IRELAND: CRH faces up to its sins of the past

Albert Manifold was unequivocal yesterday in diagnosing the group’s boomtime errors that led to the decision to sell off a tenth of its poorest-performing assets, with the future of a further 20 per cent up in the air.

“We invested in unsustainable trends. We forgot the core principle of CRH, which is that we used to make businesses better. We invested in bubbles.”

Manifold highlighted that 70 per cent of the business units heading for the door were bought between 2000 and 2006, the binge before the bang. As he spoke alongside his finance director Maeve Carton in London, it did not escape the notice of some that the period the new chief executive had chosen to highlight fell entirely under the rein of former boss Liam O’Mahony.

Myles Lee, Manifold’s immediate predecessor, was O’Mahony’s finance chief for much of that time.

Manifold continued: “Those businesses were cruelly exposed as the crisis hit. We will never again go down the road of buying market trends and growth, instead of understanding how to make those businesses better. At least now we have started to understand what went wrong. ”

So what did go wrong?

CRH, perhaps Ireland’s most conservative listed company, was swept along in the euphoria of unsustainable European housing booms, not least the one that decimated its home country. It lost its focus on returns.

Its portfolio review has directly resulted in the decision to sell 45 business units worth €1.5 billion.The future of others worth more than €3 billion is unclear, although Manifold expects most of those to be retained after “fixing”.

It has taken a €755 million write down on the businesses already tagged for sale. Manifold would not be drawn on the identity of the damned, but an analysis of where the impairments fell gives some clues.

Half of the writedowns are in its European products division, which manufactures accessories and solutions such as wall boards and tiles. The division, according to CRH’s website, is 60 per cent exposed to housebuilding, with extensive operations in the Benelux countries, France, Spain, the UK and Ireland.

Another quarter of the writedown goes to its European materials division, which produces materials such as cement. Half the writedown of its products division, and half of its exposure to housebuilding: just 30 per cent.

The rest of the writedown is accounted for by some “trimming” of its US operations.

CRH’s roll of press releases and announcements for 2000-2006 reveals some of the activity that it may now be looking to redress.

The December 2006 decision to invest €200 million in a cement plant in Drogheda looks, in hindsight, like poor timing. As do O’Mahony’s contemporaneous comments about “an expanding Irish economy and construction sector”.

CRH also acquired DIY chains in countries such as Belgium, another market that is now performing poorly.

Ireland accounts for 1 per cent of the group’s sales, but its proportion of the disposals are likely to be higher. Britain is also heavily represented in the products division that will see the biggest slice of the sell-off.

Drill further into the distribution of the €755 million writedown, however, and you can see that they have their problems too. Just €380 million of the writedown of its subsidiaries is accounted for by goodwill, which exists only on paper. The rest is a writedown on the value of the actual assets themselves.

It could have been a lot worse for CRH given the state of some of its peers. Manifold denied that there was anything strategically “wrong” with the company in the run up to 2006. “We made mistakes. We are only human,” he said.

Confirmation, if it was needed, that the errors were made by people.

BOLIVIA: Quieren reducir importación de cemento

El presidente Evo Morales expresó ayer su deseo de reducir la importación de cemento de Perú y Brasil, mediante la instalación de nuevas plantas y el incremento de la producción de este material de construcción.

"Mi deseo es acá industrialicemos y reduzcamos la importación, pero de emergencias a veces obligados a importar productos, eso poco a poco hay que reducir, ojalá pueda terminar”, manifestó durante una visita a la Cooperativa Boliviana de Cemento, Industrias y Servicios (Coboce) en Capinota, Cochabamba.

El Primer Mandatario señaló que no importa si para disminuir la importación se demanden más fábricas de cemento, ya sean privadas, estatales o cooperativas como Coboce.

Según datos de la Sociedad Boliviana de Cemento (Soboce), la demanda de cemento para este año llegará 3,5 millones de toneladas métricas, cifra superior registrada el anterior año que llegó a 3,3 millones de toneladas.

Morales también destacó sobre un crédito para la ampliación de la fábrica de cemento de Irpa Irpa, en Cochabamba, con el que se incrementará la producción de 24.000 bolsas de cemento por día hasta 75.000 bolsas.

TANZANIA:Twiga Cement plans new marketing strategies

THE Tanzania Portland Cement Company (TPCC) plans to review its marketing strategies to improve distribution and sales of its products in the country and beyond.

TPCC Managing Director Alfonso Rodriguez told a news conference in Dar es Salaam over the weekend that it was aimed at coping up with ever rising competition in the market.

He said that the company organises dinner gala annually during which agents and distributors meet with other members of the firm’s staff to share views and experiences.

“Our goal is to improve the performance of our business in the market,” he said. He said last year, the firm’s market share dropped by 20 per cent.

“We are keen to recover the lost market share,” he stressed. He further said that the Dar es Salaam based cement firm saw its net income dwindling by over one third to 19bn/- in the first six months that ended last June in 2013.

Mr Rodriguez underscored that the poor results were attributed to unregulated imports mostly from Pakistan as well as power blues following the collapse of the manufacturer’s electric transformer that cut the number of operational mills from five to three.

He noted that the firm’s plans to build its own power plant to reduce blues during the production process while boosting the cement production.

Mr Rodriguez applauded the government’s move against importation of untaxed cement that is selling cheaply in the market, subjecting the local manufacturers to unfair competition.

TPCC Sales and Marketing Director, Ekwabi Majigo said that the emergence of new manufacturers in the cement industry would make the firm come up with new business strategies in order to remain at the top of strong and giant producers of cement in the country.

INDONESIA: SEMEN SALES RISE 2014

The country’s biggest cement producer, PT Semen Indonesia, is targeting 8 percent sales increase this year and allocating up to Rp 5 trillion (US$429 million) of capital expenditure (capex) to help enhance production capacity.

Semen Indonesia corporate secretary Agung Wiharto said Monday that the company expected its sales volume to grow 8 percent from 27.8 million tons last year.

“We will enhance production at our existing facilities to achieve the target,” he said.

The publicly listed company aims to produce 31.8 million tons of cement, up by 6 percent compared to 30 million tons last year. It has set a long-term target of 40 million tons of cement in 2017.

This year’s additional production is expected to come from the Dumai cement mill, which, when it is operational, is projected to produce 900,000 tons of cement per annum. The company also commenced the operation of Tonasa V facilities in Pangkep, South Sulawesi, last week. The factory produce 3 million tons of cement once fully operational.

Agung said that the company would disburse Rp 4-5 trillion of capex this year. The company will allocate about Rp 3 trillion to finance the construction of new facilities in Padang, West Sumatra, and Rembang, Central Java. The remaining funds will be used to enhance existing production, build two new packing plants and finance operations.

He said that the total investment of the two new facilities would be Rp 7.2 trillion, with the construction of the Padang facility designed to conclude in 2016 while Rembang would be in 2017.

Semen Indonesia currently owns 22 cement mills and 21 packing plants. It also has 11 special ports, one of which is located in Vietnam.

Semen Indonesia, according to a written statement published on Sunday, managed to book Rp 24.5 trillion in revenue last year, which is a 25 percent increase compared to Rp 19.5 trillion recorded in 2012.

Semen Indonesia booked Rp 5.37 trillion in profits in 2013, up by 10.8 percent compared to Rp 4.84 trillion in 2012.

Semen Indonesia managed to secure 44 percent of the country’s cement market in 2013, a significant increase compared to 41 percent in 2012.

The company recorded an increase in its earnings before interest, taxes, depreciation and amortization (EBITDA) of Rp 8.1 trillion last year, increasing by 17.9 percent compared to Rp 6.8 trillion the previous year.

Semen Indonesia president director Dwi Soetjipto said that 2013 was actually a challenging year for the company with the fuel price hike and base electricity prices, which it managed by carrying out operational efficiency.

“The company’s move to build a packing plant in Sorong [West Papua] also helped to reduce packaging costs,” he said in the statement.

Last year, the company trimmed down packaging costs from Rp 33,078 per ton of cement to Rp 29,430 per ton.

Semen Indonesia is currently working with state-owned steel company Krakatau Steel on a joint venture to produce slag powder — a raw material for cement production.

The joint venture company, to be called Krakatau Semen Indonesia (KSI), will build a Rp 440 billion slag powder plant in Ciwandan, Cilegon, Banten.

The construction of the slag powder plant, which will have a production capacity of 750,000 tons per year, will commence early this year, with commercial production expected to begin in 2016. The facility will supply material to produce Portland cement, an ingredient of concrete.

NIGERIA: CPAN, CMAN disagree on Nigeria’s cement production status

CEMENT Producers Association of Nigeria, CPAN, is disputing the claim of the Cement Manufacturers Association of Nigeria, CMAN, that Nigeria had attained self sufficiency in production of cement.

CPAN in a statement by its chairman, Mr. David Iweta, said: ‘’Current cement production in Nigeria is under 50 per cent of nation’s requirement and in countries that have attained self adequacy in cement production, cement is sold at N500 per bag, contrary to the N1,800 sold in Nigeria.

‘’It is strange for a group to deceive the Federal Government to believe that Nigeria has attained self sufficiency in the cement production when the product is selling foa above 100 per cent and 150 per cent as it is sold in other countries that have attained sufficiency like China, Taiwan, Turkey, India, Mexico, Spain, Greece, Romania and Norway, where cement is sold at N500 per bag of cement,” CPAN asserted.

The group said, ‘’The misleading information by CMAN to the Federal Government has resulted in pushing locally manufactured cement from the expected price of about N500 per bag to N1,800 per bag.”

It alleged that the Federal Government pushed up duty, levy and bills paid on cement import to between 35 and 45 per cent because of the half truths by a cabal, while all cement import licenses earlier granted by government were suspended.

‘’As at today, there is only one cement license holder in the name of IBETO cement that is importing cement. This is because they took Federal Government to court and obtained judgment in their favour. By this, they are to import cement till 2017, while others have withheld action against the Federal Government so as give room for the government of President Goodluck Jonathan to succeed. The action of CMAN has shut the doors to other players into the industry,” the group stated.