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    CEMEX Global Strategy

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    Andre Hartono
    The cement industry is attractive with moderate threats of new entrants and substitutes. Cement demand is driven by income growth and infrastructure development. The major cement companies Lafarge, Holcim, and Cemex have global operations with largest presences in emerging markets like Asia, Latin America, Africa, and Eastern Europe which are expected to see strong cement demand growth. To improve its position, Cemex should restructure its debt from its failed Rinker acquisition, increase its presence in high growth emerging markets like BRIC countries, and implement a flexible post-merger integration approach to handle cultural and language barriers between acquired companies.

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    CEMEX Global Strategy

    Uploaded by

    Andre Hartono
    338 views42 pages
    The cement industry is attractive with moderate threats of new entrants and substitutes. Cement demand is driven by income growth and infrastructure development. The major cement companies Lafarge, Holcim, and Cemex have global operations with largest presences in emerging markets like Asia, Latin America, Africa, and Eastern Europe which are expected to see strong cement demand growth. To improve its position, Cemex should restructure its debt from its failed Rinker acquisition, increase its presence in high growth emerging markets like BRIC countries, and implement a flexible post-merger integration approach to handle cultural and language barriers between acquired companies.

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    The cement industry is attractive with moderate threats of new entrants and substitutes. Cement demand is driven by income growth and infrastructure development. The major cement companies Lafarge, Holcim, and Cemex have global operations with largest presences in emerging markets like Asia, Latin America, Africa, and Eastern Europe which are expected to see strong cement demand growth. To improve its position, Cemex should restructure its debt from its failed Rinker acquisition, increase its presence in high growth emerging markets like BRIC countries, and implement a flexible post-merger integration approach to handle cultural and language barriers between acquired companies.

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    338 views42 pages

    CEMEX Global Strategy

    Uploaded by

    Andre Hartono
    The cement industry is attractive with moderate threats of new entrants and substitutes. Cement demand is driven by income growth and infrastructure development. The major cement companies Lafarge, Holcim, and Cemex have global operations with largest presences in emerging markets like Asia, Latin America, Africa, and Eastern Europe which are expected to see strong cement demand growth. To improve its position, Cemex should restructure its debt from its failed Rinker acquisition, increase its presence in high growth emerging markets like BRIC countries, and implement a flexible post-merger integration approach to handle cultural and language barriers between acquired companies.

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    of 42

    CEMEX

    PESTEL ANALYSIS

    PESTEL ANALYSIS

    Industry Analysis

    Low barriers
    entry, capital
    intense
    Limited FDI by
    government
    Highly regulated

    Company can
    own raw
    materials
    Concentrate
    supplier
    especially in
    China

    ATTRACTIVE
    INDUSTRY

    Threat of
    New
    Entrants

    MODERA
    TE

    Threat of
    Substitutes

    LOW

    Decrease the use


    of cement in
    construction
    Proportion to use
    other material in
    construction but
    more expensive

    Consumer is
    price taker
    because the
    demand of
    cement is
    high

    Strong multinational company,


    and many regional and national
    company
    Pace of acquisition

    CEMENT INDUSTRY

    Source: International Energy Agency, Cement Technology Roadmap

    The Cement Product

    Cement

    Aggregates

    Ready Mix

    Concrete

    Market needs by
    construction stages
    development

    Source: Lafarge AR 2009

    World cement production and


    consumption

    Source: Global Research: Egypt Cement Sector, Global Investment

    World Cement 2008 by Region

    Source: Global Research: Egypt Cement Sector, Global Investment


    Hose, July 2009

    Growth in World cement


    consumption

    Source: Global Research: Egypt Cement Sector, Global Investment


    Hose, July 2009

    World expected cement demand


    by region

    Source: Global Research: Egypt Cement Sector, Global Investment


    Hose, July 2009

    Facts
    Emerging markets (notably China, India, Latin America, Central
    and Eastern Europe, Middle East and Africa) represent 77% of
    the worldwide market
    The cement demand in a country is generally driven by the
    growth in per capita income. Demographic growth,
    industrialization and urbanization progress tend to trigger a
    rapid growth in housing and infrastructure needs, leading to
    increased cement consumption
    Cement is a product that is costly to transport over land.
    Consequently, the radius within which a typical cement plant is
    competitive extends for no more than 300kilometers for the
    most common types of cement. However, cement can be
    shipped economically by sea and inland waterway over great
    distances, significantly extending the competitive radius of
    cement plants with access to waterborne shipping lanes.

    Cost Of Cement
    the cost of imported
    cement may be
    considered low, but the
    operating expenses
    make the final price
    50% more costly. This
    follows from the cost of
    fuel, freight, manpower,
    the dependence on
    transport (logistics)
    and the electric power
    used in the operational
    process.
    Source: Philippe Lasserre- Globalisation Cement Industry-

    FINANCIAL STATISTICS FOR THE LEADING


    GLOBAL CEMENT COMPANIES FOR 2009

    Source: Cementing the foundations of growth, International Finance Corporation,

    Cemex (million
    US)

    Lafarge
    (million euros)

    Holcim (million
    US)

    2008

    2008

    2008

    2009

    10.4%

    8.6%

    2009

    2009

    ROE
    EBITDA

    4080

    2657

    3.542

    2.477

    4.938

    4.248

    Net Income

    1.409

    2.278

    1.939

    1.046

    1.650

    1.350

    Free Cash Flow

    2.600

    1.215

    2.113

    2.834

    3.429

    3.567

    Sales

    20.131

    14.544

    19.033

    15.844

    23.294

    19.387

    Ebitda Margin

    20.3%

    18.3%

    18.6%

    15.6%

    21.19%

    21.9%

    Debt Ratio

    Cement Sales

    65 Mt

    141 Mt

    132 Mt

    # of Country

    25

    45

    44

    Source: Annual Report 2009

    Cemex
    Overvalued Rinker Acquisition that sale
    again to Holcim
    Nationalization Cemex Venezuela
    Lack presence in Emerging Market
    Debt maturity
    Focus to increase market in maturity
    country where low growth in cement
    demand

    Holcim
    Plants in Europe and North America in
    particular were shut down permanently
    The successful acquisition of Cemex Australia
    now Holcim Australia is a significant
    achievement. The transaction also included
    the increase in the shareholding in Cement
    Australia from 50 to 75 percent.
    capacity expansion program targeted at
    strategically important areas such as the
    plant expansions and new facilities in the
    cement sector were concentrated on growth
    markets, in particular the Indian subcontinent

    Lafarge
    strategy focuses on opportunities in
    emerging markets. 69% of the 2009
    consolidated sales of Lafarge Cement
    Division came from these markets
    3.1billion euro reduction in net debt in
    2009
    Significant acquisitions
    acquired several small-to-medium sized
    businesses (India, Middle East and Greece)

    Significant divestitures in maturity and


    low growth market

    Source: Cemex 2009


    SUSTAINABLE
    DEVELOPMENT REPORT

    Source: Holcim, AR
    2009

    Source: Cemex 2009


    SUSTAINABLE
    DEVELOPMENT REPORT

    Source: Holcim, AR
    2009

    Source: Lafarge AR 2009

    Cemex Globalization
    Strategy

    PRA-Merger Integration

    Post Merger Integration

    Cemex Way

    Source: www.cemex.com/MediaCenter/Files/Winning_Globally.pd

    Parenting Advantage in
    Cemex
    ACQUIRED
    COMPANY
    CORPORATE
    PARENT

    20%
    Retained
    practices

    e- groups
    CEMEX
    WAY

    Parenting Proposition

    80%
    Best
    CORPORATE
    practice
    PARENT
    (benchmark
    ed again
    local
    practices)

    Learning Organization
    (Culture)

    Source Of The Problem

    Rinker Acquisition overvalued


    Debt Maturity in 2008 & 2009
    Homogenous BOD
    Not focus in cement but chase aggregate
    market
    Lack presence in emerging market
    Too many different systems, practices, and
    technologies, company risked becoming
    regionalized, instead of globalizedefficient

    Goals globally
    Have more operations and more customers in
    more countries.
    A single platform of operation, and standardized
    business processes around the world.
    Aggressively share best practices throughout a
    well-integrated, global network.
    Develop an even stronger global brand,
    supplemented by a portfolio of product brands
    that are based in local markets.
    Increasingly flexible, increasingly capable, and
    increasingly diverse in management team

    Expantion Strategy

    High Production
    and Demand
    Opportunity to
    acquired local
    companies

    World expected cement demand


    by region

    Source: Global Research: Egypt Cement Sector, Global Investment


    Hose, July 2009

    Geographic Location

    L 6
    H 6
    C 6

    L 2
    H 2
    C 1

    L 5
    H 9
    C 6

    L 8
    H 9
    C 5
    L 15
    H 6
    C 2

    L : Lafarge
    H: Holcim
    C: Cemex

    L 9
    H 10
    C 2

    Geographic Location
    LAFARGE

    HOLCIM

    CEMEX

    Europe

    France
    UK
    Greece
    Spain
    Germany
    Austria

    France
    UK
    Spain
    Germany
    Switzerland
    Italy

    France
    UK
    Spain
    Germany
    Austria
    Ireland

    North America

    US
    Canada

    US
    Canada

    US

    Central and Eastern


    Europe

    Poland
    Romania
    Russia
    Moldavia
    Ukraine
    Serbia
    Slovenia
    Czech Republic

    Czech Republic
    Slovakia
    Hungary
    Croatia
    Serbia
    Romania
    Bulgaria
    Russia
    Azerbaijan

    Poland
    Croatia
    Czech Republic
    Hungary
    Latvia

    Latin America

    Brazil
    Mexico
    Ecuador
    Honduras
    French West
    Indies/Guyana

    Brazil
    Mexico
    Ecuador
    El Savador
    Nicaragua
    Costa Rica
    Columbia
    Argentina
    Chile

    Mexico
    Costa Rica
    Columbia
    Panama
    Dominican Republic
    Puerto Rico

    Geographic Location
    LAFARGE

    HOLCIM

    CEMEX

    Africa and Middle East

    Morocco
    Algeria
    Nigeria
    Iraq
    Jordan
    Zambia
    Egypt
    UAE
    South Africa
    Tanzania
    Kenya
    Uganda
    Cameroon
    Benin
    Malawi

    Morocco
    Guinea
    Ivory Coast
    Lebanon
    La Reunion
    Republic of Yemen

    Israel
    UEA

    Asia

    China
    Philippines
    Malaysia
    South Korea
    India
    Indonesia
    Pakistan
    Bangladesh
    Vietnam

    India
    Sri Lanka
    Indonesia
    Bangladesh
    Thailand
    Singapore
    Vietnam
    Philippines
    Australia
    New Zealand

    Philippines
    Thailand

    Source: http://setis.ec.europa.eu/newsroom-items-folder/world-cement-production-2009/image

    CURRENT SHARE OF CAPACITY OF THE


    MULTINATIONAL CEMENT MAJORS BY
    REGION

    Opportunit
    y to entry

    Source: FINANCIAL COMPETITIVENESS OF CEMENT COMPARED


    WITH OTHER BUILDING MATERIALS, Cementing the foundations
    of growth, J.P. Morgan, Estimates, Michel Folliet

    FINANCIAL COMPETITIVENESS OF CEMENT


    COMPARED
    WITH OTHER BUILDING MATERIALS
    cement
    remaining the
    most protable
    compare to
    di erent
    building
    material
    segments

    Source: FINANCIAL COMPETITIVENESS OF CEMENT COMPARED


    WITH OTHER BUILDING MATERIALS, Cementing the foundations
    of growth, J.P. Morgan, Estimates, Michel Folliet

    CEMENT PRICE RANGE BY


    COUNTRY IN 2009

    AVERAGE
    PRICE
    lower absolute
    cost
    and a lower
    opportunity cost

    Source: CEMENT PRICE RANGE BY COUNTRY IN 2009, Cementing


    the foundations
    of growth, J.P. Morgan, Estimates, Michel Folliet

    Recommendation:
    Restructurisation of debt maturity
    (divestiture asset, financial
    agreement with stockholders)
    Presence in BRIC and other emerging
    countries
    Flexible PMI to handle cultural and
    language barriers

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