Building Materials - 2022 General Overview
The effects of high inflation, higher fuel costs and elevated electricity prices made for a challenging year for Sabancı Holding’s building materials business. Despite this volatile environment, the building materials unit boosted total turnover by 165% and increased EBITDA by 147% in 2022. New investments and projects supported the unit’s sustainable business model. During the year, Sabancı Group’s building materials companies took major steps in decarbonization to transform from a pure cement producer to a global sustainable building materials player. Alternative fuel use at the Group’s building materials unit went up by 16 points to 25%, well-above the Türkiye average of 8%. In addition, CO2 emissions in grey cement decreased by 4% in total.
In 2022, divestment of two cement plants with limited export capability was completed during the year as Sabancı Group’s building materials companies’ FX-based revenue amounted to 51% of total building materials revenue. Meanwhile, a significant investment was made in a value-added product, calcium aluminate cement, by doubling the Group’s production capacity.
Protect and Grow the Core
Sabancı Group’s building materials companies are preferred solutions providers to all their customers thanks to their advanced R&D capabilities, collaborations, customer-oriented approach, and close proximity to customers via their strategic network. The Group’s building materials unit aims to grow and optimize its network further. The primary goal is to create more value for all stakeholders by increasing profitability and boosting customer satisfaction in a sustainable fashion. As part of its network optimization strategy, Çimsa, the Group’s international cement manufacturer, divested two landlocked plants in Central Anatolia in 2022 for EUR 110 million.
With operations in seven countries, Sabancı Group’s building materials business holds great potential after the integration of its Bunol plant in Spain. The Group’s objective is to maximize the value gained from the expanded global network by capitalizing on network synergies. Sabancı Group’s building materials business bolstered its position as the largest white cement player in the western hemisphere with decisive efforts geared toward strengthening its global network throughout the year.
By continually enlarging its geographic footprint, Sabancı Group’s building materials business is getting closer to its customers and becoming the number one choice of white cement users in diverse regions of the world, including North America, South America, and Europe.
After two years of growth, domestic demand for cement decreased by 12% in 2022 according to Turkish Cement Association figures. This year, total cement exports amounted to less than 30 million tons due to lower clinker exports. Rising competitiveness of other countries in clinker trade negatively affected the Turkish cement sector. West Africa was formerly one of the largest clinker export markets for Türkiye; in 2022, exports to this region contracted by nearly 50%. Companies with capabilities to load large cement vessels turned their focus to the US market, resulting in a 40% surge in US exports. Despite greatly elevated energy costs due to foreign exchange rate volatility and domestic market contraction in Türkiye, Sabancı Group’s building materials companies differentiated from the competition in 2022 by significantly improving efficiency, utilizing alternative options in fuel and raw material use, and entering long-term strategic procurement agreements while effectively leveraging their logistics network.
Operating in key export markets with its effective distribution network and port management capabilities serving a long term customer portfolio, the Group’s building materials companies positively contributed to Türkiye’s trade balance with combined FX revenues of TL 11 billion in 2022.
Sustainable building solutions remain the focus of Sabancı Group’s building materials companies. In 2022, Group companies outperformed their targets, boosting their use of alternative fuels, expanding alternative raw material use and reducing their clinker usage ratio.
In first quarter 2022, a new alternative fuel feeding system became operational at Sabancı Group’s Afyon plant. Alternative fuel usage in white cement production in Türkiye plants surpassed 5% for the first time in 2022, thanks to know-how transfer from the Group’s Bunol plant. Overall, alternative fuel use now accounts for an average of 25% of the total fuel consumption by Sabancı Group’s building materials companies compared to an 8% average in Türkiye. As a result, much less fossil fuel is used by these companies in production. Ongoing investments are paving the way for alternative fuel use to rise to 35% of total fuel consumption at Sabancı Group building materials companies by 2030.
A key part of the building materials unit’s decarbonization strategy is reducing its clinker ratio. Toward this end, the Clinker Saving initiative commenced in 2021. This effort continues to yield significant results and is reducing the carbon intensity of the Group’s building material products to target levels.
Sabancı Group building materials companies also prioritize high value added digital transformation projects to ramp up their use of alternative fuels. Research and analytical studies related to smart factory systems and cloud solutions are currently underway to boost energy efficiency across the board.
Invest in New Growth Platforms
Sabancı Group’s calcium aluminate cement (CAC) is a critical part of its transformation strategy in the building materials segment. A value-added niche product in the construction industry, calcium aluminate serves as a bridge between the cement and construction chemicals sectors for the Group. Currently, Çimsa is investing USD 45 million to double its calcium aluminate production capacity by the end of third quarter 2023 with a greenfield investment at its Mersin plant. The new production capacity will be utilized for exports with the US and Europe as the target markets. This major investment is in line with Sabancı Group’s sustainable investment policy of delivering high value with low CO 2 intensity.
In 2022, Cimsa Sabancı Cement BV, an entity set up in the Netherlands as a robust overseas platform to position Sabancı Group as the leader in the global white cement trade, was rebranded to Sabancı Building Solutions BV. The rebranding effort is aimed at widening the Group’s portfolio of sustainable building solutions for international markets.
In 2022, Sabancı Building Solutions became a limited partner in Zacua Ventures, a venture capital firm focused on new frontiers in construction tech and advanced building materials. Zacua Ventures enables Sabancı Building Solutions to become an indirect investor in startups while providing an ideal opportunity to access new emerging technologies and closely monitor developments in these key areas. To date, we have invested in three startups via Zacua Ventures and two startups directly via Sabancı Building Solutions.
At end-2022, Sabancı Building Solutions Technology Center was established in Munich, Germany in collaboration with Technical University of Munich. This new center was set up to serve the Group’s product diversification efforts and conduct research on new construction technology and sustainable building materials.
The Way Forward
Sabancı Group’s building materials companies plan to focus on growing and transforming into a global sustainable building solutions portfolio. Sustainability is the key component of the Group’s building materials business. In alignment with Sabancı Holding’s 2050 sustainability targets, the Group’s cement business has set out a CO 2 roadmap that includes a wide range of efforts, such as further reducing the clinker ratio, expanding the use of alternative raw materials and significantly boosting the use of alternative fuels.
Currently, Sabancı Group’s building materials unit operates Çimsa plants in the US and Spain, in addition to international terminals. With this extensive geographic footprint, the Group’s building materials companies effectively reach global customers. Further expansion of this network is planned to get closer to customers, especially in developed countries.