Latin American producers target US for growth

Latin American producers target US for growth
08 September 2023

Two Latin American cement producers have sought to bolster their financial positions in recent weeks with favourable growth deals in the US. Last week Union Andina de Cementos (Unacem), Peru's largest cement company, acquired a US cement plant for US$317m from Martin Marietta. Furthermore, Argos SA's merger announcement followed this week as it looks to combine its US operations with Summit Materials Inc, which will create the fourth largest player in the market.

Unacem: regional player
Unacem's Tehachapi purchase was made via Skanon Investments, a subsidiary of the Peruvian company in the US. The Tehachapi unit in California has capacity of 1Msta of cement, and 0.94Msta of clinker and recorded sales of US$114m in 2022.

"The acquisition will double the current clinker and cement production capacity of the Unacem Group in the US, accessing one of the most important markets on the West Coast," the company said.

The company’s current US operations are situated in Paulden, Arizona, and are operated by Drake Cement Co, which as 1.5Mta of clinker capacity and 1.55Mta of cement capacity. In the 1H23 the US unit's output totalled 312,000t of cement compared to 348,000t in the 1H22.

However, the majority of Unacem's operations are in Peru, accounting for 64 per cent of sales in 2022, while 16 per cent are derived from its US operations and 19 per cent from other Latin American countries. In addition to Peru and the US, Unacem has operations in Chile and Ecuador. In Chile the company owns the 0.3Mta Cementos San Juan grinding plant and in Ecuador the company runs the 1.80Mta Otavalo integrated plant.

Argos: expanding US presence
Even more significant the announcement that Argos North America Corp and Summit Materials will combine operations. This will create a new company, the fourth-largest cement platform in the US, with an approximate capacity of 11.6Mta. The merger will also create the sixth-largest aggregates platform in the United States, with reserves of over 5.5bnsta and annual sales of around 70Mst. In addition, the new entity will be one of the largest concrete producers, with more than 220 plants and more than 1800 mixers. 

Cementos Argos will become the largest shareholder of Summit Materials with 31 per cent ownership in the combined entity. The agreement fulfills the strategic pillar of value realisation in the US business, as established in the company's SPRINT programme (Stock Price Recovery Initiative). 

Like Unacem, Argos will similarly see its financial position strengthened by its merger with Summit Materials. This combination unlocks estimated annual synergies of at least US$100m, according to Argos, with significant realisation within two years, derived from optimised sourcing, enhanced operational efficiencies, increased utilisation of the import terminals’ network, and an augmented asset base to increase the use of alternative fuels. Further synergies and opportunities are expected to result from improving the use of supplementary cementitious materials and new sources of aggregates, says Argos. The Colombian company is expected to achieve an estimated net debt/EBITDA ratio of 1.8 times, resulting in greater financial flexibility.

To this new US platform, Cementos Argos will provide its proven export capacity from Cartagena, and integration into a network covering Colombia, Central America and the Caribbean.

Jorge Mario Velásquez, CEO of Grupo Argos, stated: "We are delivering to the market a transaction worth over US$3bn, which allows us to combine the assets of Argos USA with a vehicle that has liquid listed securities on the New York Stock Exchange." The transaction is expected to close in the first semester of 2024, subject to required regulatory approvals and customary closing conditions.

The US Infrastructure and Inflationary Reduction Acts have created a positive investment climate in the US for construction materials. Cement producers are positioning themselves to maximise exposure to the forthcoming state infrastructure and decarbonisation investments. In addition, the US market will see the move of CRH to join the New York Stock Exchange this month.

Published under Cement News