Lower gearing is the key

Lower gearing is the key
Published: 18 September 2009

Looking at the gearing levels of the major international cement producers as at mid-year, the most highly geared groups were Cemex at 131.4% and HeidelbergCement at 124.2%. Both HeidelbergCement and Cemex have announced rights issues in recent weeks to try and improve their balance sheets.

While HeidelbergCement will issue voting shares that will change the control of the company, Cemex intends to issue non-voting participation certificates. Lafarge came next with 97.6%, followed by Holcim (82.0%), Italcementi (60.8%) and Buzzi Unicem (48.9%). Outside the top half dozen, Vicat and Cementir stand out as having particularly strong balance sheets with gearing levels of just 39.0% and 40.4% respectively.

Holcim and Lafarge, on a comparative basis, should each have an annual cement capacity of just over 200Mt by the end of this year, almost twice the capacity of the third largest group, HeidelbergCement.

Consdiering HeidelbergCement in more detail, the combination of the one-for-two rights issue and proposed sale by Merckle controlled entities and their financial allies, will turn HeidelbergCement from a privately controlled, though still-quoted, company to an index stock with a free float approaching, or exceeding, 75%.

As a result, around, or close to, 125m shares will come onto the market, representing a value of more than EUR4000m. While debt will remain high in absolute terms, the gearing will come down appreciably, just by how much will depend on the placing price, to be announced early next week.

The group is committed to selling its remaining assets unrelated to cement and aggregates, which now consist primarily of the clay and concrete products operations of Hanson in Great Britain and North America. Being no longer a forced seller, better prices should now be achievable for these, but the buyers will still have to be found and bricks are hardly the flavour of the month on either side of the Atlantic.