Global Cement News

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.

Australia: The Federal Opposition has claimed that 1800 cement industry jobs will be at risk from Labour's carbon tax and proposed new shipping rules. Nationals leader Warren Truss says the USD2.2bn-a-year industry is facing a 'double-whammy' under the Gillard government, saying that domestic cement manufacturers could be killed off by 'dirtier' imports, made cheaper under the carbon tax.

"The paradox is Australian cement production is a leader in low-emission technology and any shift to imports will force global CO₂ emissions to rise," said Truss. He added that the Australian cement industry has the world's second lowest greenhouse gas emissions behind Japan. "The carbon tax will price Australia's cleaner cement out of the market, giving the green light to our international competitors to boost their higher CO₂-emitting production and flood Australia with dirty cement. The Australian cement industry will be crushed by competitors who will not be paying a carbon tax."

Mr Truss said Labor was also rewriting the Navigation Act to force businesses that ship products around Australia to use domestic union-dominated vessels. He said 'unionised shipping' in Australia cost significantly more than current international market rates and would be another blow to the cement industry.

"Right now it costs about the same to ship cement from China to Australia as it does to ship it from Adelaide to Port Kembla," he said. "Under the Gillard government's sop to the maritime union, our biggest competitors in cement - China, Indonesia, Taiwan and Thailand - will dramatically undercut Australian suppliers on shipping costs alone."

The Cement Industry Federation (CIF) backed Truss's claims, saying the shipping reforms would impose new cost burdens on the sector. "Australian manufacturing cannot afford adding further cost imposts as a result of regulatory changes to coastal shipping," said a CIF spokeswoman in a statement. "While improving job security and conditions for Australian-based shipping crew is important, this must be weighed against the job security for manufacturing workers in primary production and manufacturing industries."

Meanwhile, Truss said a large section of the cement manufacturing sector would not be compensated under the carbon tax plan. The compensation package would apply only to producing clinker, the first stage of making cement. "The milling stage to make cement receives no compensation," he said.

Truss dismissed federal Treasurer Wayne Swan's comments that predictions of job losses in the manufacturing industry as a result of the carbon tax were 'doom and gloom.' "It is simply a nonsense for Mr Swan to suggest that his tax on Australian industry is not going to affect the competitiveness of Australian producers," he said. "We will be the only cement producers in the world and the only manufacturing industry in the world that pays a carbon tax. It naturally makes Australian products less competitive and will cost Australian jobs."

Mexico: Cemex has announced that its consolidated net sales increased by 9% during the second quarter of 2011 to approximately USD4.1bn compared to the same period in 2010. Operating earnings before interest, tax, depreciation and amortisation (EBITDA) declined by 7% during the quarter to USD615m compared to the same period of 2010.

The group attributed the increase in consolidated net sales due to higher volumes mainly from operations in Northern Europe, South/Central America, Mexico and the Caribbean, with infrastructure and residential sectors acting as the main drivers of demand in most markets.

The group's free cash flow (after maintenance capital expenditures) for the quarter was USD18m, compared with USD187m in the same quarter of 2010. Its operating income in the second quarter declined by 12% to USD258m.

Fernando González, Executive Vice President of Finance and Administration, said, "This is the third consecutive quarter of top-line growth in our results. We are pleased with the quarterly performance of our operations in Northern Europe, the South, Central American and Caribbean region and Mexico, which helped mitigate the challenging conditions of the construction sector in the US. We also remain focused on our transformation process, which will reach a run rate of USD400m in recurring improvement in our steady state EBITDA by the end of 2012."

Net sales in Mexico increased by 5% in the second quarter of 2011 to USD968m, compared with USD923m in the second quarter of 2010. Operating EBITDA declined by 4% to USD309m versus the same period of 2010. Cemex's operations in the US reported net sales of USD619m, down by 9% from the same period in 2010. Operating EBITDA was a loss of USD22m.

In Northern Europe, net sales for the second quarter of 2011 increased by a massive 24% to USD1.35bn, compared with USD1.10bn in the second quarter of 2010. Operating EBITDA for the region was USD152m, 52% higher than in 2010. Second-quarter net sales in the Mediterranean region were flat at USD477m. Operating EBITDA decreased 15% to USD125m for the quarter versus the comparable period in 2010.

The group's operations in South/Central America and the Caribbean reported net sales of USD442m, an increase of 23% over the same period of 2010. Operating EBITDA decreased by 3% to USD125m in the second quarter of 2011, from USD128m in the second quarter of 2010.

Conversely, Asia saw a surprise decrease reporting a 9% decrease in net sales for the second quarter of 2011 to USD129m. Operating EBITDA for the quarter was USD22m, down a gigantic 45% from the same period of 2010.