Global Cement News

Pakistan: Lucky Cement has declared its best ever profit after tax of US$71.8m for the year ending 30 June 2012. The result is 70.8% higher than the net profit of US$42.1m made in the same period in 2011.

The company's gross profit increased by 46% as its net sales revenue improved by 28.1% to US$353m from US$276m. Higher sales volume in the domestic market coupled with better retention prices attributed to the record-breaking profit. Local sales volumes grew by 7%, to 3.72Mt from 3.46Mt. However, export sales volume fell by 4% from 2.35Mt to 2.25Mt, mainly due to a focus on the domestic market, which contributed in increasing the overall profitability of the company.

Lucky Cement undertook various capital expenditures in the year ending 30 June 2012, including new refuse-derived fuel (RDF) and tyre-derived fuel (TDF) plants and a new European-origin packing plant. The RDF and TDF plants replaced up to 20% of coal consumption with alternative fuels. During the year, a project of supplying electricity to the Hyderabad Electric Supply Company (HESCO) was also successfully completed whereby a grid station and 22km of interconnection lines were installed. The company is also working on joint venture investments for a cement plant in the Democratic Republic of the Congo and a grinding facility in Iraq.

Denmark: Cement equipment provider FLSmidth has reported that its second-quarter net profit for 2012 fell by 24% to Euro30m as increased costs and big write-downs outweighed growth in its revenue. Its profit in the same period in 2011 was Euro38.8m.

FLSmidth saw its revenue improve by 26% year-on-year, to Euro811m from Euro644m. Order intake also grew substantially by 20%, to Euro973m from Euro812m. As a result, earnings before interest, tax, depreciation and amortisation (EBITDA) rose by 32%, to Euro90m from Euro68.2m.

However, amortisation and write-downs of intangible assets jumped to Euro34.4m from Euro5.51m, which had a negative effect on overall profit. This negative item consisted mainly of a one-off Euro25.3m write-down of capitalised research and development costs.

FLSmidth registered strong order intake and earnings before interest, tax and amortisation (EBITA) in all its segments except for Bulk Materials, which has been experiencing difficulties in project execution as a result of underestimated risks in connection with orders received in previous years. For its cement sector two major orders in the USA and the Middle East were received in the second quarter. The period saw a order intake rise by 47%, to Euro256m from Euro173m.

Pakistan's Lucky Cement received the 'all clear' for its cement imports from the South African regulators last week. The situation exposes the increasingly competitive market in the country after the South African Competition Commission cartel investigations in 2011.

Sales of Lucky Cement were originally shut down in 2011 due to accusations made by its competitors, including Pretoria Portland Cement (PPP) and Natal Portland Cement (NPC). They complained that Lucky was not complying with South African standards. South Africa's National Regulator for Compulsory Specifications (NRCS) then ran its independent investigation and released its results last week.

The regulator's full 28-day test found no evidence that Lucky Cement imports were non-compliant with regards to their quality. A minor infringement concerning underweight bags was found and fixed. However, about a week beforehand, Lafarge South Africa's CEO said that his company was considering approaching another trade body with concerns about 'low-quality cheap cement' imported from Pakistan.

More serious criticism came from the Cement and Concrete Institute when the NRCS admitted that it didn't know how much cement had been imported into South Africa so far in 2012. The NRCS is supposed to inspect and approve the testing bodies each producer and importer uses for every 500t of cement.

Lucky Cement has been a regular importer of cement to South Africa since 2009. It exports around 1.65Mt/yr to over 22 countries in South East Asia, the Middle East and Africa. CCI figures reckon that 140,000t of cement was imported to South Africa in the first quarter of 2012, mostly by Lucky Cement. According to the Global Cement Directory 2012 South Africa's capacity is around 11Mt/yr.

Four domestic producers – Lafarge, PPC, AfriSam and NPC – were accused of cartel activity by the South African Competition Commission, in a case that has been running since 2008. PPC confirmed the existence of the cartel, whilst Lafarge and AfriSam were fined US$19.6m and US$16m respectively.

By letting Lucky Cement resume the sale of its cement in South Africa, the NRCS has arguably done more than the Competition Commission to prevent cartel activity. With reports surfacing that other producers in Pakistan and India are considering exports to South Africa, domestic producers are going to have to become more inventive and more competitive.

Switzerland: As part of its 'Holcim Leadership Journey', the Swiss cement multinational has announced a series of personnel changes to save at least Euro1.25bn by 2014.

The group's Europe region (excluding the UK) will be consolidated and led by current member of the Holcim Executive Committee Roland Köhler. The North America and UK region will report to Bernard Terver who has been appointed member of the Holcim Executive Committee.

Corporate functions that directly contribute to the programme to strengthen customer excellence and cost leadership will be led within the newly created project management office for the 'Holcim Leadership Journey' by Urs Bleisch. He has been appointed corporate functional manager and member of the senior management of Holcim. He will be reporting directly to the CEO of Holcim, Bernard Fontana.

Member of the Holcim executive committee Urs Böhlen will leave the executive committee and act as an advisor to the CEO of Holcim until his retirement in 2013. Members of the executive committee Benoît-H. Koch and Patrick Dolberg will leave the group.

Switzerland: Holcim's net income has risen by 9% for the first six months of 2012. Despite this, the world's second-largest cement maker plans to cut costs and raise cement prices to meet its financial targets. These have been both hit by poor demand Europe and high-energy costs.

The company's net income attributable to shareholders rose to Euro324m in the January 2012 to June 2012 period from Euro267m in the same period of 2011. Net sales rose by 2%, to Euro8.62bn from Euro8.45bn. Operating earnings before interest, tax, depreciation and amortisation rose by 1.9%, to Euro1.61bn from Euro1.60bn. Sale volumes of cement rose by 4%, to 74Mt from 70.9Mt. Second quarter results for the April 2012 to June 2012 period supported these overall trends.

By region, Holcim's Asia Pacific and Latin America areas showed steady growth while Europe continued its decline. In Asia Pacific sales of cement rose by 8% for the half year, to 41.2Mt from 38.1Mt. In Latin America sales rose by 3.3%, to 12.1Mt from 11.7Mt. In Europe sales fell by 4.1%, to 12.3Mt from 12.8Mt, mainly due to poor performance in the first quarter of 2012. In North America sales rose by 8.6%, to 5.4Mt from 5Mt. In Africa and the Middle East sales rose by 2.7%, to 4.5Mt from 4.4Mt.

"While demand in North America should beat the previous outlook, Holcim now expects a decline in Europe," the Holcim said. The firm's construction industry customers, especially those in southern Europe at the heart of the debt crisis, are suffering as governments slash spending in an attempt to get budgets under control. Analysts at Bank Vontobel said that while Holcim's overall outlook was almost unchanged, the contribution of Europe compared with North America was three times bigger, making this effectively a 'reduction of the outlook'.

The Swiss cement maker said that its spending cuts were under way and would result in an additional operating income of at least Euro125m in 2012.