Sabanci Holding: Energy incentives for cement industry not wise

Sabanci Holding: Energy incentives for cement industry not wise
Published: 15 November 2007

Sabancı Holding Cement Group head Erhan Kamışlı has said the cement manufacturing industry is an energy-intensive industry and that it would not be wise to offer free energy incentives for this business.

Noting that the state is providing incentives to some “underdeveloped” cities across Turkey, Kamışlı said: “We believe that the most valuable energy will be the energy that can be found in the future. The most expensive energy is the one that doesn’t exist. Today energy is abundant, but in the future, scarcity is going to start being a serious problem. Therefore we believe that the state should deliver energy to manufacturers in an efficient manner instead of granting energy incentives. There is no good in freebies.”

During a press conference in İstanbul yesterday Kamışlı presented information about his company’s recent investments and about developments in the industry. Upon a question as to whether they had had any interaction with the state over the incentives issue, Kamışlı answered in the negative, adding that this is the first time they were publicizing their stance on the issue. “We have to express what is right for us and we are well aware that not everyone favors such an approach,” Kamışlı noted. He also underlined that they fully believe in the benefits of incentives for employment.

Kamışlı said there has been “a cement mania” worldwide, with world cement production growing 5 percent per year. In Turkey, Kamışlı predicted, 44.7 million tons of cement will have been consumed in one year by the end of 2007. He claimed that the year 2008 will be a hard one for the industry because of excessive production, rising costs and collective bargaining agreements. He also predicted that domestic consumption will rise by 1 percent, adding that this estimate is subject to change depending on real interest rates and local elections. Once the ongoing investments are completed in the industry, capacity will increase to 18 million tons per year, Kamışlı noted. “Firms in the business will try to eliminate this excessive amount by exporting their products. Still I believe that overall growth opportunities for the industry are still valid despite slow growth of the domestic market.”

Mehmet Hacıkamiloğlu, general manager of Çimsa, the Sabancı Group’s leading company in the cement industry, also said a few words on the issue. He said they have been searching for new merger and acquisition opportunities abroad with the full support of Güler Sabancı, chairman of Sabancı Holding. According to Hacıkamiloğlu, the group is eyeing the Mediterranean and Black Sea regions, the Middle East and the Turkic republics of Central Asia as potential expansion markets.

Kamışlı also said that the cement group’s doors are mostly shut to partnerships with other players, adding that they also have no plan to sell their companies or abandon the market completely. He said there had been some lucrative offers for Sabancı’s cement facilities from foreign players during 1990 and that the group had seriously considered these propositions. “We now see that we made the correct decision to stay in the business,” he added. The only possibility of partnership is through asset-sharing, he said and insisted that they will deny any partnership request offering money in return for shares. “Should a company wish to strike a partnership with us, they will have to bring an asset of equal value and quality as ours: a factory, for example, in the US, Asia or Europe; it certainly must be one in a good position in the market.”

The group has spent $818 million in capacity-increasing investments and acquisitions in the period between 2003 and 2007. The investments are expected to continue uninterrupted and the number of ready-mixed concrete facilities held by the group will increase from 65 to 79 by the end of 2010. By then, the share of the Sabancı Group in total domestic cement production will reach 22 percent, Kamışlı estimated. The group is planning to sell 11 million tons of cement in 2007, and this figure is expected to grow to 14 million tons by 2010. According to Kamışlı’s predictions, the export of cement will hit 2.5 million tons by 2008. The group is expecting to yield a turnover of between $920 million and $1 billion in 2008, and around $180 million of this will be from cement exports.