Industry brief: Cement
Cemex SA, the Mexican cement/concrete giant, has signed an agreement to buy the UK's RMC Group, another major concrete company. Both companies have a wide geographical reach. The $5.8 billion deal (it includes assumption of debt) is yet another step in the consolidation of cement/concrete into the hands of a very small number of multinational companies.
The acquisition, according to a Wall Street Journal article ("Cemex Cements Its Position With Agreement to Buy RMC", 9/29/2004) will make the Cemex the leading concrete producer in the world. (Concrete is the building material made from cement, sand, and water.) RMC is strong in the US and Western Europe (so is Cemex), but also in Eastern Europe, with presence in Poland, the Czech Republic, and Hungary. Cemex had earnings of $7 billion last year, while RMC had earnings of almost $8 billion.
The acquisition, according to the article, is the largest ever by a Mexican company. Cemex, once a provincial cement company in northern Mexico, has grown by aggressive moves to become a leader in its field. It is celebrated for its dedication to efficient service and high profit margins, and it is now the #1 cement company in the US. The company has acquired 15 other companies since 1992.
Among its competitors:
Lafarge SA of France. In 2001, it acquired the UK company Bleu Circle Industries, making it the industry leader. It has operations in 75 countries, including in the US with Lafarge North America. The company made $12 billion in the last fiscal year.
#2 Holcim Ltd. of Switzerland. It operates in 70 countries. Its US subsidiaries include St. Lawrence Cement and Holcim Apsaco. It has income over $10 billion.
HeiddelbergCement, a German company, is #4, with operations in 50 countries, and revenue of $8 billion.
There are other large cement corporations, including Italcementi (Italy), Taiheiyo (Japan), Buzzi Unicem (Italy), Grasm/Cemco (India), and Gujarat (also India). These companies (some of them the result of recent mergers themselves) are smaller and scope and less global in operations.
By its nature, cement would seem to be a localized, unconcentrated industry that involves heavy transport and close relationship with builders. But through mergers and acquisitions, it has now become a surprisingly global one.
Update 10/15
Check out how Holcim used its political muscle in getting environmnetal exceptions for building the US's largest cement factory in Missouri. (Thanks to reader RETARDO).
Read here to find an analysis of how Cemex uses its dominant market position in Mexico to hoist prices to among the highest in the world..(Thanks to readeer Stuart).
