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PESTEL ANALYSIS
PESTEL ANALYSIS
Industry Analysis
Low barriers entry, capital intense Limited FDI by government Highly regulated
Threat of New Entrants Threat of Substitutes
MODERA TE
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
ATTRACTIVE INDUSTRY
Strong multinational company, and many regional and national company Pace of acquisition
CEMENT INDUSTRY
Cement
Aggregates
Ready Mix
Concrete
Source: Global Research: Egypt Cement Sector, Global Investment Hose, July 2009
Source: Global Research: Egypt Cement Sector, Global Investment Hose, July 2009
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 Source: Philippe Lasserre- Globalisation Cement Industry-2007 operational process.
FINANCIAL STATISTICS FOR THE LEADING GLOBAL CEMENT COMPANIES FOR 2009
Cemex (million US) 2008 ROE EBITDA Net Income Debt Ratio Free Cash Flow Sales Ebitda Margin Cement Sales # of Country 2.600 20.131 20.3% 1.215 14.544 18.3% 65 Mt 25 4080 1.409 2657 2.278 2009
Lafarge (million Holcim (million euros) US) 2008 2009 2008 10.4% 3.542 1.939 2.477 1.046 4.938 1.650 2009 8.6% 4.248 1.350
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
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)
PRA-Merger Integration
Cemex Way
Source: www.cemex.com/MediaCenter/Files/Winning_Globally.pd
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
Source: Global Research: Egypt Cement Sector, Global Investment Hose, July 2009
Geographic Location
L 2 H 2 C 1 L 6 H 6 C 6 L 8 H 9 C 5 L 15 H 6 C 2 L 9 H 10 C 2
L 5 H 9 C 6
Geographic Location
LAFARGE
France UK Greece Spain Germany Austria US Canada Poland Romania Russia Moldavia Ukraine Serbia Slovenia Czech Republic Brazil Mexico Ecuador Honduras French West Indies/Guyana
HOLCIM
France UK Spain Germany Switzerland Italy US Canada
CEMEX
France UK Spain Germany Austria Ireland US
Europe
North America
Czech Republic Slovakia Hungary Croatia Serbia Romania Bulgaria Russia Azerbaijan Brazil Mexico Ecuador El Savador Nicaragua Costa Rica Columbia Argentina Chile
Latin America
Geographic Location
LAFARGE
Africa and Middle East Morocco Algeria Nigeria Iraq Jordan Zambia Egypt UAE South Africa Tanzania Kenya Uganda Cameroon Benin Malawi China Philippines Malaysia South Korea India Indonesia Pakistan Bangladesh Vietnam
HOLCIM
Morocco Guinea Ivory Coast Lebanon La Reunion Republic of Yemen
CEMEX
Israel UEA
Asia
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
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
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