A path towards value creation

Published 28 February 2018

In the first instalment of this two part article, McKinsey & Co reveals how the large, multinational players have failed to create value for their investors and have been outperformed by their regional counterparts. Can the emerging regional champions offer a new path to sustained value creation? By Michael Birshan, McKinsey & Co, UK, Patrick Schulze & Thomas Czigler, McKinsey & Co, Germany, and Siddharth Periwal, McKinsey & Co, India.

Figure 1: overview of cement industry performance

Like industries from aviation to financial services, the cement business has been on a “big is beautiful” march over the past five decades. A rush of expansions, mergers, acquisitions and consolidations has reshaped the industry. The model has not necessarily created value for companies or their investors. In pursuit of growth, companies have often overpaid for acquisitions, constrained their balance sheets, and were insufficiently disciplined in capital and operational expenditures. Consequently, the sector has an erratic value-creation history. Recently, however, demand growth has shifted to emerging regions where urbanisation has been creating opportunities for regional companies to shine. A promising outcome of these developments has been the emergence of value-creating regional champions.

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