Specialist
Former Head at LafargeHolcim Ltd
Agenda
- Impact of the novel coronavirus pandemic on levels of construction activity and cement plant closures in Europe
- Export and import changes due to the coronavirus
- Production cost drivers and cement tonnage pricing
- Geographic footprint restructuring across key players and impact of the coronavirus on rate of restructuring
Questions
1.
How are you conceptualising the total decline of demand across cement, concrete, aggregates and ready- mix that you’re noticing or predicting in Europe? Thinking specifically about the consequences of the coronavirus pandemic.
2.
Do you think that construction across the rest of Europe will eventually have to stop due to a lack of planning processing, or is this UK-specific? Some countries have a ban on construction, some companies are continuing, but the key bottleneck comes in at the planning level. Perhaps eventually construction companies won’t be able to get more planning, so they’ll have to stop construction.
3.
What do you think about the magnitude of the downswing and the speed of the possible recovery compared to the 2008 global financial crisis?
4.
If the most oversupplied markets in Europe are Germany, Italy and Spain, what are you expecting to happen to volume pricing over this period?
5.
During this period, what demand are you expecting to observe, particularly for the oversupplied regions? Could pricing collapse significantly further, or will it stay roughly equal across Europe?
6.
I think Germany is the region with the most oversupply in Europe. Obviously, Heidelberg has the most capacity here as well. If we take Germany first, how do you expect closures to play out?
7.
How much capacity do you think could be removed from Germany?
8.
Do you have any views on who’s will be leading these capacity changes? We went through Germany, but across Europe’s high-closure regions, do you think it will be equally shared between the major players?
9.
How much capacity do those smaller players account for? How far do you think they could go from just some smaller players being pushed out of the market and rebalancing these markets?
10.
Do you think that these players will survive a protracted downturn?
11.
Why would a company such as Lafarge want to be the first player to acquire a business and then close it down, or rationalise the footprint, if it’s not just more beneficial for a competitor to do this?
12.
Do you think if one of the majors led, the other ones would follow, and do it in the respective region that they’re the biggest?
13.
What are your expectations for undersupplied markets such as the UK and Switzerland over this period? Are these markets going to continue, are they going to stop imports and then push volume back onto the countries that they’re importing from?
14.
Is it typically significantly sized plants that need to be closed down, or could this take place in any of them?
15.
What are your expectations for CAPEX cutting? Lafarge has said it will cut out CHF 400m compared to ’19. How are you expecting Heidelberg and CRH to compare?
16.
Do you think the majors will cut down the maintenance CAPEX for the rest of their expenditure, or could there still be some growth CAPEX?
17.
Do you think there could be more CAPEX cuts, given they are already at pretty low levels? It doesn’t seem as drastic as I’d expect it to be.
18.
Where should these players acquire? What sort of reasons do you think they should consider?
19.
Do you think the aggregate strategy is a strong long-term strategy?
20.
Are you expecting there to be strong long-term opportunities in ready-mix? What’s your view on the products’ long-term competitive positioning, in a similar way that we analysed concrete, cement and aggregates?
21.
Do you think there are a large number of aggregates assets available for acquisition? Would you expect these independent assets to perform pretty poorly through this?
22.
Lafarge again has said that it will cut out CHF 300m worth of fixed costs. How do you expect this to itemise? Is this going to be plant closures, or how are you thinking about this, because it hasn’t announced it?
23.
Cutting out CHF 300m in overhead headcount is difficult. What would you expect to be a realistic number that could be cut out in corporate overhead?
24.
How much do you think can be renegotiated on third-party products and energy prices? Lafarge spends CHF 5bn-5.3bn on procurement. What is the potential to renegotiate some of these procurement items?
25.
Where do you think the key acquisition opportunities are? Do you have anything to add beyond a focus on aggregates?
26.
Lafarge was in the running for BASF Construction Chemicals, and didn’t make it in the end. What are your views on cement players getting into construction chemicals, as Lafarge didn’t win that asset?
27.
What do you think the split is between fixed and variable costs in cement manufacturing? How variable do you think those variable costs will be in today’s market, given a potential duration of a downturn for a couple of months?
28.
What do you think about unions preventing staff lay-offs across Europe? Unions are the main variable fixed cost aside from COGS, and energy in that COGS.
