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The APM white clinker and cement plant in Ipoh, 180km north of Kuala Lumpur.
The APM white clinker and cement plant in Ipoh, 180km north of Kuala Lumpur.

Adelaide Brighton claims slice of Asian cement producer

Construction materials producer Adelaide Brighton has expanded into the Asia-Pacific market, after signing onto a stake in a Malaysian white cement business last month.

In December, Adelaide Brighton entered into an agreement to acquire 30 per cent of Aalborg Portland Malaysia Sdn Bhd (APM), an integrated white clinker and white cement production facility in Ipoh, 180km north of Kuala Lumpur.

The acquisition price for the 30 per cent equity stake in APM was valued at $US29.7 million ($AUD28.5 million), including $US2.3 million for 30 per cent of the net cash on hand, plus transaction costs of $US0.4 million. Italy’s Cementir Holding SpA owns the other 70 per cent of APM.

The APM white clinker and cement plant in Ipoh, on the west coast of the Malaysian Peninsula, comprises a 180,000 tonne capacity per annum kiln, a 200,000 tonne capacity per annum grinding mill and a packaging plant.

The deal secures a 10 year agreement for Adelaide Brighton with APM, effective from 2015. It also provides breathing space for Adelaide Brighton, in terms of raw material availability and domestic production cost pressure.

“The high dollar, rising power costs, the carbon tax and increasing labour costs make building a new plant in Australia too high in terms of capital expenditure costs,” Adelaide Brighton chief financial officer Michael Kelly explained.

Kelly added that Adelaide Brighton needs to secure imports and the acquisition provides a strategic position in Asia for the company and adds to the range of potential supply sources in a tightening regional cement market.

The acquisition of the stake in APM will be funded from Adelaide Brighton’s existing facilities. On a standalone basis, the returns are expected to exceed the company’s cost of capital, especially if APM embarks on an $US18.6 million expansion to increase its white clinker capacity by 150,000 tonnes per annum from 2015.

On top of its stake in APM, Adelaide Brighton also announced that it had entered into two separate clinker supply agreements with Japanese suppliers with respective terms of seven and 10 years. In an ASX statement, the company said the contracts would also reduce “exposure to fluctuations in the exchange rate”, while increasing the company’s overall imports of cement products from 1.6 million tonnes in 2012 to more than two million tonnes in 2016.

Adelaide Brighton’s new foray into imported cement products follows recent announcements by Boral and Holcim that they too would be winding back domestic cement production in favour of importing products.

However, Adelaide Brighton continues to support the Australian market, also signing final agreements with a major cement customer in Western Australia and South Australia for the supply of cement through to 31 December, 2014, based on similar terms and volumes to those currently in operation. It will also supply 100 per cent of the requirements of a lime contract with a major WA customer in 2013.

Sources: Adelaide Brighton, Global Cement

Tuesday, 25 September, 2018 01:55pm
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