The move provides a platform for the significant expansion of SigmaRoc's European aggregates business.
In October 2019, SigmaRoc established its European heavy side materials platform by acquiring CDH, a major quarrying and dimension stone company located in Belgium. In addition to an annual production of around 1 million m² of Belgian Blue Stone, a high-value decorative stone, the operations also produce approximately 1.5 million tonnes of standard construction aggregates.
Before entering into the LH Agreement, production and commercialisation of these aggregates were undertaken by LafargeHolcim, under an inefficient royalty deal that was due to end in February 2023.
The LH Agreement gives SigmaRoc full control over CDH's production assets, putting the group in a far stronger position commercially and operationally to pursue its growth strategy in the Belgian aggregates market as a large-scale supplier.
In addition to generating an estimated incremental EBITDA of €1mn per annum, the assumption of full control of all production at CDH will enable the group to drive operational efficiencies over time. Furthermore, the LH Agreement will give SigmaRoc further flexibility to install new crushing and screening equipment, further enhancing output.
Under the terms of the LH Agreement, SigmaRoc will, from 1 April 2021, take-over all of LafargeHolcim's production installations located at CDH for nil consideration. The group has agreed to supply LafargeHolcim Belgium with a minimum of 1.5 million tonnes of aggregates per year until 31 December 2024, under a take or pay agreement. SigmaRoc will charge a production margin. Additional volumes produced are subject to a pre-emption right by LafargeHolcim or to be utilised by SigmaRoc.
During the agreement period, SigmaRoc will build and commission a new aggregates production facility and decommission the old LafargeHolcim installations. SigmaRoc expects this process to be seamless and the decommissioning and demolition of the old installation to be cost-neutral.
Given its entry into the Belgian market as a large scale supplier of high-quality aggregates, SigmaRoc has decided to incorporate a new subsidiary and launch a new brand for its quarrying operations, Granulats du Hainaut. The new operations will form part of a larger network of quarries in Belgium, including the group's three existing Stone Holdings' sites. SigmaRoc's total European production volume will therefore increase to approximately 2 million tonnes per year.
David Barrett, chairman of SigmaRoc, said: "This agreement is the right next step for Carrieres du Hainaut and our partners LafargeHolcim. Over the next four years, we will continue to work together by producing quality material for the Belgian market, improving safety, efficiency, and sustainability on site. Carrieres du Hainaut will also welcome nearly two dozen colleagues from Holcim Belgium who will help deliver a good result for both parties."
Max Vermorken, CEO of SigmaRoc, said: "When we acquired CDH, we saw the potential to unlock significant added value from the legacy arrangements with LafargeHolcim. With the assumption of control over the aggregate production assets, we get one step closer to fully benefitting from the potential CDH has to offer and this intermediary step will allow us to be well prepared to establish ourselves as a major supplier of aggregates in the Benelux market by the end of 2024."