Cimentos de Portugal SGPS S.A. (Cimpor)

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Cimentos de Portugal SGPS S.A. (Cimpor)

Rua Alexandre Herculano 35
Lisbon
Portugal
Telephone: +351 21 311 81 00
Fax: +351 21 356 13 81
Web site: http://www.cimporgroup.com

Public Company
Incorporated: 1976
Employees: 5,706
Sales: EUR 1.37 billion ($1.73 billion)(2004)
Stock Exchanges: Lisbon
Ticker Symbol: CIM
NAIC: 327310 Cement Manufacturing; 327320 Ready-Mix Concrete Manufacturing; 327331 Concrete Block and Brick Manufacturing; 444190 Other Building Material Dealers; 484110 General Freight Trucking, Local; 488510 Freight Transportation Arrangement; 488991 Packing and Crating; 551112 Offices of Other Holding Companies

Formerly a state-owned business, Cimentos de Portugal SGPS S.A. (Cimpor) is the Iberian region's leading producer of cement and related products, including concrete, aggregates and mortar. Cimpor has also asserted itself as a rapidly growing player in the international cement market, building up key positions in Spain, Mozambique, Angola, Morocco, Egypt, South Africa, Tunisia, Brazil and, since late 2005, Cabo Verte. In Portugal, the company is the clear market leader, with a 58 percent share of the national market. The company also holds top positions among the top five in each of its other markets, including the number three spot in Brazil. Cimpor's total installed capacity tops 24 million tons per year. The company operates three cement plants in Portugal, along with 66 concrete plants and backed by 16 aggregate quarries, among other operations. The company operates 15 more cement plants among its international holdings. Together, Cimpor's foreign holdings account for nearly 60 percent of its revenues. Into the 2000s, Cimpor's domestic production continued to account for some 50 percent of its operations, down from 100 percent just a decade earlier. The group's strong strategic position has made it an attractive takeover target from its larger global competitors. If Cimpor was previously protected by the Portuguese government's 'golden share' (which successfully ended a takeover attempt at the beginning of the 2000s) Cimpor is now 100 percent publicly owned, and therefore remains a potential target. The company is listed on the Lisbon Stock Exchange. In 2004, Cimpor posted sales of EUR 1.37 billion ($1.73 billion).

Nationalized Cement Company in the 1970s

Founded in 1976 as a result of the nationalization of the Portuguese cement industry, Cimpor built on foundations established in the late nineteenth century. The first element of the later national cement giant appeared in 1873, with the founding of Companhia Mineira e Industrial do Cabo Mondego. That company became the first in Portugal to install a vertical oven for the production of cement in 1884. Another important element of the later Cimpor was founded in 1890, with the construction of a plant in Alhandra. That plant became the first in the country to produce artificial cement using the Portland cement method. The Alhandra plant launched production in 1894, marketing its cement under the Tejo brand. In 1912, the Alhandra company adopted the Tejo name as its own, becoming Cimentos Tejo.

Alhandra was by then an important center for the Portuguese cement industry, and included another plant, built in 1904 by the Araujo Rato company. Another company, Compagnie des Ciments du Portugal, founded in 1906, represented the entry of foreign investors into the country.

By 1913, Portugal's total cement production had already topped 3,600 tons. In that year, also, the Alhandra plant became the first in the country to switch over to the dry production process (the last of the later Cimpor's wet process production plants was phased out only in 1985). By the end of the First World War, Portugal's total cement production had topped 8,000 tons per year.

A new company joined the Portuguese cement industry, when Henrique Araujo Sommer founded Empresa de Cimentos de Leiria in 1919, and began constructing that company's first cement complex in Maceira in 1920. The new plant was the first purpose-built dry process cement plant in Portugal and the launch of production at the site in 1923 single-handedly tripled the country's total production, which topped 26,500 tons that year. The Maceira site also built the country's first modern rotary kiln, with a daily output capacity of 220 tons.

Cimentos de Leiria was merged into Cimentos Tejo in 1925. That year, the Maceira site launched production at Portugal's first horizontal kiln. The new facility, and further investments in the industry enabled the country's total output to near 90,000 tons by the end of the decade.

In the 1930s, the Sommer family emerged as the dominant force in Portugal's cement industry. In 1934, the family acquired control of Cimentos Tejo, including the Cimentos de Leiria operation. In that year also, Henrique Araujo Sommer acquired the Araujo Rato cement company, giving the Sommer family the leading position in the national cement industry.

The Sommer-controlled cement group continued to grow, modernizing and expanding its production plant. The group also acquired another cement producer, Favrica da Matola in 1944, and began building a new plant in Dondo starting in 1945.

Following the Second World War, shortages in domestic production led the government to lower tariffs on cement imports. This resulted in a drop in domestic prices. At the same time, new competitors had begun to emerge in the industry in the 1950s. In 1950, a new facility for the production of white cement was established in Pataias, forming the basis of the Cibra company. The government too began to invest in the sector, with the Ministry of Public Works backing the creation of a Fábrica Cimento da Sociedade Técnica de Hidráulica in Alhandra for the production of asbestos-cement pipes. The Ministry of Defense, at the same time, launched Companhia de Carvoes e Cimentos do Cabo Mondego in 1950.

Cimentos de Leiria continued to expand its own operations. At the end of the 1950s, the Alhandra site added a new 167.5-meter kiln, then the world's largest, with a production capacity of more than 500,000 tons per year. The following year, the Cimentos Tejo operation installed the world's largest rotary kiln for the period. By the end of the 1960s, Cimentos de Leiria controlled more than half of Portugal's total cement production.

Two new cement companies were established in the early 1970s. In 1972, Cinorte was established and began constructing a plant at Souselas. The following year, another new company, Cisul, began construction of its plant at Loulé.

The 1974 revolution, which saw the end of some 50 years of dictatorship in Portugal, led to the new government's taking control of much of the country's industry. The nationalization of the cement sector came in 1975. Under that legislation, the government took control of Cimentos de Leiria, Cimentos Tejo, Cinorte, Cisul, Sibra, Cabos Mondego and Sagres, all fully owned by Portuguese interests, as well as the Portuguese share of another company, Secil, Companhia Geral de Cal e Cimento. The following year, these companies were merged together to form a single company, CIMPOR—Cimentos de Portugal EP.

International Cement Leader in the New Century

Cimpor operations included its newest production site, at Souselas, which came online in 1975. The government-owned company continued to expand that facility, opening two more production lines. The third line at Souselas, with a capacity of one million tons/year, began production in 1982. Cimpor also began shifting its factories from a reliance on coal as a fuel source, adapting the plants to run on oil. This program was completed in 1983. Two years later, the company shut down the last of its wet process production lines, completing its shift to the more fuel-efficient dry process method.

Portugal's admittance into the European Union in 1986 signaled the start of a new era for the country's cement industry. The Portuguese government made a commitment to privatize the cement industry in the early 1990s. As part of that effort, Cimpor was converted to limited liability status in 1991, becoming Cimpor-Cimentos de Portugal S.A. In that year, also, the company launched a new ready-mix business, creating subsidiary Precimpor. In 1992, the company's operations in Maceira and Pataias were hived off into a separate company, Cimentos Maceira e Pataias (CMP).

In the run-up to privatization, Cimpor recognized that in order to become competitive in a deregulated market it would have to expand its operations beyond Portugal. The company took its first step internationally in 1992, buying 97.7 percent of Spain's Corporacion Noroeste S.A. The purchase of Noroeste gave Cimpor control of two cement plants and a number of ready mix plants, with a total cement production capacity of 1.3 million tons, and a 4 percent share of the Spanish market. At that time, the company announced its plans to increase the share of international sales to 50 percent of its total sales.

Cimpor's privatization began in 1994, when the Portuguese government sold 20 percent of the company to the public. In that year, the company continued its drive to boost its foreign holdings, acquiring a 51 percent stake in Cimentos de Moçambique, which, with three cement plants, was that country's largest cement operation. While the Mozambique market remained quite small, the lack of infrastructure in the country suggested strong growth possibilities in the future. Back in Europe, meanwhile, Cimpor became one of 33 European cement companies fined for forming a price-fixing cartel.

Company Perspectives:

As one of the leading global players in the movement designed to consolidate the industry, CIMPOR intends to continue along the path of growth and internationalisation, maintaining its independence with regard to other cement groups while retaining its decision centre in Portugal.

Cimpor next expanded into North Africa, acquiring 55 percent of Asment Temar, which operated a cement plant between that country's two principal markets of Casablanca and Rabat. That 1996 purchase was accompanied by the sale of a new tranche of Cimpor's shares, representing another 45 percent of the company. The following year, the company moved into the Brazilian market, acquiring two companies, Cisafra, and the cement division of Serrana Group. These purchases gave the company approximately 5 percent of the Brazilian cement market.

The third stage of Cimpor's privatization was completed in 1998, reducing the government's stake to a 'golden share' of just 10 percent—giving the government the right to veto a potential takeover of the company. In the meantime, Cimpor continued its own acquisition drive, buying up Société des Ciments de Jbel Oust, the second-largest cement producer in Tunisia. The following year, the company returned to Brazil, buying up three cement companies belonging to the Brennand Group. That acquisition, at a cost of more than $500 million, boosted Cimpor to the number three position in Brazil, with a 10 percent share of the total cement market there.

By 2000, Cimpor's international growth, and the strong positions it held in its selected markets, had brought it to the attention of the rapidly consolidating multinational cement industry. The company found itself at the center of a bidding war, launched by Holcim, of Switzerland, and joined by France's Lafarge. Cimpor's independence appeared in doubt—until the Portuguese government deployed its golden share to veto any acquisition of Cimpor. When the government sold off its remaining stake in 2001, it did so to Portuguese group Teixeira Duarte, which became Cimpor's single-largest shareholder.

Assured of its independence, at least for the time being, Cimpor returned to its expansion drive. The company added operations in Egypt in 2000, buying Amreyah Cement Company, and adding its 2.4 million ton capacity. In 2002, Cimpor entered South Africa, buying up 33 percent of Natal Portland Cement Company. Later that year, the company took control of Natal through its purchase of Lafarge's own 33 percent stake in Natal. Lafarge provided the source for other Cimpor acquisitions, including its Cimento Brumado operation in Brazil, and, for EUR 225 million, its cement operation in southern Spain in 2003. This latter acquisition boosted the group's Iberian Peninsula capacity to 9.7 million tons.

By 2005, Cimpor had completed two more acquisitions, of 49 percent of Nova Cimangola, in Angola, and 86.65 percent of Cimento Cabo Verde. With a total capacity of more than 24 million tons, Cimpor had raised itself to the upper levels of the global cement industry. The company expected to continue its expansion in the new century, boosting its production while adding new international acquisitions.

Principal Subsidiaries

Societé des Ciments de Jbel Oust; Cimentos de Mozambique SARL; Amreyah Cement Company.

Principal Competitors

Lafarge S.A.; Guizhou Cement Factory; Tata Sons Ltd.; CRH plc; Supercemento S.A.I.C; Beijing Yanshan Cement Plant; Grupo Empresarial Maya S.A. de C.V.; Cementos Apasco S.A. de C.V; Holcim Ltd.; HeidelbergCement AG; Taiheiyo Cement Corporation.

Key Dates:

1975:: New Portuguese government nationalizes the cement industry.
1976:: Seven nationalized cement companies are merged to become Cimpor.
1992:: Cimpor acquires first international cement operations in Spain.
1994:: The first stage of Cimpor's privatization is completed, reducing government's position to 80 percent.
1994:: Cimpor acquires the cement business in Mozambique.
1996:: Government completes second stage of privatization process, reducing government stake to 35 percent.
1997:: Cimpor enters the Brazilian market.
1998:: Government completes third stage of privatization, reducing its holding to a 'golden share' of 10 percent.
1999:: The company acquires Brennand Group cement business in Brazil, becoming the third-largest cement producer in that market.
2000:: Government deploys golden share to block takeover of Cimpor; Cimpor acquires Amreyah Cement Company in Egypt.
2001:: Government sells remaining 10 percent stake to Teixeira Duarte.
2003:: Lafarge's cement operations in southern Spain are acquired.