Vassiliko Cement Works Public Co. Ltd. is at an advanced stage of deliberations paving the way for a massive investment in new technology and production lines, aiming to boost productivity, cut staff costs and become a more environmental friendly producer.
Andreas Panayiotou, Executive Chairman of Vassiliko told an investor presentation at the CSE that the plan is to exchange the current three production lines into one brand new, similar to one already functional in Italy, where Board members recently paid a visit.
“It’s an ambitious plan that involves a massive investment, which is why more studies are needed before we take the final decision,” said Panayiotou, adding that in the event that the project is implemented, then it would go a long way to boost productivity, cut staff expenses, save energy and be more environmental friendly.
In the meantime, Vassiliko is forging ahead with efforts to boost its production facilities, planning to set up a new silo facility, due in 2006 that will improve its ability to boost exports as well as better storage of clicker, which is currently housed outside.
George Sideris, Director – General Manager revealed that Vassiliko plans to proceed with the expansion of its existing electricity power station aimed at boosting capacity by another 5MW of electricity by 2006, which will result in further annual savings of CYP 500.000. The existing power generation unit supplies 6MW of electricity, helping the company save at least CYP 500.000 to CYP 600.000 in fuel costs.
Sideris is also hoping that the company will manage eventually to lift cement prices to levels close to Greece at EUR 68 per ton compared to EUR 55 or CYP 31.5 per ton in Cyprus.
“We are the 9th cheapest EU country in terms of cement prices,” said Panayiotou citing research by BNP Paribas, behind the EU 15 but ahead of most of new members.
The company is under investigation by the Competition Committee for price fixing, but it is not known when a decision will be made.
Efforts to boost revenue also include renting the nearby area and Vassiliko port facilities to third parties, which according to George Savva, Financial Manager will lead to another CYP 800.000 in additional annual income.
The objective is to increase the company’s return on equity (ROE) to 9.5% by end of 2005 and 10-12% by 2007 from 8.1% in 2004.
STRONG RESERVES
Panayiotou revealed that Vassiliko’s cement reserves extend to 60 years of production at the current full capacity, which end of 2004 amounted to 1.3 mln tonnes, giving the company a 70% market share of local use.
Recent efforts to acquire stakes in quarrying companies are also aimed at ensuring a steady supply of raw material needed to produce clicker and in turn cement of the highest quality.
But with building permits levelling off, company officials don’t anticipate new takeovers soon.
Local sales in 2004 increased by 37.6% to CYP 35.6 mln, while exports fell 57% to CYP 3.2 mln as the company decided to divert most of its production to service the booming local market.
Analysing VCW’s cost base, George Savva said 40% of total costs in 2004 amounting to CYP 24.3 mln were spent on energy, 20% on staff, 15% on raw materials and 13% on other production costs.
The company’s own power station and constant efforts to improve production facilities were instrumental in lowering the fuel consumption from 950 kcal/kg of cement in 2001 to just under 900 kcal/kg in 2004 and electricity consumption from 110 kw/tonne cement in 2001 to 102 kw/tonnes cement in 2004 at a time when production was rising.
The constant drive to invest in new technology has also been instrumental in the reduction of staff employed from 307 in 1992 to 199 end of 2004.
Italcementi
The largest shareholders in VCW are the EME Group with a 17.5% direct stake, which added to KEO’s 8.62% stake and others takes its total direct and indirect stage to 32.52%.
The Italy based multinational Italcementi Group holds a direct 20% stake which together with others, lifts its total direct and indirect stake to 33%, while another 7.15% is held by the A. Leventis Foundation.
The remaining 27.33%, spread among the public is mainly held by institutional investors. Italcementi acquired a 20% stake in VCW in 1990, which was lifted to 33% in 1997 and has been a key partner in helping Vassiliko modernise its operations and keep pace with developments in the cement trade.
