Vassiliko Cement to invest EUR 125m

Vassiliko Cement to invest EUR 125m
Published: 12 April 2007

Vassiliko Cement Works Pcl (VCW) is waiting for the green light from the Commission for Protection of Competition on its planned merger with Cyprus Cement in order to commit a record EUR125m for a modern cement production line.  
The new production unit will utilise the best available technology, with significant benefits in environmental performance and production efficiency. Total capacity will increase significantly to cover the increasing demand for cement in the local market and strengthen its exporting activity.  
One important issue is the reduction of the CO2 emissions that has been dominating the headlines in Cyprus, the EU and other developed countries.
The replacement of the five old-technology production lines with a state-of-the-art unit will help to reduce total CO2 emissions at country level and enable Cyprus to meet its commitments without facing any penalties from the European Commission. Furthermore, the new production line will be able to utilise alternative renewable sources of energy to replace traditional fuels.
Dr. Andreas Panayiotou, Chairman of the board of Vassiliko told the Financial Mirror in an exclusive interview that the cement merger plan may easily be seen as make-or-break for Cyprus to meet its obligations to produce energy from alternative sources, cut down on CO2 and other emissions, absorb waste and comply with the increasing environmental constraints.  
"The planned merger is also crucial for the survival of cement production in Cyprus and will have a major impact on the future prospects of Vassiliko Cement," said Panayiotou. 
He pointed out that "the increasing environmental constraints imposed on the industry will significantly raise the production cost of the current old-technology production lines, becoming uncompetitive at the end of the day".  
"The deal between Vassiliko and  Cyprus Cement is a win-win situation for everybody, the shareholders, the stakeholders and the consumer. The increase of total capacity will ensure that the fast-growing demand for cement on the island will be met at all times, at competitive prices and of the high quality at which the Cypriot consumer has enjoyed so far".  
The deal 
Vassiliko Cement Works and  Cyprus Cement (CCC) have signed a preliminary agreement according to which VCW will acquire the cement related operations of CCC as well as CCC’s investments of 50% each in Latouros Quarries, CCC Aggregates Ltd, Athinodorou Beton-Transport Ltd, Athinodorou Beton-Estates Ltd, Athinodorou Beton Ltd and ELMENI (Quarries) Ltd.  
The company will issue, subject to EGM approval, a total of 18.199.794 shares to CCC at the weighted average of VCW’s closing price during the three months that preceded the date of the agreement on March 9 (EUR2,89/share). This will represent 25.3% of the issued share capital of VCW.  
The deal is subject to the approval by the Commission for Protection of Competition (CPC) as the Cyprus cement industry is a duopoly with VCW holding around 70% market share and CCC the rest.  
Once the cement production unit at Moni near Limassol is disbanded, CCC will develop the extensive land area that now is occupied by the plant in new ventures creating new opportunities for growth and development.  
Currently VCW operates three production lines with total capacity of 1,35 - 1,4 mln tonnes cement and CCC has two production lines with total capacity of 0,43-0,45 mln tonnes cement.  
The new unit planned to be built at Vassiliko at a cost of EUR 125 mln, will eventually replace the five production lines with a total capacity of 2,4 mln tonnes of cement compared to the combined total production of 1,8 mln of the two companies.  
The new unit will be one of the biggest installations in the region and will be able to cover the projected increasing cement consumption on the island. It will further strengthen the exporting activity of Vassiliko to the Mediterranean Rim. Exports currently range between 200.000 to 300.000 tonnes per annum depending on local demand. The new capacity increase will enable VCW to export up to 600.000 tones a year mostly to European destinations in the Mediterranean Sea turning Cyprus into one of the leading cement exporters in the region.