The multi billion dollar question for the cement industry.
With a decent career in the global cement industry, I still follow the industry and hope for its turnaround (“The Cement Industry: you better start swimmin’ or you’ll sink like a stone“). But not much is happening and share prices like it red, rather than green.
So the questions still stand:
- Is it possible for a global cement company, which is locked into its high maintenance & fixed costs structure, assets which take 20-40 years to be paid off (or never), very limited transportation radius, and no access to the end-user in mature markets, struggling with environmentalists’ pressure, to ever turn around their business model?
- Is its dependency on sales channels (contractors, prefab producers, concrete producers, mortar producers), cash, short term shareholder returns, just too strong?
- Could it be solved by selling the assets, franchising the brand & expertise to smaller local players, and using the divestment capital, much lower overhead and operating costs, to pursue a new strategy which really focuses on becoming future proof?
It would reduce the dependency, improve the cost structure, less cash needs to be spent on maintaining assets, shareholders can be paid back, and the company can focus on the future instead of struggling with its past.
- Or are all players betting on oligopolies in a shrinking market to make the most out of controlling supply/demand ratios?
- Or on competitors being the first shutting down capacity and reducing overall supply?
Shareholders (last 12m*: LH -19%, HBC -17%, CRH -5%, CX -20%) seem to disapprovethe current, post-global financial crisis course (last 12m*: SPX +19%), while we are experiencing the longest bull market ever. (*Sep 6, 2018)
End-users prefer to put their money into substitutes (steel, glass, timber, AlCoPa’s, etc.), domotics, and energy performance (which is enforced by government subsidies/tax benefits). Evidence? Just look outside and compare building materials trends now and from the past, and observe the level of automation in your office and at home.
So how would the future look like, freed from assets, but with loads of expertise and money to invest in the future? For one that’s a once in a life time 28’000’000’000 EUR or even a 64’000’000’000 CHF question…
For the other it’s a weekly Monday morning acquisition update to change another market…