Global Cement News

Denmark: The board of Danish cement plant producer FLSmidth has released financial results for the three months to 31 December 2011, which show that earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 57% to Euro133m compared to Euro89.1m in the final quarter of 2010. The company recorded a revenue of Euro979m, up by 32% year-on-year from Euro742m. Its order intake also increased by 32% to Euro787m for the quarter compared to Euro595m.

For the whole of 2011 the group's revenue increased by 9% to Euro2.95bn and its EBITDA increased by 11% to Euro356m. Its net profit was up by 12% to Euro193m compared to Euro180m in 2010.

FLSmidth said that its cement sector remained solid despite a difficult market. In 2012 the company expects a consolidated revenue of Euro3.2-3.5bn exclusive of acquisitions. In the cement sector it expects a slight increase in revenue over 2011's Euro592m.

Saudi Arabia: Saudi Cement Company has announced that it will re-start operation of its 4000t/day Kiln No. 6 by the start of May 2012 at the latest. It will have completed a large-scale environmental overhaul and conversion of the kiln from gas to crude-oil by this date.

The company will also recommence operation of three older kilns over a similar timescale. These have a combined capacity of 1325t/day. The total additional available capacity available in May 2012 will be 5325t/day, helping to meet rising demand in the country.

India: In a clear move away from its traditional engineering, procurement and construction (EPC) business, Shriram EPC, part of the financial services major Shriram Group, is ready to pick up a majority stake in Sree Jayajothi Cement. The company's board approved picking up a significant equity share capital of Sree Jayajothi by partially converting the dues owned by Sree Jaya Jothi into equity.

Shriram EPC, which provided EPC services to the latter's cement plant at Yanakandala village in Andhra Pradesh, has invested its own money for the project. Shriram EPC hopes to complete the deal by mid-April 2012, according to its managing director and CEO, T Shivaraman.

"For us it is a strategic move," explained Shivaraman. "For the group it is a diversification to get into the cement business. This move will have long term benefits for us. Since Sree Jayajothi could not return the money that we invested over the years, we thought it fit to convert the dues into equity. We are converting part of the dues into equity and it will be for majority stake."

Sree Jayajothi has been struggling to find a suitable investment partner for its cement business, with repayment so far taking longer than expected. Over recent years Shriram EPC has invested over US$100m in the plant.

Saudi Arabia: The Ministry of Commerce and the department of customs has tightened its surveillance on Saudi cement outlets to ensure a strict implementation of the ban on exporting cement, which came into effect on 18 February 2012.Industry sources said that no cement or clinker bricks had been exported since the ban was imposed. Only Bahrain is exempt from the ban, receiving about 25,000 bags of cement per week.

Some cement companies took advantage of a grace period that preceded the start of the ban to export large quantities of cement. Keen not to confuse or disturb the companies, the ministry warned producers beforehand, enabling factories to coordinate with distributors. A meeting was held in January 2012 warning that such a move was becoming likely.

Following the ban on exports Al Jouf cement announced an immediate 30% price increase. The company justified its move by saying that it was done to reduce the losses it might incur as a result of the ban.

The ministry said that it had stopped exports in order to put an end to the cement crisis, which has seen cement become very scarce in certain regions of the country. It asked factories to produce at full capacity to provide enough cement for local consumers. A cement shortage in Makkah is expected to end with the ban on exports and an extra 10,000t/day, produced for the Makkah region.

Earlier, more than 70 people were arrested and are to be investigated in connection with a cement crisis in Jeddah, which had seen cement become expensive and scarce since the start of 2012. Trucks owned by the accused were captured while selling cement at inflated black market prices in various parts of the city.

UK: The UK Competition Commission has decided provisionally that the proposed joint venture between Anglo American plc and Lafarge SA in the UK could damage competition in certain markets for construction materials.

In February 2011 Anglo American, through its UK subsidiary Tarmac Ltd, and Lafarge announced a proposal to establish a 50:50 joint venture, to which each of them would contribute the bulk of their construction materials businesses in the UK. The two parties' main overlapping activities in relation to the joint venture are in the production and supply of cement, aggregates, asphalt and ready-mixed concrete. The Office of Fair Trading referred the case to the Competition Commission on 2 September 2011.

Now the Competition Commission has reported that the joint venture could lead to a substantial lessening of competition in the markets for the supply of bulk cement, rail ballast, high-purity limestone (when used for flue-gas desulphurisation), primary aggregates for construction applications in 23 local markets, asphalt in two local markets and ready-mixed concrete in seven local markets.

"We have a number of concerns about this joint venture," said Roger Witcomb, chairman of the Anglo/Lafarge Inquiry Group. "In bulk cement there are currently only four UK producers and there is evidence that the market is not as competitive as it could be. Prices and profit margins haven't been affected in the way we would have expected following the big falls in the demand for cement in the past few years."

Although the Commission has not reached a view on whether or not there has been coordination in the bulk cement market, Witcomb said there were concerns that the proposed tie-up would increase the susceptibility of this market to co-ordination. "Some of the reasons for this arise from the proposed combination of the cement businesses and some from the increased vertical integration that would result from the combination of their ready-mixed concrete businesses," he said. "Lafarge currently have a relatively small ready-mixed concrete business, while Tarmac have a relatively large one."

Witcomb continued, "We are now consulting on the possible actions we could take in response to the reductions in competition we have found, bearing in mind the close links that exist between the different product markets."

As well as the summary of provisional findings, the Competition Commission has published a notice of possible remedies, outlining ways that the potential anti-competitive effects of the joint venture could be prevented. It will issue a final report no later than 1 May 2012.