across the country. Our goal is to ensure effective regulations that protect communities both environmentally and economically."

"This legislation would give the EPA time to develop achievable standards that protect public health without threatening jobs or the global competitiveness of America's industries. We look forward to working with our colleagues on both sides of the aisle and the administration to see this legislation become law."

The Cement Sector Regulatory Relief Act would; 1) Provide EPA with at least 15 months to re-propose and finalise achievable rules for cement manufacturing facilities; 2) Extend compliance deadlines from three to at least five years to allow facilities adequate time to comply with standards and install necessary equipment; 3) Direct the EPA, when developing the new rules, to adopt definitions that allow cement-manufacturing plants to continue to use alternative fuels for energy recovery and; 4) Direct the EPA to ensure that new rules are achievable by cement manufacturing facilities in the US and impose the least burdensome regulatory alternatives consistent with the President's Executive Order 13563.

The new rule is in response to the EPA's three 'interrelated, complex rules' impacting the nation's 100 cement plants. While the EPA estimates that the MACT Cement Rule (dealing with hazardous pollutants in airbourne emissions) will impose USD2.2bn in total capital costs when it is introduced in 2013 but the Portland Cement Association (PCA) estimates that the capital costs for MACT could exceed USD3.4bn, more than half of the industry's annual income (USD6.52bn) and that the 'Standards of Performance and Emissions Guidelines for Existing Sources: Commercial and Industrial Solid Waste Incineration Units,' (CISWI) rules would impose costs of another USD2bn, causing 18 plants to close with the loss of 3000 - 4000 direct jobs and a further 12,000 - 19,000 in the wider construction sector.

Europe: Several European cement producers have announced financial results for the second quarter and the first half of 2011. On 28 July 2011 Lafarge, the world's largest cement producer, announced that its profit fell by 16%, in part due to higher material costs (Read full story here). Other European producers have seen a mixed bag of results for the quarter, with Ciments Français and HeidelbergCement both reporting improvements over the year. Unlike the multinationals however, Cementos Molins and Titan, which both have significant interests in markets that are currently depressed, have had bad quarters.

Ciments Français took a consolidated revenue of Euro2.04bn in the first six months of 2011, down by 1.8% on the year. The group's recurring earnings before interest, tax, depreciation and amortisation (EBITDA) were down more significantly, by 12.8%, at Euro386.4m and its net profit was Euro232.2m. This compares favourably with the Euro166.9m made in the six months to 30 June 2010. The group's net debt was down by Euro218.2m to Euro1.19bn. Group sales volumes in the first six months of 2011 remained relatively stable (-0.7%) for cement and clinker at 21.9Mt. Sales volumes increased in India (+16.3%), France and Belgium (+10.8%), Thailand (+6.6%) and Morocco (+6.0%). Volumes dropped in Greece (-26.1%), Bulgaria (-25.0%) and Egypt (-14.1%). Volumes remained fairly steady in the group's other markets.

HeidelbergCement (HC) announced that its net profit grew to Euro208m in the second quarter, up by 25% on the same period of 2010. Revenue rose only slightly (3%) on the year to Euro3.4bn, burdened by negative exchange rate effects. The group's operating profit dropped by more than 10% to Euro441m, which the company attributes to rising energy costs that have not been offset by the implemented price increases. "Despite a positive development of revenue and results, we are not satisfied with the second quarter," said HC's CEO Bernd Scheifele, who added that the group's FOX 2013 fiscal savings programme had so far generated savings of some Euro134m. Its turnover for the second quarter was Euro3.39bn.

The attributable profit of the Spanish cement company Cementos Molins for the first half of 2011 went down by 57.8% year-on-year to Euro11.64m. Its turnover inched up by 0.6% to Euro400.23m. The 15% increase in the company's international operations offset a massive 24.7% fall that it registered in the domestic market. Its EBITDA amounted to Euro76.19m between January and June 2011, an annual decline of 16.2%.

Meanwhile, analysts are predicting an even worse time for Greece's Titan when it announces its results on 2 August. They expect its profit to drop by a staggering 64% amid the ongoing weakness in the Greek and US markets where Titan has a significant majority of its assets.

France: Lafarge has released its financial results for the second quarter and first half of 2011 which show strong cement volume growth. The group's sales were stable in the second quarter of 2011 at Euro4.42bn but current operating income was down by 16% on the year to Euro702m. For the first half of 2011, sales were up by 3% to Euro8.0bn but current operating income was down by 14% to Euro926m.

Sales increased on a like for like basis in all product lines for both the quarter and first half of 2011, thanks to strong volume growth driven by continued strength in emerging markets. Cement prices moved progressively higher from the fourth quarter of 2010 to the second quarter 2011, but were slightly down compared to the first-half of 2010.

Lafarge achieved Euro50m of structural cost savings in the quarter and has achieved Euro100m of savings in 2011 to date and has agreed to sell its Australian, South American and European gypsum wallboard assets.

Bruno Lafont, Chairman and CEO of Lafarge, said, "While I am encouraged by the return to cement volume growth for the last several quarters, the impact of high inflation and a slow recovery in mature markets has weighed on the cement sector. The group is focused on its priorities, including price actions in response to a high-cost environment and strategic moves with its asset portfolio, to support profitability and reduce debt by at least Euro2bn in 2011. The business will continue to benefit from volume growth thanks to our continued development in emerging markets."

Lafarge expects to see cement demand continuing to move higher and estimates market growth of 2-5% in 2011 compared to 2010. Emerging markets continue to be the main driver of demand and Lafarge benefits from its well balanced geographic spread of high quality assets.

Cement sales were stable in the second quarter (up by 3% like for like) and up 3% in the first-half (up by 3% like for like), reflecting volume improvements in emerging markets and new capacities acquired in Brazil offset by the negative impact of foreign exchange.

Volumes increased by 9% in the quarter (up by 6% like for like) and by 8% in the first-half (up by 5% like for like), with growth driven by the Middle East, Africa and other emerging markets. Despite the Group's cost reduction program, higher cost inflation and foreign exchange put pressure on results and margins.

US: Despite recovery momentum in late 2010, the US economy is again in a slowdown, according to the most recent economic forecast by the Portland Cement Association (PCA), which says that the slowdown will weaken construction activity and restrain gains in cement consumption until 2013.

The PCA downgraded its cement consumption growth forecast to 0.2% for 2011, 0.4% in 2012 with a significant 16.4% increase in 2013. According to the report, uncertainty regarding highway spending legislation and government policy related to the debt crisis will cause a negative drag on construction activity for the next few years.

"Our previous forecast had assumed the new highway bill would be 20% higher than existing levels but we now believe the funding will remain at current levels," said PCA chief economist Edward Sullivan. "A lack of highway funding and reduced consumer, business and bank confidence due to the debt crisis will all slow down construction recovery."

According to Sullivan, economic recovery from the recession will be led by a strengthening of confidence in these areas. Without a sustained improvement, private sector fundamentals such as job creation, investment and ease in lending standards will not be released in full force and commit the economy to a path of improvement.

India: Madras Cement is planning to pump in around USD34m on expansion and power projects at its three cement plants in southern Indian city of Tamil Nadu. As per the company's 2010-11 annual report, it has plans to invest USD13.6m in the installation of a roller press at its R R Nagar power plant for expanding the cement grinding capacity to 260t/hr from the current level of 210t/hr. The planned project will start commissioning in March 2012. Apart from the roller press, the company is looking to install a 25MW thermal power plant at the same plant at an estimated cost of USD25m.

Madras will also install a roller press and a heavy fuel oil-based power generator of 5MW at its Salem grinding unit with a projected investment of USD25m and USD5.2m respectively. In addition to the expansion of the production capacity at its Ariyalur plant, Madras is looking to build up a second facility with a capacity of 2Mt/yr, which is to be commissioned in August 2011.