Aggregates industry performance in 2011

As 2011 draws to a close, it is interesting to reflect on the aggregates industry, and how it is coping in the current economic climate.

In the past few weeks, I have reported as companies have rolled out their third quarter results, and many of the major players are more upbeat than may have been expected.

However, to meet the challenges, equipment manufacturers (including 460 Sandvik and 385 Atlas Copco) and quarry operators have been reorganising and restructuring to (in the words of 1343 Hanson) “improve efficiency and customer service and prepare for the challenges which lie ahead in 2012 and beyond.”

There are many challenges, including those listed in the 2886 European Aggregates Association’s (UEPG) column in this issue, which highlights three key documents on raw materials, biodiversity and resource efficiency, developed by the 1022 European Commission, which “will have strong implications for the aggregates industry,” and which the UEPG says it intends to closely monitor.

Hanson’s restructure will see its UK quarry products division split into three product-focused business lines: Hanson Aggregates (incorporating Hanson Marine); Hanson Concrete and Hanson Asphalt and Contracting, all managed nationally, while 725 Lafarge says its new organisation project is more agile and responsive, and is focused on its markets and its clients, being designed to accelerate the group’s development and profitability. The product line-based organisation will be replaced with a country-based organisation, which will include the removal of a layer of management and the resulting reorganisation of the Executive Committee.

In advance of its preliminary results, due in March 2012, 894 Breedon Aggregates, the UK’s largest independent aggregates producer, issued a statement saying that while the outlook is uncertain as forecast growth in the economy slows, the directors believe there is significant scope to further develop the group, and that “the current market conditions will inevitably create further opportunities to purchase assets at realistic prices and several potential acquisitions are currently under review.”

Many companies that could have given far more gloomy outlooks are, as one would expect, tackling the problems head on, and with huge infrastructure projects on the horizon, including the UK’s recently announced €35billion spend, are looking to new markets for growth.

674 HeidelbergCement’s better-than-expected adjusted operating profit in the third quarter of 2011 saw growth in Asia-Pacific and Africa helping to offset rising energy costs, and while Lafarge reported a decline in third-quarter profits, it saw cement demand rising, driven by emerging markets.

I note that despite an income fall of 32%, 680 Holcim, which saw an increase in sales of cement and shipments of aggregates and ready-mixed concrete, is also pinning its hopes for consistent growth in the emerging markets of Latin America and Asia.

Cemex celebrated with a 5% increase in consolidated net sales in the third quarter of 2011 compared to the comparable period in 2010; operating EBITDA increased by 1% while operating income increased by 7%.

So as we head for 2012, I feel that an industry that has been hit hard by the economic downturn could be heading for better times.