Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to the newest version of your browser.

Your browser appears to have cookies disabled. For the best experience of Construction News, please enable cookies in your browser.

Welcome to the Construction News site. As we have relaunched, you will have to sign in once now and agree for us to use cookies, so you won't need to log in each time you visit our site.
Learn more

Cemex secures its foothold in Europe

CONCRETE - When Mexican cement producer Cemex announced it was to buy RMC earlier this year many feared the change. Paul Thompson asks Cemex UK's president Ignacio Ortiz if it was right to

FOR YEARS the industry lynchpin that was RMC had been embroiled in takeover talks.

Ever since the early 1990s and doubtless before that, whispers that the giant ready-mixed concrete, precast concrete, cement and asphalt producer was under attention from outside investors regularly spread through financial circles.

But most of the talk revolved around fellow European producers aching to get hold of the RMC name and interests; rarely did those whisperers look beyond Europe for potential suitors; and none uttered the name Cemex.

That is until late in 2000 when RMC was beginning to struggle under the weight of poor performance and spiralling group debt. But even then the Mexican outfit tended to be drafted in at the end of a conversation about potential buyers, almost as an afterthought.

The reality was that the steadily growing company, based in Monterrey, northern Mexico, had been circling its prey for some years, according to Cemex UK president Ignacio Ortiz.

He says: 'We had been looking at RMC for several years before we approached the company. Since 1992, when Cemex began its global expansion, we have made 15 significant international acquisitions. RMC was one of the world's leading ready-mixed concrete suppliers. It was bound to be of interest to us.' But the approach did not come for a good few years, by wh ich t ime RMC had saddled itself with a £1.5 billion debt that it was desperately trying to off load. Sales of peripheral interests such as its 20 per cent stake in Australian cement producer Adelaide Brighton and swingeing cuts in staffing levels helped, but its efforts to farm off its ailing German division, Readymix AG, raised eyebrows.

It begged the question: what on earth was in it for the Mexican outfit?

Mr Ortiz provides the answer: 'We saw a great potential in RMC, ' he says. 'The attraction was the company's strong presence in Europe.' And that is the key to the deal. The Cemex board decided that the opportunity to get into the more developed markets was too good to pass up. An acquisition would give it more cash f low stability but also, crucially, it would allow the firm to penetrate the newer markets of Eastern Europe and give it the opportunity to grow.

But was the time right for Cemex? Could it have held on a little longer and offered the RMC board a little less? Certainly at the time of the £2.3 billion deal there were expressions of su rpr ise f rom many senior analysts that Cemex had offered so much. Mr Ortiz rebuffs this.

'We are in business for the long term and I believe that the acquisition was the right decision, taken at the right time and under the right conditions, ' he says. 'Ultimately the market will determine this.' Mr Ortiz showed he was not scared of taking some tough decisions almost as soon as he came on board at Cemex UK. In an atmosphere where rumour and counter rumour were circulating among employees over the likely fall-out from the deal, it was announced that staff ing levels were to be slashed. Some 750 jobs would be chopped from a company that not 18 months previously had lost 500 staff members in a major restructure.

Making those sort of job cuts not six months into the long-term plan has confirmed the worst fears of many ex-RMC employees but Mr Ortiz is unrepentant.

'Workforce reductions are always difficult, ' he says. 'But it is paramount that we make the UK operations more competitive and dynamic to secure a long-term future. Following a review of the business it became necessary to bring in a new structure to improve performance and strengthen the profitability and position in the UK. But for the employees that remain, Cemex aims to create an environment in which people can develop to their full potential.' The larger-than-expected dose of realism seems to have given the company a boost. Since taking over RMC in March, the previously faltering Rugby Cement kiln has reached a reliability level of 90 per cent compared with the 70 per cent levels at the same time the previous year and production levels are consistently averaging more than 100,000 tonnes of cement clinker a month. Mr Ortiz expects to invest a further £6.5 million in a top-notch filter for the £200 million plant to improve its environmental performance.

And the cash injections will not stop there.

'Ou r vision for Eu rope and the UK is to invest in and grow the business, ' he says.

Perhaps, f inally, the troubled times actually are over.