In the last week, HeidelbergCement has completed its divestment of its 50 per cent share in Ciment Quebec and its minority participation in Syria (Al Badia Cement via the Italcementi acquisition). The company also auctioned its Helwan plant in Egypt and divested its Ukrainian businesses, as it targeted divestments of EUR1.5bn by 2020. This is on the back of selling its stake in Lehigh White Cement in 2018. Having acquired Italcementi, HeidelbergCement has had to modify its swollen portfolio to make synergies and improve performance. The company also indicates that further divestments could be on the way. Importantly, HeidelbergCement is not alone in this strategy.
LafargeHolcim is also restructuring and made the huge divestment of LafargeHolcim Indonesia at the end of 2018, as it targeted deleveraging to achieve two times or less net debt-to-recurring-EBITDA ratio by the end of 2019.
CRH is also modifying its portfolio targeting a further EUR1.5-2bn of divestments over the medium-term and Alfred Manifold, CRH's CEO, said that there will be a pause on any major acquisition activity "pretty much for the remainder of this year". The Irish company began its restructuring last year, but its new structure only kicked in this January with a more focussed business, based on three reporting divisions – Europe Materials, Building Products and American Materials.
InterCement (Camargo Corrêa group) also wants to reduce its debt and last October it sold its cement and concrete operations in Portugal and Cape Verde to Turkey-based Oyak Cement. InterCement will see up to 49 per cent of the group's operations in Europe and Africa open to an initial public offering (IPO) in early 2019.
BBMG Corp has also scale back in China this week by releasing the equity in seven Chinese cement plants to Jidong Cement for US$227.06m.
Capacity hunters
With many of the large multinationals taking their foot off the acquisition pedal, this has already led to second-tier companies spotting opportunities to pounce in markets where they see potential growth. So, who are the new band of acquisition kings looking to soak up additional capacity?
UltraTech – the Indian company is still focussed on acquiring capacity in India and played the long game to finally take over Binani Cement followed by the purchase of Century Textiles in 2018.
Vicat – while Vicat has seen strong cement sales from its US operations, it took a big leap of faith to enter the Brazilian market in by acquiring Ciplan in October 2018.
This week, Vicat also announced it was investing heavily in Sinai Cement in Egypt.
Buzzi Unicem – the Brazilian market has also attracted Buzzi Unicem to acquire a 50 per cent share in BCPAR, a subsidiary of Brennand Cimentos.
Taiwan Cement – making a bold move to create a joint venture with Oyak Cement, Taiwan Cement set up Dutch TCC holdings in October 2018 to press its business in Europe.
Dangote Cement – the Nigerian giant is still targeting a larger pan-African portfolio and is locking horns with Raysut Cement to bid for the stricken ARM in Kenya, while preparing for an IPO listing on the London Stock Exchange later this year.
Raysut Cement – Raysut Cement is keen to expand overseas and also has an eye on ARM Cement and expansion in Georgia with a greenfield plant.
Outlook
The wave of acquisitions and disposals triggered by the LafargeHolcim merger in 2015 is still having repercussions in 2019. The take-overs may be at a lower level now, but the dynamic for better balance sheets and stakeholder profits is fostering ripples further down the scale. With oversupply of cement a growing trend in world markets, cement producers on the acquisition trail will have to be very astute in selecting the better markets to enter in 2019.
The central question, however, is whether one of China's building material giants will seek to expand internationally via a major acquisition in 2019. In spite of the contracting demand, consolidation in China's cement industry is supporting a significant leap in profitability for local players. They now have the firepower to make bold move abroad, if they chose to: could 2019 be their year?