CRH has sold its Brazilian cement business to a local joint venture for $218 million (€184.4 million) as the Irish building materials giant continues to retrench from emerging markets.
The business has been bought by Brazilian Companhia Nacional de Cimento, a company that is ultimately controlled equally by Italy's Buzzi Unicem and Brasil-based Grupo Ricardo Brennand.
CRH Brazil owned three full-cycle cement plants and two grinding centres in the southeast of the country. The unit, which CRH inherited in 2015 as part of its purchase of €6.5 billion of assets from European rivals Lafarge and Holcim as they completed their own merger, sold about 2.5 million tonnes of cement last year.
“For CRH, the disposal sees it reduce its footprint in emerging markets,” said Davy analyst Robert Gardiner. “For now, disposal proceeds will likely be used to build on its already significant financial capacity. That will leave the group with lots of capital options in 2021.”
Deferred consideration
The company sold its 50 per cent interest in its Indian joint venture, My Home Industries, last year for a deferred consideration of €300 million. CRH had acquired its Indian holding in 2008.
CRH also reportedly sold a building materials business in the French overseas department of La Réunion in September for an undisclosed sum.
In addition, the group was reported last year to be preparing the ground for the sale of its Philippines cement unit – which was also bought under the Lafarge-Holcim deal – for as much as $3 billion. CRH, which is mainly focused on the European and North American markets, also has a 26 per cent stake in Yatai Building Materials in northeastern China.
Lower end
Goodbody Stockbrokers analyst David O’Brien said the price achieved for the Brazilian business is at the lower end of the typical range for such assets in emerging markets, relative to the amount of cement it produces. Still, he said, this partly reflects issues in the local market.
“Given the challenging backdrop in the Brazilian market, where overall capacity utilisation is circa 50 per cent, and CRH’s desire to focus on developed markets, it is no surprise to see the Brazilian assets being disposed of,” Mr O’Brien said. “While small in the overall scheme of the group, it is encouraging to see further cash inflows from non-core asset disposals.”
He said the money could be used to boost cash returns to investors or invest in deals that offer greater payback potential.
