A new cement industry player emerges in Northern Ireland

A new cement industry player emerges in Northern Ireland
28 January 2022

This week Holcim continued its divestment strategy by selling its Northern Ireland cement business to the newly-formed Cookstown Cement Ltd. The total sale amounts to GBP55m and brings a new player into the Northern Irish cement sector.

The divestment includes a number of businesses of Aggregate Industries that include the Cookstown cement plant, a limestone quarry and a shale quarry in Dungannon, plus a terminal at Belfast Harbour. Cookstown Cement plant, in County Tyrone, celebrated 50 years of cement production in 2018 and has an integrated cement capacity of 0.5Mta. In 2019 the Cookstown site achieved its best results to date after being ranked in the top 10 of LafargeHolcim's European cement plants when evaluated against industrial benchmarks. The plant has introduced co-processing with Geocycle supplying waste-derived fuels to substitute fossil fuels.

Cookstown Cement Ltd's Managing Director, David Millar, described the acquisition as a fantastic opportunity to expand the business in the years to come. "We have acquired a great company with a strong team and excellent products and the investment we are making will allow us to expand further in the years to come. This is a fantastic opportunity to bring new investment and a new, local approach to this established business," said Mr Millar.

Northern Ireland cement market
The total cement production capacity of Northern Ireland is 0.95Mta. It consists of just two cement producers: Cookstown Cement Ltd and Mannok (Aventas Group), which runs the Derrylin unit and the Ballyconnell plant across the border. Mannok was the new name to replace Quinn Cement in 2020. The rebranding marked the end of a six-year transformation and investment programme that saw sales grow for the company by 44 per cent. In 2020 EBITDA rose to EUR31.1m from EUR26.6m in 2019.

The Derrylin plant has seen significant upgrading in the last year, including an investment of EUR1.2m on a new bagging facility to double the company's production capacity. Haver & Boecker were contracted to design and manufacture a new ROTO-PACKER® ADAMS® 10-spout bag filling system for packing powdery products in weatherproof bags and a new automatic film reel changer, designed to run at 1200 bags per hour. The new machinery has been fully integrated into Mannok's existing line.

"The success of the bags in both UK and Irish markets gave us the impetus to invest further in order to increase our output and, despite the challenges presented by COVID and Brexit, we have followed through with our investment plan, demonstrating our commitment to continued growth on both sides of the Irish Sea and placing us in a strong position for the new post-Brexit landscape," said Mannok's CEO, Liam McCaffrey. 

Brexit and cement shortages
Among the factors that may have increased Holcim's urgency to sell its Northern Ireland business are the challenges over trade since the Brexit Agreement and continued uncertainties of cross-border trading due to the Northern Ireland Protocol. Last summer recorded soaring building material price rises and shortages as local contractors grappled with the issues of COVID-19 and the inability to complete construction projects on time. "In Northern Ireland, some 80 per cent of firms reported that they were seriously impacted by rising material costs and 38 per cent said it was critical," according to The Belfast Telegraph.

House prices rose accordingly while the existing housing shortage and poor state of the existing dwellings only raise the demand for building materials further.

On top of this, a January 2022 survey from the Construction Employers Federation (CEF) revealed that one in four or 27 per cent of construction firms in Northern Ireland have been critically impacted by the record levels of inflation.

Mark Spence, CEF managing director, added, "While the Northern Ireland Executive has taken positive steps to help those contractors that are engaged on public works, much of this has yet to translate into actual financial assistance.

"Additionally, with it understood that such assistance doesn't come close to addressing all the cost increases of the last 18 months, it is undoubted that much public work is being delivered at a loss to contractors and we have yet to see the full impact on the medium to long-term sustainability of many firms."

An absence of infrastructure
The Cookstown Cement plant is based in the mid-southwest regional economy of Northern Ireland, which has a severe lack of infrastructure. The area accounts for half the landmass of Northern Ireland but only has eight per cent of the country’s motorways or A roads. There are also issues in terms of a reliable electricity supply and wastewater systems, as well as a lack of land for industrial expansion.

The Regional Economic Strategy completed in 2020 seeks to underpin the UK government's Growth Deal Funding of October 2018 and will look to address some of these challenges.

Holcim has decided that it can invest elsewhere in faster-growing and more lucrative markets than in Northern Ireland, where trading risks may slow development. However, the long-term nature of Northern Ireland's need for housing and infrastructure do present an opportunity for construction firms. Mannok has already seen a swift return on its recent investments that Cookstown Cement Ltd will hope to replicate.

Published under Cement News