Adbri successfully navigates challenging year
Australia-based Adbri released its 2022 financial results this week and reported a YoY revenue increase of 8.4 per cent to AUD1.7bn (US$1142m). While the building materials producer celebrated 140 years of being in business last year, it turned out to be one of the most challenging years for the company with inflationary pressures and wet weather events. However, Adbri's sustainability path progressed and it was linked to the company's Net Zero Emissions Roadmap (NZER) from May 2022, while investments in cement and lime production continued to expand its capacity.
The NZER will see Adbri target a short-term goal to source of 50 per cent of kiln fuel from alternative fuels in South Australia by 2024 and increase the use of supplementary cementitious materials (SCMs) nationally. The company's 2030 cement emissions intensity target is to achieve 446kg CO2e net/t of cement, which would be a drop of 47 per cent in emissions reductions from 2012 to 2030. Further reductions will be reached through fuel mix alternatives (such as biomass), a mix of cement products and progress on new lower-carbon products with high SCM content.
In 2022 the company achieved a 12 per cent reduction in operational emissions against the company's short-term 2024 target, set against a 30 June 2019 baseline. The Birkenhead cement plant increased its use of refuse-derived fuel (RDF) achieving a substitution rate of 39.5 per cent in 2022, up from 35 per cent in 2021. The South Australian Environment Protection Authority licence permits Adbri to use 25tph of RDF. This reduced the company's reliance on natural gas, displacing about 40 per cent of the total gas requirement for the calciner and kiln, and exposure to the volatile energy markets. FCT recently conducted a heat and mass balance of the 4200tpd kiln at Birkenhead to fire natural gas and alternative fuels. A total of 1.3Mt of RDF has been used at the Birkenhead cement plant since 2003.
Cement revenue increased by 6.3 per cent YoY in 2022, following a 12 per cent YoY rise in 2021. Demand in Western Australia remained solid with general purpose cement sales up 2.9 per cent and SCM sales slightly up when compared with the previous year.
Cement and concrete demand
Adbri's focus has been on infrastructure development. Key projects delivered in the last year included the Brisbane International Airport apron works, RAAF Base Tindal Western Access Road in the Northern Territory, Western Sydney Airport civil and pavement package and Gold Coast Light Rail stage 3. By the end of 2022, Adbri has won a ratio of 20.8 per cent on concrete and 40.3 per cent on aggregate tenders submitted and awarded. The company's infrastructure order book rose by AUD34.5m during 2022.
Residential construction is anticipated to decline in Australia in 2023 with the conclusion of HomeBuilder scheme and rising interest rates. However, the backlog of residential construction works, resulting from the wet weather, is expected to continue to underpin good order books in 2023.
Cement and cementitious materials volumes rose by 4.8 per cent in 2022 compared to 2021. The increase was driven by demand from the residential sector in Victoria and the industrial and mining sectors in South Australia and Western Australia.
Concrete volumes were stable during 2022, while aggregates volumes rose by 14.9 per cent YoY. Concrete and aggerate demand was supported by residential, commercial and industrial sectors in the eastern states, along with the supply of aggregates for infrastructure projects, including the Western Sydney Airport.
Cement price rises
Meanwhile, the average selling price of general purpose cement rose by 9.1 per cent across all of the company's markets, excluding the supply agreement to Independent Cement Ltd. The company increased cement prices in April and August to partially offset widespread inflationary costs. In the 4Q22 the average selling price of cement was up 11.9 per cent compared with the 4Q21. Further cement price increases are forecast in 2023. Cementitious materials had an average selling price that increased by 3.7 per cent in 2022.
Kwinana project
Adbri is proceeding with several large investments in 2023. The Kwinana cement plant upgrade is on schedule to be commissioned in 2024 and the most recent cost estimation for the project is AUD290m. The conclusion of this investment will see the closure of the company’s Munster facility and the consolidation of cement production in Western Australia at the 1.5Mta Kwinana plant. The closure of the Munster plant will also see the end of Adbri's use of coal, which has fallen YoY and currently represents 50 per cent of the fuel mix at the plant.
Lime investment
AdBri has also been building its lime business with an extension of its quicklime supply agreement with Alcoa to the end of 2024. Revenues are expected to be boosted by an increasing number of customers that previously relied on lime imports, but who are turning increasingly to domestically manufactured lime supply. Adbri continues to be the key supplier for lime and cement to the mining sector in South Australia, Western Australia and the Northern Territory. It has also proposesesd a new lime kiln at Kalgoorlie.
