Breedon's cement business thrives

Breedon's cement business thrives
13 March 2020

As Breedon Group Plc releases its 2019 results, ICR takes a closer look at the UK company's cement business and future plans.

Breedon, which operates cement plants in the UK and Ireland, reported that its cement business delivered a six per cent revenue increase in 2019 to GBP186.4m, up from GBP176.5m in 2018. EBITDA from the cement business reached GBP58.8m, up from GBP48.6m in 2018, while underlying operating profit rose GBP36.3m, up from GBP31.4m in 2018.

Overall cement sales reached 2Mt with both markets impacted by the uncertainties around Brexit. The Irish cement market was challenging and Dublin was the only growth area in this region, while in Great Britain market conditions were broadly stable for cement.

The Hope cement plant completed the replacement of its raw mill drive and kiln shell projects, and saw the overhaul of the company's 50t rail wagon fleet. Kiln reliability saw clinker production ahead of 2018 at Hope Cement. All three kiln shutdowns at the Hope and Kinnegad facilities were completed on time and on budget. The Kinnegad works met clinker demand and averaged more than 72 per cent usage of alternative fuels with successful trials of SRF. Kinnegad also started its LEAN waste project. Breedon's cement kilns consumed around 218,000t of waste in 2019.

In the remainder of 2020, the company aims to implement price increases to recover cost inflation. A new baghouse filter will replace to ESP system at the Kinnegad cement plant and further alternative fuel trials are planned at this plant in 2020. Hope Cement plant will also explore further alternative fuel options and will seek planning permission for a supplementary raw material delivery system and a longer-term project to extend the limestone quarry.

Sustainability priorities and the call for 'Net Zero' carbon targets has risen to the top of the company's agenda. Breedon is in the process of finalising a definitive sustainability roadmap with the Global Cement and Concrete Associaiton (GCCA) and Mineral Products Association (MPA) to reduce carbon emissions.

During the course of 2019 Breedon expanded its portfolio with key acquisitions in the ready-mix, aggregate and asphalt sectors. Roadway Civil Engineering & Surfacing Ltd was acquired for GBP13.5m to offer asphalt services in north Wales, Shropshire, Cheshire and Merseyside. In December 2019 the company also created a joint venture with Brett to increase ready-mix supply in Greater London. Breedon also acquired a substantial portfolio of high-quality assets from Cemex UK for GBP178m, adding approximately 170Mt of mineral reserves and resources.

Breedon continues to manage the potential impact that Brexit could have on its businesses. With the exception of cement and import of bitumen, the company's businesses are all local and the products do not generally cross national borders. However, cement and bitumen is imported from the EU, and there would be a risk if the UK left the EU without a deal at the end of the transition period in 2020. World Trade Rules would see delays to supply chains, the need for additional working capital and the implementation of tariffs.

Another emerging threat is the spread of COVID-19, and its growing impact on business and the well-being of employees.

On a positive note, the integration of Lagan is now largely complete and the current synergies have passed the target of GBP5m. At the end of 2019, Breedon has 900Mt of mineral reserves and resources, enough to last 38 years at current rates of extraction, coupled with two cement plants with high replacement values.

Looking to the future, Breedon aims to increase its set base in all markets in which it operates and ensure it continues extracting value as efficiently as possible.

Published under Cement News

Tagged Under: Breedon Group Plc UK