News & Views

The World is only just emerging from a palpable recession and almost a re-run of the 1930s; plus the near collapse of the international financial system. Sure, this recession is a humdinger but the difference and saviour, of course, has been concerted global governmental stimulus ($US 1,879 for every man jack of us on the planet). But what was the alternative? Indeed, what the stimulus bought us was survival - plus survival of the financial system - and avoidance of an even worse recession (although it may not have felt like it).

But there ain’t no free lunch and because it was easier on the way down - i.e. the denouement was less precipitous - so the upturn will be commensurately more muted. All developed national governments will be indebted to the rafters for a generation. State spending - capital and current - will be slashed and taxes will rise inexorably. Secondly, given the identified mistakes and excesses of the recent past (especially in banking), we will all be more regulated; and these are the challenges for any Government or Governments, newly elected or incumbent.

Our wonderful industry is, of course, no stranger to either a parsimonious public purse or rules and regulations – albeit an even keener eye will need to be kept on both. Civil servants will be more powerful, too, and better paid (and thus competitors for talent). Similarly, private finance for public sector projects and asset management will become even more important; and are ignored at your peril.

A legacy issue of the GFC, too, is that there will be a greater number of opportunities for growth in developing markets. Many of them are rich in both resources and population, on the one hand, and beneficiaries of Western bailouts, on the other. Indeed, Global Construction Perspectives believes that many of these individual construction markets will double in size over the next 10 years.

At the micro level, few of the industry’s participants have not had the knife - for people, debt and costs (and for a number of participants, revenue has fallen by a third or more). What is different this time around, however, is that the slicing has been more focused and surgical.

As a consequence, this means that we will have an older, wiser, leaner and fitter industry in the future, when the sunny uplit lands beckon once more. Indeed, unless the paradigm has shifted, recovery will follow slump. Similarly, the human race has the capacity to work out its difficulties and prosper from adversity. And, already, we are seeing a number of governments and corporates behaving more responsibly, putting their houses in order and reducing debt. In other words, the two of us, your presenters, are in ‘the glass is half full’ camp.

This is especially true of the cement industry. But what was it like before the GFC?

Front and centre, of course, was a period of unprecedented expansion and stellar financial performance driven by a tight supply-demand balance and a palpable construction boom. What is more, the industry reacted by adding new capacity which was funded, principally, by cheap debt. And, towards the end of these halcyon days (2008) the industry found that it had:
- committed to substantial capacity additions
- allowed short term players to enter
- increased its debt position

Thereafter the crisis arrived like an express train and, after an amazing spell of growth, the industry experienced substantial reversals:
- near catastrophic downturns in developed markets; but more stable demand, and some growth, in emerging markets
- selling prices eroded by some 15%
- costs abated, temporarily, but then continued rising
- overcapacity was legion in most markets
- utilisation rates dropped to very low levels

The industry reacted by cutting costs and seeking to preserve free cash flow (FCF).

Post-crisis, the industry must embrace a new set of strategic drivers:
- prepare thoroughly for the cyclical recovery
- be alive to the potential of exports and CO2 credits
- continue to improve your financial performance, with particular focus on: capacity utilisation; closures (where necessary); and lower substitution rates
- seek to achieve a long term low cost position
- improved market structure and dynamics: embrace consolidation; and the potential of vertical integration (VI)
- effective cash management: for those who have cash; and those who don’t

And the developing trends in the industry in its post-crisis era:
- regional disparity (developed vs emerging)
- alternative building products and systems
- the push to sustainable construction
- deleveraging
- cyclical recovery


Terry Pavlopoulos

In June 2011 Terry Pavlopoulos chaired a one and a half hour session at the Intercem - Barcelona conference. The session examined the sector through the pre-crisis, in-crisis and post-crisis periods. The title of the session was: “The Global Cement Industry: through the financial crisis; and beyond”. If you require a PDF of the presentation please contact: info@constructionknowledge.biz.

In March 2011 Terry Pavlopoulos presented at the Intercem - Beirut conference. Terry presented on the environmental legislation impact on the cement sector. If you require a PDF of the presentation please contact: info@constructionknowledge.biz.

Terry Pavlopoulos has posted a series of three articles on vertical integration on CemWeek. If you require a PDF of these articles please contact: info@constructionknowledge.biz. The first article was posted on October 13 2010.

In October 2010 Terry Pavlopoulos presented at the Intercem - Asia conference in Singapore. The presentation was titled: "Climate Change Legislation - How to assess its impact on the cement sector?". If you require a PDF of the presentation please contact: info@constructionknowledge.biz.

In April 2010, Terry Pavlopoulos posted an article on World Cement (www.worldcement.com) titled: Is the cement sector subject to unnecessary interference by the authorities? In that article Terry lists six reasons that make the cement industry a "soft" political target. If you require a PDF of the article please contact: info@constructionknowledge.biz.

In March 2010 Terry Pavlopoulos presented at the Intercem - Cairo conference. His presentation was titled: "How does vertical integration affect profitability in the cement industry?". Terry used real life examples to explore the impact of vertical integration on the sector. He examined the strategic, operational and environmental aspects of vertical integration. If you require a PDF of the presentation please contact: info@constructionknowledge.biz.

In February 2010 Terry Pavlopoulos posted an article in CemWeek (www.cemweek.com) titled: Will global environmental legislation diminish value in the cement industry?. The article is posted in the "News & Views" section of this site. If you require a PDF of this article please contact: info@constructionknowledge.biz.

Terry Pavlopoulos gave an interview to CemWeek at the beginning of October 2009. The interview elaborates on Terry's article: "The current economic climate and the opportunities for cash rich cement players". The interview can be found on www.cemweek.com. A PDF of the interview can be found in the "Downloads" section of this site.

Construction Knowledge is the guest contributor to the World Cement Magazine - August edition. Our short article published by World Cement comments on the current M&A activity in the cement sector. A PDF of the comment can be found in the "Downloads" section of this site.

Construction Knowledge will be a regular contributor to the Features section of CemWeek (an international cement industry information platform - cemweek.com). We will be discussing topical industry issues. The first contribution to CemWeek is a recent article titled: "The current economic climate and the opportunities for cash rich cement players".

Terry Pavlopoulos took part in an Intercem workshop on the 18th and 19th of May 2009 in Frankfurt. The workshop theme was "Weathering the storm, producing profits in a challenging market". Terry addressed the following topic: "What challenges are affecting the industry, what are the solutions and how can companies benefit from opportunities that will emerge? - The cement industry beyond the survival phase." A PDF of Terry's presentation can be found in the "Downloads" section of this site.

Terry Pavlopoulos presented at the Intercem - Doha conference (27 and 28 of January 2009). The topic of the presentation was: MENA (Middle East and North Africa) cement industry - Strategic options under a new paradigm. A PDF of the presentation can be found in the "Downloads" section of this site.

Terry also presented at the 15th Arab - International Cement Conference (18 - 20 November 2008) in Cairo. The topic was:
"An Analysis of a Vertical Integration (cement to ready-mix concrete) strategy". A PDF of the presentation can be found in the "Downloads" section of the site.

Terry Pavlopoulos presented at the Global Insulation Conference (16 & 17 October 2008) in Barcelona. The topic of presentation was: "Insulation + Plasterboard: Is there a case for a merger?". An article based on this presentation has appeared in the December 2008 issue of the Global Insulation magazine. A PDF of the presentation and the article can be found in the "Downloads" section of the site.

Terry Pavlopoulos has written an article in the November 2008 issue of the Global Cement Magazine titled: The current economic climate and the opportunities for cash-rich cement players. A PDF of the article can be found in the "Downloads" section of the site.