“As far as I understand, several types of investors are interested in the international assets of the two groups, from construction material companies to private equity funds,” François Pétry told ZF in an interview.
There are strong signals about a number of buyers interested, so the sale will not be made at a discount but a good, fair price, Pétry added.
The assets the two giants proposed to sell to be able to complete their international merger include the Lafarge assets in Romania, the most important of which are the two cement plants in Medgidia (Constanta County) and Hoghiz (Brasov), as well as the cement mill in Targu-Jiu.
The market value of the Lafarge assets in Romania is about EUR500 million, according to ZF’s calculations. They need to be sold or else the new entity created by the merger would have a dominant position in Romania, accounting for more than half of the market estimated at EUR500 million to EUR600 million a year.
The buyers interested in the assets of the two are Turkish companies Oyak and Sabanci, and private equity firms CVC Capital Partners and KKR. A potential buyer in Romania is Turkish businessman Omer Susli, who bought the local network of the do-it-yourself retailer Praktiker and said he was interested in the Lafarge plant in Medgidia. Pétry says the merger is, indeed, an ‘ambitious’ project and Lafarge and Holcim will continue to be rivals until it has been completed.
The merger has to be completed by the end of the first half of next year. Under the circumstances, François Pétry is faced with a double challenge, professionally: finalizing the merger in Romania and the fact that the local construction sector is unable to rebound in full gear.
Cement production in Romania dropped from 13 million in 2008 to merely 7 to 7.2 million tons, according to the Romanian Association of Cement Producers (CIROM).
“Cement consumption is already affected by the low number of infrastructure projects and unfortunately, no major infrastructure tenders were held in 2013-2014 so most projects started in 2011-2012 are about to be completed,” Pétry said.
Infrastructure works should normally generate 40% of the demand for cement while the non-residential and residential segments should generate 40% and 20%. Residential and non-residential segments account for a greater share of the total now, due to the dearth of major infrastructure projects, Pétry said.
Holcim expects a rebound of the residential sector, considering the investments made in small and medium-sized projects. Meanwhile the non-residential sector will continue to develop too, through retail chains, office and industrial buildings, the executive added.
Pétry says the local market can recover by improving the absorption of EU funds. This will help the construction industry and the economy, because EU funds are made available for all the sectors of the economy. Holcim hopes to see absorption of EU infrastructure funds pick up, which may lead to an increase in spending on infrastructure projects.
Moreover, Romania needs fiscal stability, after both individuals and companies were affected by the introduction of new taxes, such as the 1.5% special building tax or the overtaxation of mineral resource revenue, the executive says.
All those fiscal measures do is increase cost pressure not only on the cement industry prices but also on those in the entire economy, he added.
Holcim Romania posted EUR202 million revenue last year and EUR1.4 million net loss, according to Finance Ministry data.
Under the best-case scenario, the revenue of Holcim should grow slightly compared with 2013, but given the lack of new major infrastructure projects, the company would rather not provide exact estimates for its sales performance, François Pétry says, adding he expects his company to return to profit this year.
(English version by Loredana Fratila-Cristescu)