Carpatcement Holding's sales stagnate due to production limitations

Carpatcement Holding, the local division of the German group HeidelbergCement, posted a mere 1% increase in turnover in the first half of the year, against the same time in 2007, as a result of the company’s limited production capacity. The company currently has the lowest production on the local market – 3.5 million tonnes, unlike its main rivals, Lafarge (France) and Holcim (Switzerland), which saw H1 sales increases of 27.8% and 20%, respectively. According to Carpatcement Holding representatives, the poor increase in turnover was not due to turmoil on the real estate market, which has yet to affect the constructions market.
“The volume of cement sales we recorded in the first six months of 2008 is similar to the level registered in the first half of 2007, because of our limited capacity. At present, due to the growth rate of the constructions sector, demand outdoes supply. Our company produces at full capacity,” said Mihai Rohan, general manager of Carpatcement Holding. As early as the beginning of the year, the cement company had forecast that turnover would stagnate in 2008 and that net profit would fall, as a result of limited production capacities and higher costs. The Germans are conducting an extensive investment programme worth 150 million euros, which will last until 2011 and will see the company double its production capacity in Romania, at its plants in Bicaz, Fieni and Deva.
“The first stage of the investment into doubling the production capacity will be the modernisation and start of operations at the second production line in Bicaz. The investment revolves around 60 million euros and will be completed in mid-2009. This will boost production by around 1 million tonnes a year,” says Rohan. Currently, Heidelbergcement has a production capacity of around 3.5 million tonnes.
The company will also invest in a building a clinker silo (the raw material from which cement is made) with a 90,000-tonne capacity, a cement mill in Fieni, and will modernise a cement mill in Deva.
“All the contracts have been signed for the delivery of equipment necessary to start operating the second line in Bicaz. Part of the equipment has already been delivered. The silo’s concrete structure has already been erected in Fieni, and the main body of the cement mill is on its way to the plant right now,” explained Rohan.
Due to the rise in production costs, Carpatcement Holding boosted its prices by 10-15% at the beginning of the year. “Carpatcement has not operated any other price changes since this date,” stated Rohan. Since the beginning of the year, construction companies have repeatedly said that the price of cement has risen by 20-30%, but cement producers claim distributors are the ones that operate major prices increases, due to the high demand.
The turnover of German group HeidelbergCement went up 67% in the first half of the year and reached 7 billion euros, while operating income rose 37% and reached 888 million euros, due to major factors that included the takeover of British-based Hanson, as well as contributions from Eastern European markets.