Next steps for Italcementi

Next steps for Italcementi
Published: 01 October 2010

Italcementi, the fifth largest multinational cement producer in the world, has underlined its commitment to expanding its position in emerging regions and boosting its efficiencies in mature markets as it looks to take its next steps in Bulgaria, China and Italy. The group said it is planning investments of €3.1bn over the next five years. 



In terms of current expansion, the company announced at an investor event in Agadir, Morocco, that it has started the reconstruction and modernisation of the Devnya cement plant in Bulgaria. The project, which had been postponed due to the onset of the global financial crisis, involves an investment of €250m. An agreement was signed last August with general contractor Strabag who will work with a Chinese partner, CBMI, on the venture. The new 7000tpd dry-process clinker line is scheduled to begin operations in 2012 and will see the company’s cement capacity in Bulgaria reach over 3Mta.



Elsewhere, Italcementi said it agreed to buy an initial minority stake in China’s Shifeng Cement, further expanding its presence there. Shifeng has an annual production capacity of 2Mt. In terms of its domestic market of Italy, approval measures for the revamping of cement plants in the northern part of the country are also underway.



Italcementi now has 77.2Mta of cement capacity – or 54.6Mta, if minority interests are deducted. While Italcementi’s operations are more concentrated in Western Europe than those of the other cement majors, the growth in the company’s cement capacity in recent years has focused on emerging markets, via subsidiary Ciments Français, as the company attempts to reorientate its country portfolio.



In terms of recent capacity developments in 2010, Italcementi brought on-stream a 0.9Mta replacement kiln line at its works in Matera, southern Italy in the first quarter. Ciments Français opened a new 2Mt kiln line in Martinsburg in the USA during the same period, primarily replacing two costly wet-process lines. A new 2.3Mta kiln opened in 1Q10 at Yerraguntla in India, increasing Ciments Français’ capacity in the country by 70%. In November 2009, the grinding mills opened at the new 2.2Mta plant at Ait Baha in Morocco and the new 5000tpd kiln came on-stream in July this year.

Financially the company has moved to strengthen its liquidity reserves and reduce costs. The Italcementi Finance subsidiary has reached an agreement with a consortium of 16 international banks granting a five-year revolving credit facility for a total amount of €920m.



The group was aggressive in reducing its costs last year, cutting them by €242m, equivalent to 4.2% of its sales in the previous year. This was the highest percentage amongst the major cement companies. It has already announced €100m of savings for this year, representing 2% of its 2009 sales.



Last week analysts at Jefferies International increased its recurring EBITDA estimates for Italcementi by 0.9% for 2010, from €844m to €851m, but reduced it for 2011 from €935m to €921m. Italcementi’s home market only accounted for 6% of its EBITDA last year. However, there is a risk of a further significant deterioration in the country’s profit contribution, according to Jefferies. As demand continues to weaken, prices may decline further as the comparatively unconsolidated industry makes capacity closures less likely.