A new player is about to enter the cement business in Adelaide and blow a hole in the profits of the key local manufacturer, it’s been revealed.
Cement Australia, a Queensland and Tasmania based joint venture between overseas companies Holcim (50 per cent) and HeidelbergCement subsidiary Hanson (50 per cent), is planning to build a facility at Osborne to process imported cement.
The decision is a blow to local manufacturer Adelaide Brighton Cement (ABC), which expects the deal to cut about 10 per cent from its market share.
It has, so far, ruled out any job losses.
“That’s a topic we have not entertained at this time,” a company spokeswoman told InDaily.
Adelaide Brighton pointed to the emergence of the new business in its Preliminary Final Report released to the stock exchange today.
In the report Adelaide Brighton booked a profit downgrade of $15 million, citing the loss of sales of 120,000 tonnes of cement.
The company’s Birkenhead plant produces more than 1.3 million tonnes per year.
Brighton’s financial outlook referred to agreements it had executed with a major cement customer in Western Australia and South Australia for the supply of cement through to 31 December 2014 on similar terms and volumes to those previously in operation.
“Adelaide Brighton has been informed that the customer now proposes to construct facilities in Adelaide that will allow it to supply its own requirements for cement in South Australia,” the company said.
The customer currently buys circa 120,000 tonnes of cement from Adelaide Brighton in South Australia.
Due to the uncertainty regarding the time required to construct the facilities, the exact timing of the cement requirements are unknown at this time.
“If Adelaide Brighton lost all of the volume currently associated with the customer in South Australia from 1 January 2016, it is estimated that Profit Before Tax would decline in 2016 by circa $15 million.”
The company’s statement assured investors that Adelaide Brighton “remains the sole manufacturer of clinker in South Australia at its world class manufacturing facilities at Birkenhead”.
“This provides the company with a highly competitive operation when compared to the cost of product imported from outside the state.
“Adelaide Brighton has a long term consistent strategy of operational improvement, growth in the lime business and vertical integration into downstream markets.”
Cement Australia partners, Hanson and Holcim, have been key players in the local construction industry as a supplier of concrete, using Adelaide Brighton’s locally manufactured cement powder.
Hanson is one of the world’s leading aggregates and heavy building materials companies and Holcim is one of the world’s largest suppliers of cement, aggregates and concrete.
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