Limited exposure to Europe helps Votorantim Cimentos in IPO quest
- Written by Don Marsh
In 2012 business reviews, the world’s leading public cement companies confirm sales or profit declines reflecting deep ties to European Union economies beset by nightmarish governing. Brazil’s Votorantim Cimentos S.A. is preparing to join the publicly traded operators club, presenting investors a portfolio with a key differentiating factor—minor European exposure—compared to peers Cemex SAB de C.V., Heidelberg Cement, Holcim Ltd., Italcementi SpA and Lafarge Group.
In a U.S. Securities and Exchange Commission preliminary prospectus, parent company and initial public offering-minded Votorantim Industrial S.A. profiles Votorantim Cimentos’ vertically integrated operations, including Votorantim Cement North America (VCNA), which spans the Prairie Material, St Marys and Superior Materials brands in Great Lakes markets, plus Prestige Concrete and Suwannee in Florida. Specific to North American acquisition or investment opportunities, the prospectus notes, “We will select companies or assets with potential to improve their operating and financial performances and generate synergies with our existing clusters.”
In the U.S. and Canada, a publicly traded Votorantim Cimentos would “focus efforts on maximizing the benefits from expected market recovery, and expect to further improve utilization rates of our [cement] plants as higher sales volume reduce fixed costs per ton sold.” Concurrent with Votorantim Industrial’s proposed IPO are market tailwinds for VCNA operations, with U.S. cement consumption on track for 8 percent or higher gains in 2013 and 2014, and 13.5 percent in 2015, according to Portland Cement Association projections.
VCNA assets include five cement and two clinker grinding mills, 140 ready mixed concrete plants, 34 aggregate and four limestone operations. They accounted for $869 million, or 18.7 percent, of Votorantim Cimentos’ $4.64 billion in 2012 revenues, the balance from strong cement market positions in Brazil, Argentina and Chile, and smaller stakes in neighboring South America countries, plus Spain, Turkey, India, Tunisia and Morocco. In total, the Votorantim Cimentos portfolio covers 34 cement and 22 clinker grinding mills; 328 ready mixed and 13 mortar plants; plus, 84 aggregate and 61 limestone operations.
An IPO would have a proposed $5.4 billion maximum, the prospectus indicates, with Votorantim Industrial maintaining majority shareholder status. “We believe we are uniquely positioned to maintain high returns on capital and generate significant value for our shareholders,” it states. “The key elements of our management model are: (1) delivering superior returns by actively managing our cost structure to adapt to changing market conditions; (2) increasing efficiencies in the use of raw materials and other large-scale supply contracts in order to benefit from our economies of scale; and, (3) employing qualified and experienced professionals.”
Like Cemex and (Oldcastle parent) CRH Plc, Votorantim Cimentos would dual list on the lead exchange in its home base (Sao Paulo) and the New York Stock Exchange, the latter through American Depositary Receipts (ADR). It would bring a new cement and concrete company listing to the NYSE, which since 2005 has seen through acquisition or merger delisting of Florida Rock Industries and Lafarge North America shares and Hanson Plc and Rinker Group ADR.
A successful Votorantim IPO would give cement and concrete market investors a company that can afford to pay a lot more attention to the business climate in the Americas than the European Union.