Concerns over Egypt’s effect on cement industry

Global cement industry has bottomed-out

Earlier this week, Milan-based Italcementi reported that following the global cement industry’s decline, growth is inevitable, with Asia and some mature countries in the forefront. The chief executive, Carlo Pesenti stated, "We went through very tough market conditions in the last couple of years. We look to the future in a more positive way and we believe we are at the bottom of the cycle."

Family owned Italcementi has reported unimpressive figures during the past three years. Last week the company detailed a 36% fall in net profits in 2010 to  45.8 million (US$64 million), where strong performance in Egypt, Morocco and Asia were counter-balanced by weak accomplishments in mature countries.

Risks for the future

Alongside recent reports of a 3 -6% rise in 2011 from Lafarge, the world’s largest cement group, Italcementi forecast a 0 - 5% increase in its volumes. Additionally, Italcementi shares closed at their highest point in more than eight months with an increase of 4.6%, and the full year results exceeded expert analyst expectations.

The main risk going forward for Italcementi is the uncertainty over the current situation in Egypt, where its Suez Cement plant is a key unit. "Egypt is a question mark. We do not know what will be the outcome of this phase of political and social (change) and then there is a risk of further cost inflation," Pesenti said. The rising cost of production is a concern for many in the cement industry as the price of oil leapt to a 2.5-year peak earlier this week. Concern stems from the expanding unrest in Libya and its potential to influence other oil-producing nations in the Middle East.

Italcementi suspended its five Egyptian plants for one week in February, and has since reopened them. The group’s Egyptian business accounts for its third biggest market revenues after France and Italy.

The Italian market volumes are expected to remain stable in 2011, and see a rise of 5 – 10% in prices, whereas in France both the prices and volumes should rise to 1.5 – 5%. India is anticipated to see a rise of 10% of volumes and prices, booming in comparison to the European figures.

Pesanti added that the group was in a good position to take advantage of the market recovery, focusing on cash generation, debt reduction, and possible disposals to help it seize acquisition opportunities.

Read the article online at: https://www.worldcement.com/africa-middle-east/08032011/concerns_over_egypt%E2%80%99s_effect_on_cement_industry-/