Cement Industry Mergers & Acquisitions Force Rationalization of $13.8 Billion of Active Growth Projects

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Researched by Industrial Info Resources (Sugar Land, Texas)--Merger and acquisition mega-deals by Holcim (Jona, Switzerland) and Lafarge S.A. (Paris, France) last year, and HeidelbergCement AG (Heidelberg, Germany) and Italcementi (Bergamo, Italy) this year, are changing the face of the global cement-manufacturing industry. Both deals will provide strong market share growth by adding operations in geographies that were not previously covered prior to the combination; however, it is likely that there will be some redundancy in certain markets.

Holcim, already the world's largest cement producer, became larger with its $40 billion merger with the second-largest cement producer, Lafarge. The new LafargeHolcim Limited (Jona, Switzerland) has an installed cement capacity of 386.5 million tons per year. LafargeHolcim already has announced that it was cutting back on capital expenditures in 2015, and production cutbacks can be expected as global demand for cement is depressed due in part to the slowdown in China.

Global cement production was about 4.18 billion tons in 2014, as estimated by the U.S. Geological Survey (USGS), meaning that the new LafargeHolcim accounts for about 9.2% of the global cement production. China produces more than half of the world's cement.

In order to avoid antitrust laws, the companies had to divest assets in some markets, creating a series of smaller acquisitions. For example, Lafarge sold a cement-manufacturing plant in Davenport, Iowa, and several cement distribution terminals on the Mississippi River to Summit Materials Incorporated (NYSE:SUM) (Denver, Colorado) in a deal worth $450 million. Last week, Essroc (Nazareth, Pennsylvania), a subsidiary of Italcementi Group, completed the acquisition of Holcim's 500,000-ton-per-year slag cement grinding plant in Camden, New Jersey.

HeidelbergCement-Italcementi Deal Not Far Behind
In the second mega-deal, HeidelbergCement AG last week announced it will acquire Italcementi, creating the second-largest cement producer, with a capacity of 200 million tons per year. It also creates the No. 1 aggregate producer and the No. 3 ready mix producer.

It will be an interesting year as the acquisition progresses and the companies rationalize production assets and growth projects going forward. Prior to the merger and acquisition, these four companies were developing 450 projects totaling $14.27 billion in 62 countries, according to Industrial Info's Global Cement Project Database. This includes 183 growth projects, such as grassroot construction projects and expansions of existing plants, totaling $13.8 billion. The other projects primarily are maintenance projects.

Industrial Info's global cement database includes more than 3,100 projects totaling $169 billion. Contact Industrial Info for access to the Global Cement Project Database, or call 1-800-762-3361.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.