During the first half (H1) of 2020, Egypt’s demand for cement decreased by 6.5%, compared to the same time last year, says Solomon Baumgartner Aviles, CEO of Lafarge Egypt.
In an interview with Daily News Egypt, Aviles touched on the company’s targeted sales for 2020, and the impact of the novel coronavirus (COVID-19) pandemic. He also addressed the criteria the company considers when choosing a country in which to build a factory, or transform into a regional manufacturing hub.
During the interview, Aviles also discussed the national projects that Lafarge has contributed to in Egypt.
What has been the effect of COVID-19 on Egypt’s cement industry?
Overall, COVID-19 has strongly impacted the building materials sector, and specifically the cement industry. Thanks to the Egyptian government’s sound decisions, infrastructure projects are operating at full capacity. During these challenging times, this makes for a promising prospect for the construction industry.
Individual construction, however, which is the largest consumer of cement, has been severely affected since the pandemic’s beginning. This is due to low demand as individuals tend not to invest in construction in times of crisis, but also because of the recent ministerial decision to halt licences for building, expanding, upgrading, amending, or supporting construction work for private housing in Egypt’s major cities. We believe this decision increases the stress on the sector, as we estimate its impact to be even more severe than that of COVID-19.
Although Lafarge Egypt understands this decision, it comes at an unfortunate time, and as mentioned will have a devastating impact on the economy, and particularly on the cement sector which is already under unprecedented pressure. We still hope for a reconsideration or, if not, for a speedy end to these control measures, to safeguard the viability of our businesses.
What is the company’s strategy during the current crisis and declining market demand?
We have developed an integrated plan on Health, Cost and Cash to weather this crisis, and are executing it with precision. On the Health aspect, Lafarge Egypt has impacted over 100,000 lives positively, by supporting local communities to fight COVID-19. We have donated over 80,000 masks and gloves, made 200 litres of antibacterial gel available, and supported public hospitals by refurbishing 460 ventilators..
On Cost and Cash, we started implementing action with the first signs of this crisis in late January, making substantial progress in a very short time. Despite COVID-19, the market conditions and the competitive environment of Egypt’s cement sector are such that producers operating under normal conditions are, and have been, suffering financial loss and will not be able to sustain their operations. If nothing happens, this will inevitably result in the collapse of a number of players, including the exit of certain foreign players from Egypt.
What about Lafarge’s desired target net profits and sales in 2020?
Regarding our sales expectations for the end of the year, the answer will ultimately depend on the development of this fierce and mysterious virus, how long it takes to develop a vaccine, and the speed of resolving the building licensing issue.
At Lafarge Holcim, the health and safety of our employees, contractors, customers and surrounding communities is our top priority. We have, and will, continue to take all precautionary measures. Equally, we will continue to work with and to abide by all the instructions and directives issued by the Ministry of Health.
Secondly, we remain focused on continuing our cost and cash programme as we create export opportunities, even if these are scarce. Finally, we are starting to look beyond this current crisis and to push our sustainable development agenda along the lines of the Ministry of Industry’s Joint Committee and EBRD efforts. We trust that the Government will set incentives for plants to use alternative fuels. This will foster waste recycling at sites and the creation of environmentally friendly factories in the long-term. We also strongly believe in performance-based product portfolios. We have a great opportunity in Egypt to introduce a larger variety of blended cements.
There are many reasons, including heavy oversupply and cost hikes, why the situation is as it is, and Lafarge Egypt is fully aware that addressing each all of these challenges is not possible. It is possible to create an environment allowing the various players to continue production in the short term, and the possibility to operate efficiently and competitively in the long term under normal market conditions.
Lafarge Egypt welcomes the Prime Minister’s initiative to find measures addressing this situation that comply with the Competition Law. We would urge the Government to take prompt and fair action in the interest of industry and to the benefit of Egypt.
How many factories does Lafarge have in Egypt, and what is their production capacity? How many employees does the company have in Egypt?
We have one plant in Ain Sokhna, which is one of the largest cement plants in the Middle East and Africa. It was constructed in 1997, before Lafarge’s acquisition of the Egyptian Cement Company. Operated by 1,534 employees, it has five production lines and a production capacity of 10.2 MT.
We also have Geocycle Egypt, a member of LafargeHolcim, which started operations in 2011, feeding the Lafarge cement plant with refuse-derived fuel (RDF) as an alternative to fossil fuel. Working in line with Egyptian regulations, Geocycle meticulously chose RDF waste management solutions for their economical and environmentally friendly nature.
What criteria do you use when choosing a country to build a factory in or as a regional manufacturing hub? Is Lafarge Egypt considered a regional hub?
Egypt is a key country for our company. We have talented teams and an important plant equipped with state-of-the-art technology. Annually, we invest heavily in our people and sites to future-proof these and secure our long-term success. Equally, Egypt is blessed with a privileged geographical export location, which is important for our group.
As the saying goes in Egypt, “the artist does not leave his mark unless he passes, stays, and sets out from Egypt”. The same is true for our company. We take pride in our presence in this strategic market of 100 million people. We have full confidence in the Egyptian Government‘s ability to weather the crisis and support industry in becoming the main resource for Africa and neighbouring countries.
Could you tell us more on the major national and investment projects Lafarge Egypt supplies products to?
Lafarge Egypt contributes to one of the most technically challenging projects in Africa, the Cairo Metro project, supplying over 900,000 m³ of various concrete types. We demonstrate Lafarge Holcim’s ability to understand the unique nature of each project, and develop the best solutions that suit its construction needs. With Lafarge Egypt’s extensive road expertise and integrated solutions, we help optimise construction costs and project schedules, as well as augment road service life.
In 2012, Lafarge Egypt proudly completed the 170km long Cairo–Alexandria Highway. We were trusted again by the Egyptian Government to work on the 45km long Shoubra–Banha Highway, which we successfully completed in 2017. I hope that we can overcome current challenges, and that Egypt’s development continues at both the infrastructure and human capital level.