UK: Hope plans bagged cement launch

Despite being on the verge of being taken over, Hope Construction Materials continues to invest in expanding and strengthening a brand with an uncertain future.

Hope Construction Materials is in the process of being acquired by Breedon Aggregates, subject to approval of competition authorities. The deal is expected to complete sometime during 2016. Until then, however, Hope Construction Materials is continuing to operate as if nothing is going to change.

Next up, Hope is planning the launch of a bagged cement product.

The cement will be produced at the Hope Works in Derbyshire, which has been making cement for more than 80 years, and then transported by rail for bagging and distribution from Hope’s new Dagenham plant (below) which is set to open in the second quarter of 2016. It will be available to customers across the southern half of England.

The distinctive packaging features a large ram – a nod to the firm’s Derbyshire roots.

Hope cement had previously been available in bags through a third party supplier, but this launch marks the first time Hope cement will be in the firm’s own packaging.

Hope has spent 18 months developing this product launch, so was not likely to postpone it to see what Breedon’s plans might be for the Hope brand.

Gary Brennand, Hope’s commercial director for cement, said: “For 18 months we have spoken at length to builders and merchants to understand their needs and how we can add value to them. Using this insight we have developed a full package which we believe will redefine the sector and are really excited about sharing it all. Revealing our Hope Professional Grade Cement branding is just the start.”

JAPAN: Cement exports rise as domestic demand sinks

Japan is shipping more cement abroad to make up for slack demand at home.

The country's cement exports for fiscal 2015, through this March, are projected to top 10 million tons for the first time in four years, according to the Japan Cement Association. The final figure is expected to be more than 6% higher than last year's.

Thanks in part to the yen's depreciation in 2015, Japanese cement producers see opportunities for bigger profits on exports. They are looking toward Asian markets, in particular, as demand for cement is growing as construction of ports and other infrastructure picks up. 

A cement plant in Kochi Prefecture, in southern Japan, has been boosting shipments abroad. The facility is the only export hub for Sumitomo Osaka Cement, which holds a 20% market share in Japan. The company had earmarked 1 million tons for export, out of the plant's 3.8 million tons of annual output. But an official at Sumitomo Osaka Cement said the current export volume is 5% higher than the forecast.

Singapore is the top destination for Japanese cement. In the April-November period of 2015, the volume rose 18% on the year to 2.37 million tons. Quite a bit of it is being used in airport and subway construction.

Australia-bound cement exports stood at 1.13 million tons, up 13% from a year earlier.

Overseas customers are becoming more diverse, too. Exports to Kenya and the Philippines are surging, though volumes are still modest.

Japanese cement has a positive reputation overseas. "The quality of the cement is good, and it does not crack easily," said an official at a major construction company based in Asia.

Headaches

In response to the increased international demand, Japanese producers are building up their overseas capacity. Taiheiyo Cement, the nation's No. 1 producer, built a new cement silo in Singapore last year, boosting capacity by roughly 50% to 74,000 tons.

Back in Japan, however, all is not well. Cement makers are feeling the effects of reduced investment in public works projects.

Last autumn, the JCA cut its domestic demand forecast for the current fiscal year to 44-45 million tons, compared to its previous forecast of 46 million tons.

Domestic demand for this fiscal year is likely to come to 44 million tons or so, said JCA Chairman Fukuichi Sekine, who is also president of Sumitomo Osaka Cement.

Japanese cement companies could face another headache, depending on developments in China.

As that country's economy slows, Chinese competitors may try to cope by exporting more cheap cement. This would eat into Japanese producers' export profitability.

CHINA: Shanshui Cement to buy back bonds with support from Tianrui

China Shanshui Cement Group, whose old and new board of directors have been embroiled in an eight-month battle over management control, has offered to buy back US$525.9 million worth of bonds, averting another potential default on its debt obligations.

Rival Tianrui Group, which launched a hostile takeover by snapping up its shares in the open market last April and raised its stake to 28.2 per cent to become Shanshui’s largest shareholder, will provide the necessary funding to Shanshui to complete the buy-back.

Henan province-based Tianrui had already amassed a 10.5 per cent stake in Shandong Province-based Shanshui, China’s seventh largest cement maker, in February, by paying a hefty premium compared to the prevailing market price.

“The Board has received assurances from Tianrui that it will procure that the company has sufficient

funds to comply with its financial and other obligations in relation to the offer at the relevant time,” Shanshui said in a filing to the Hong Kong stock exchange.

A spokesman for Tianrui declined to disclose who is providing financial backing, but said it is sure of being able to meet the needs of loss-making Shanshui’s bonds repurchase.

Shanshui has already defaulted on a 2 billion yuan (HK$2.4 billion) bond repayment in November, and its principal Shandong unit - which is still under the control of former chairman and founder Zhang Caikui who retains the company chops - warned late last month it will likely default on another 1.8 billion yuan bond this month.

According to a bond prospectus issued by Tianrui two months ago, the parent of Hong Kong-listed China Tianrui Group Cement had a debt-to-asset ratio of 65 per cent at the end of March last year.

It had 590 million yuan of cash and 3.75 billion yuan of borrowings at the end of 2014, and a net debt-to-shareholders’ equity ratio of 40.9 per cent.

The Shanshui bond repurchase, triggered by a change in shareholding control and board reshuffle last month, was offered to holders of the US$500 million senior notes that carry 7.5 per cent of annual interest and will mature in 2020, as well as US$28.9 million of 8.5 per cent notes due this year.

The bondholders are allowed to demand Shanshui to buy back the bonds at a 1 per cent premium to their principal amounts in case the original controlling shareholders Zhang Caikui and his son Zhang Bin lost management control, under the bond issuance terms.

The elder Zhang was removed from the board in October in an extraordinary shareholders’ meeting called by Tianrui.

His son was ousted early last month as the entire board, including directors appointed by Taiwan-listed Asia Cement and state-backed Hong Kong-listed China National Building Material (CNBM) were removed.

China Shanshui Investment, in which Zhang Caikui is a trustee holding shares on behalf of nearly 2,500 Shanshui’s employees as a result of a state asset privatisation over a decade ago, owns 25.1 per cent of Shanshui.

CNBM has a stake of around 16.7 per cent in Shanshui, compared to Asia Cement’s 20.9 per cent.

GHANA: Cement manufacturers cry foul

The Cement Manufacturers Association of Ghana (CMAG) has called on government to eliminate any unfair trade regime which favours cement imports.

Dr George Ahmoah-Dawson, CMAG Chairman, claimed the 10 per cent tax subsidy to DANGOTE cement imports from Nigeria, contrary to the stipulated 20 per cent tax, should be addressed to keep local manufacturers afloat.

He said this in an interview with the Ghana News Agency following the recent visit of Dr Ekwow Spio-Garbrah, Minister of Trade and Industry to the Diamond Cement Factory at Aflao, during which he promised to carry the concerns of cement manufacturers to government.

Dr Ahmoah-Dawson said Ghana’s annual cement requirement of approximately 5.5 million tonnes is within the production capacity of 7.6 million tonnes by local companies- 3.2 million tonnes by Diamond Cement and 4.4 million tonnes by GHACEM.

“CMAG is not against our country’s law on free trade and on cement imports, we are only against the unfair practices which tilts the game in favour of DANGOTE and the Chinese imports”, he said.

Dr Ahmoah-Dawson appealed to government to fast-track the Ghana International Trade Commission Bill to address the unfair trade environment.

Mr Tati Rama Rao, General Manager, Diamond Cement, told the GNA at Aflao that the problem has resulted in the company cutting production by 30 per cent by closing the plant three times a week.

He said Ghana may lose revenue due to the 10 per cent tax exempt being enjoyed by DANGOTE since 2010.

Mr Rao said while Ghana was allowing DANGOTE imports under the ECOWAS trade protocol, Nigeria on its part was restricting imports of the product from other countries including ECOWAS states.

He claimed DANGOTE enjoys a 30 per cent subsidy under Nigeria’s Export Expansion Grant Scheme (EEG) for cement exports from that country, while also benefiting from the ECOWAS’ zero per cent tax through Aflao.

Mr Rao said this makes it unfair to the local manufacturers as the importers have the leeway to play “market theatrics” as in the case of DANGOTE, which directly delivers to customers with its own bulk tankers.

Mr Abdul Razak, spokesperson Haulage Tank Drivers and Owners, pointed to the empty parking-lot, which was full of trucks awaiting loading and expressed worry at the turn of events.

KENYA: Construction boom increases cement use

Cement uptake in the country increased by the highest pace last year, driven by the booming construction industry.

Kenya National Bureau of Statistics data show the consumption of cement reached 5.23 million metric tonnes in November, slightly higher than the 5.19 million metric tonnes that was used throughout 2014.

High uptake of cement indicates heightened activity in the construction sector, KNBS said.

The data show construction sector grew by 11.3 per cent in the first quarter of 2015 compared to a growth of 7.6 per cent in a similar period in 2014.

The growth was mirrored in cement consumption which expanded by 15.5 per cent over the first quarter to 1.36 million metric tonnes 1.16 million metric tonnes over the same period previously.

The sector, however, recorded decelerated growth of 9.9 per cent during the second quarter of 2015 compared to a growth of 16.6 per cent during the same quarter in 2014.

Cement consumption was highest in the third quarter, when it stood at 1.44 million metric tonnes, compared to 1.3 million metric tonnes in a similar period in 2014.

“The construction sector is estimated to have expanded by 14.1 per cent between July to September compared to a growth of 8.8 per cent in the same period of 2014. The growth was on account of increased public infrastructure projects and private sector development in the real estate sector,” KNBS said.

The high demand for cement in the review period, pushed the manufacturing firms to increase their production capacity, reaching 5.84 million metric tonnes in the period to November 30, 2015.

Cement production stood at 5.88 million metric tonnes in 2014.

Cement manufacturers in the country include EAPCC, Bamburi, ARM, National Cement and Savannah Cement.

In 2012, Bamburi invested in a Sh540 million filter kiln to eliminate dust emissions and save energy during cement production.

Last year ARM said it had adopted new technology that will boost its cement production capacity and significantly reduce the cost of construction while Savannah Cement confirmed plans to invest more than $200million in the installation of a high efficiency milling plant to meet growing demand for its products.

On the other hand, National Cement wants to invest Sh18.5 billion ($199 million) in a new factory in Uganda.

AMERICA: Cemex, otro damnificado de la crisis de tasas de cambio

Cemex latam holdings, filial en la región de la mexicana Cemex, reportó una pérdida neta de 22 millones de dólares en el cuarto trimestre del año pasado debido a una caída en las ventas, afectada por fluctuaciones de las tasas de cambio y menores volúmenes.

El saldo negativo contrastó con la utilidad de 64 millones de dólares que registró la empresa en el cuarto periodo del 2014. Las ventas netas se contrajeron un 17 por ciento a 1.427 millones de dólares en el periodo comprendido entre octubre y diciembre pasado con respecto a los 1.725 millones de dólares en igual trimestre del 2014.

"Esta disminución está explicada principalmente como resultado de fluctuaciones en la tasa de cambio y el efecto de menores volúmenes de cemento en nuestras operaciones de Colombia y Panamá", explicó la compañía en un comunicado.

En el acumulado del 2015, Cemex reportó una caída de 65 por ciento en su utilidad neta a 95 millones de dólares, en comparación con los 273 millones que alcanzó durante el 2014. La deuda neta de la cementera que abarca los activos del conglomerado mexicano en Colombia, Panamá, Brasil, Costa Rica, Guatemala, Nicaragua y El Salvador, disminuyó un 9 por ciento a 1.034 millones de dólares al cierre del 2015, frente al saldo del año previo.

Cemex Latan Holding es sociedad matriz de la cementera mexicana Cemex en Colombia y varios países de América Latina.

NIGERIA: Dangote begins construction of new 9 million tons capacity cement plants in Okpella, Itori

In a deft move to consolidate its leadership position in the Nigerian cement sector, Dangote Cement Plc has announced the commencement of construction of new cement plants in two communities in the country.

The new plants are expected to add 9million metric tonnes per annum to the company’s current local cement output of 29.25 million metric tonnes, bringing it to a total of 38.25 million metric tonnes per annum.

The company stated that the communities in which it is setting up the new plants are Okpella in the northern part of Edo State, South-south of Nigeria with a three million per annum plant and another six million per annum capacity plants in Itori in Ogun State, South-west of the country.

The Group Managing Director and Chief Executive Officer (CEO), Dangote Cement Plc, Mr. Devakumar Edwin, who made the announcement in Lagos, explained that the Okpella plant will be made up of one line and will produce a total of 3 million metric tonnes per annum, and the Itori plant which will deliver approximately 6 million tonnes per annum from two procution lines. Both plants are expected to come on stream within the next three years.

Devakumar said the move by the company was to help expand the spread of the company’s manufacturing outfits, thereby reducing the transportation cost component of their operations.

He added that the new investments will further lower cost of production; bring about future reduction of the price of cement and also to generate employment opportunities for the youths of host communities.

Also speaking at the event, the Group Managing Director, Cement, Dangote Industries Limited, Mr. Onne Vander Weijde, said the demand for cement was still high considering the level of population growth in Nigeria, saying that Nigeria’s per capita consumption of the building material which is just above 100kg per capita is relatively low, indicating a massive growth potential.

“There has always been a surplus in demand because cement was not readily available, but ours is available and the prices are affordable. Consumer prices have fallen by 35 per cent in naira terms, but if you take it in dollar terms and relate it with today’s parallel market rates, you will realise the price of the product has gone down in Nigeria, and in some cases below the prevailing average global price.

“This itself is a huge driver for increasing the per capita consumption,” he said.

He said with the capacity of the plants in Nigeria, the company can supply the entire western and central Africa region, maintaining that currently, Dangote cement is exporting cement to Niger, Ghana, Togo with plans to move up to the Ivory Coast.

“Nigeria had always been an import-dependent country in terms of cement in the past and if we do not add up capacities, we will not be able to match up the consumption rate in the country. We want to ensure that we are always one step ahead to meet the local demand for the commodity,” he said.

According to him, the investments would create in excess of 5000 jobs at the beginning stage, noting that logistics and construction of the plants would also provide more employment opportunities indirectly to surpass that amount.

In his remarks, the Special Adviser to the President of Dangote Group, Mr. Joseph Makanju, said expectations were very high about cement price reduction when the nation began building local cement production capacity.

He noted that those price reduction expectations were now being met with cement now selling at about N1,300 per 50kg bag, among the most affordable in the world.

“Before now, cement was selling for over N2000. There is a lesson here to learn for the country and the media has a big role to play in this because when you go through transformation by moving a country from being dependent on import, there is need to encourage local investment to make those products being imported into the country,” he said.

“I am using this medium to appeal to the media by saying they have a huge role to play. You can refer to the cement story to educate the public. The price of cement has now come down to about N1300 in an environment where all the input costs are going up. The achievement is actually bigger than the figures.”

Expressing the excitement of the community on the announcement of the commencement of the new plant in Okpella, a community leader from the community, Chief Calib Musa, said the Community had long awaited the move by Dangote saying the Okpella people are happy and would give all the necessary cooperation to Dangote Cement.

His words, “the investment is a very welcomed development. Dangote has the full support of our people because we know that the initiative will be beneficial to us and the company as well”.

Musa stressed that communities around the world wish and pray for opportunities like this to come to their way and Okpella leaders, people and youths are happy with Dangote for his decision to contribute to the development of our land.

He explained that the investment move was long due adding that all the noise about the community not supporting Dangote Cement was a ruse.

“We are happy with Dangote we want him to move very fast and we thank him immensely,” said the community leader.

ALGERIA: FLSmidth receives large cement order

FLSmidth has signed an EPC (Engineering, Procurement and Construction) contract with a value of more than EUR 200m with the Algerian cement producer SARL Amouda Ingineering for the supply of a greenfield cement plant in Algeria. The plant will be located in El Beida (Laghouat), approximately 400 km from the capital Algiers. 

The order includes engineering, equipment supplies, construction, commissioning and training. Once completed, the cement plant will have a capacity of 6,000 tonnes per day.

"EPC solutions areincreasingly requested by the industry and we are very happy that SARL Amouda Ingineering chose FLSmidth as the preferred supplier based on a very close collaboration and our extensive knowledge of the region. Algeria is a very important market for FLSmidth and we have supplied several cement plants in the country," Group Executive Vice President of the Cement Division Per Mejnert Kristensen comments.

The order will be booked by the Cement Division and contribute beneficially to FLSmidth's earnings until early 2018.

ROMANIA: Cement producer Holcim Romania appoints new CEO

Algerian-Canadian Sofiane Benmaghnia, 39, will be the new CEO of cement producer Holcim Romania starting April 1.

He will replace Francois Petry, who took over as CEO of Aggregates Industries, the British subsidiary of the newly formed LafargeHolcim group.

Sofiane Benmaghnia joined LafargeHolcim in 1999 as a financial analyst. Since then, he has built his career within the group, working in several markets where LafargeHolcim operates (North America, Middle East, Africa and Europe). He has an experience of over 16 years in the cement industry.

He has been the CEO of Meftah Cement Operations, Aggregates & Concrete in Algeria since 2011. Before that, he was Chief Financial Officer of Lafarge Concrete and Aggregates in the Middle East for three years.

Sofiane is a Certified Public Accountant and Certified Management Accountant and has a degree in Commerce from the University of Tunisia. He also holds a certification in managerial accounting from the Concordia University in Montreal, and an executive MBA from the Sherbrooke University in Canada.

Holcim Romania has two cement factories, in Campulung and Alesd, and some 800 employees. The company had sales of EUR 217 million and a net profit of EUR 16 million in 2014.

INDIA: LafargeHolcim sees Rs10,000 crore valuation for its cement portfolio

Franco-Swiss cement maker LafargeHolcim Ltd is expecting almostRs.10,000 crore in deal value for the entire 11 million tonnes per annum (mtpa) Indian cement portfolio it plans to sell, according to two people with direct knowledge of the matter.

Among those interested in the assets are JSW Cement Ltd, Irish building materials maker CRH Plc and private equity (PE) firm Blackstone Group LP, according to the two people and a third person familiar with the development.

LafargeHolcim on Thursday said it was considering a revised plan to sell Lafarge’s full cement capacity in India.

Informal talks on the sale of these assets have already started, according to the two people cited in the first instance.

“What is on right now is the informal discussion rounds; formal process will start only once Lafarge receives the Competition Commission of India (CCI)’s approval for the revised plan. The expected valuation for the deal is being quoted at around plus or minus of Rs.10,000 crore,” said one of the two people mentioned above.

Both spoke on condition of anonymity.

The spokespersons for LafargeHolcim, Blackstone and CRH refused to comment for this story.

CCI, the country’s antitrust regulator, had in April directed LafargeHolcim to divest Lafarge’s east India cement assets to allow for the merger between the local units of French cement maker Lafarge SA and Holcim of Switzerland.

Lafarge entered into a deal with Birla Corp. Ltd in August 2015 for its east India assets.

The deal was called off on 2 February because of regulatory hurdles over the transfer of related mine leases.

“Officially, the sale process has not been launched but investors who had previously looked at the assets, including the PE funds, have started looking at the deal and they are trying to assess the value of the assets,” said a second person.

JSW Cement, CRH and Blackstone were also among those that had expressed initial interest in the 5.15 mt east India cement assets that Lafarge had put up for sale in April 2015.

LafargeHolcim is now seeking CCI approval for the revised plan, which involves a full exit from Lafarge’s India cement assets.

“They had written to CCI seeking an approval to sell the entire 11 mtpa which has not come yet and their deadline to complete the asset sale is over; so they are awaiting clarity,” said the third person, a banker who is advising a client on the potential acquisition of these assets.

The banker, who also wanted to remain anonymous, added the transaction is entirely dependent on CCI’s directive.

Lafarge holds the 11 mt cement capacity across Chattisgarh, Jharkhand, Rajasthan, Haryana and West Bengal through its unit, Lafarge India Pvt. Ltd.

“The deal would involve buying out a 100% stake in Lafarge India, and the company does not have a huge debt component to be transferred. It is a fat cheque deal and not many would be able to cut a cheque of that size,” said the first person cited above.

The size of the deal makes it a tough one, said Sandipan Pal, vice-president-real estate and cement, Motilal Oswal Securities Ltd. “Those who have the financial strength to buy (the assets) will face CCI issues in terms of market share; those who can buy (without triggering a CCI issue) will face financing issues because of the size of the deal.”

On 22 January, a spokesperson for JSW group, said in an email to Mint, “We are looking at various opportunities to expand our cement business. Lafarge assets are also under consideration. However, nothing has been concluded.”

A deal, if closed, will help the successful bidder to scale up its presence in India significantly. In the case of JSW, the company would almost triple its capacity from 6 mt to 17 mt.

For CRH, a deal would provide an opportunity to expand its presence with an eye on India’s expected infrastructure demand for the building material in the coming years.

CRH’s current presence in India is restricted to a joint venture with My Home Industries Pvt. Ltd, which has annual capacity of 8.4 mt.

“I think consolidation will continue to happen as building greenfield assets have become increasingly difficult and with mining issues and non-availability of land as a resource we will see continued M&As (mergers and acquisitions) in the sector,” said Srinivas Tekal, director at investment banking firm O3 Capital Global Advisory Pvt. Ltd.