A time of reassessment for HeidelbergCement

A time of reassessment for HeidelbergCement
23 February 2018

This week it was announced that HeidelbergCement would be selling its 51 per cent stake in the Lehigh White Cement Co LLC while the company also reported on its full-year and 4Q17 results. The sale of HeidelbergCement's interest in the Waco and York cement plants in the USA would mean a complete exit from the North American white cement market for the Germany-based multinational.

HeidelbergCement is carrying out a global portfolio review and optimisation process to generate cash flow. The Lehigh White facilities were said by Dr Bernd Scheifele, chairman of the Managing Board, to be contrary to the "strategic focus on efficiency at HeidelbergCement".

This has enabled Cemex to increase its minority share holding in Lehigh White Cement to 36.75 per cent, but Cementir-owned Aalborg Cement will also up its stake by 38.75 per cent to a controlling 63.25 per cent. So, the deal looks like a sweetener to Cementir Holding following HeidelbergCement's recent acquisition of Cementir Italia.

However, HeidelbergCement is still a major worldwide white cement producer and continues to operate white cement plants through its subsidiaries SA Cimenteries CBR (Belgium), Italcementi (Italy), Devnya Cement AD (Bulgaria), Helwan-El Minya White Cement Co (Egypt) and PT Indocement Tunggal Prakarsa Tbk (Indonesia). The sale of the stake in Lehigh White Cement reduces HeidelbergCement's total operational white cement capacity from ~1.86Mta to 1.6Mta, but should raise around US$140m, the company claims.

Strong North American portfolio
The review of operations follows a challenging year for HeidelbergCement, which saw the completion of its acquisition of Italcementi and the incorporation of Essroc as a subsidiary minus the Martinsburg cement plant (part of the requirement to bring Essroc into the HeidelbergCement group). Yet, the North American markets remain a driving force in the company's earnings.

"With the acquisition of Italcementi’s North American subsidiary Essroc in July 2016, we have significantly expanded our footprint in the Northeast and Midwest of the USA as well as in the eastern part of Canada," said Dr Bernd Scheifele. 

European focus
In the eurozone, a continuation of the economic recovery and robust market development is expected. In January 2018, Italcementi completed the acquisition of Cementir Italia and HeidelbergCement expects to benefit from synergies. 

Meanwhile, in Germany HeidelbergCement is progressing with its modernisation projects for the Schelklingen and Burglengenfeld plants, which together will bring an additional 5.5Mta of cement capacity to the group's European operations. 

The uncertainties around Brexit, however, are hampering the economic development in the UK, claims HeidelbergCement. In northern Europe, the company still expects a continuation of solid growth.

Furthermore, HeidelbergCement is investing in the development of carbon capture technologies, which appears a key focus of company research in Europe. The Low Emissions Intensity Lime and Cement (LEILAC) consortium is now implementing Calix carbon capture technology at the CBR Lixhe cement plant in Belgium and will report results in two years' time.

African slowdown
The full-year 2017 results were less positive for the group in Africa and especially Egypt, where HeidelbergCement has approximately 14.6Mta of grey cement capacity with its operations at Helwan Cement, Tourah Portland Cement and Suez Cement Co. Egypt's weak economy and weakening exchange rates impacted negatively on HeidelbergCement’s results, even if a new coal mill provided a better fuel-mix options.

The west African market of Burkina Faso will be a region where HeidelbergCement will expect to see a pick-up in production later this year, having laid the foundation stone for Cimburkina’s second cement mill at the Ouagadougou plant.

Southeast Asia stability
HeidelbergCement announced a stable Asia-Pacific region in terms of cement sales with demand rising in Indonesia thanks to the beginning of infrastructure programmes, although infrastructure delays and weak residential construction have slowed cement sales in Thailand.

Dr Bernd Scheifele is confident of strong group performance in 2018. "Considering the overall positive outlook for the global economy we are confident about the future," he said. "At the same time, we are aware of the macroeconomic risks, in particular the rise in energy prices and inflation as a whole, and initiated counter measures on the cost and price side.

"In 2018, we will benefit from the economic development in the USA and the continued recovery in the Eurozone," he added.

Published under Cement News