Ecocem laying foundations for its UK expansion plans
The cement maker is pushing ahead with a move into the British market, regardless of the uncertainty caused by the Brexit vote. UK and Ireland managing director Micheal McKittrick spoke to Gavin McLoughlin
Environmentally friendly Irish cement company Ecocem has ambitious plans to expand into the UK and will not let Brexit get in the way. Micheal McKittrick, managing director of the UK & Ireland arm of Ecocem, is pushing ahead with a big expansion drive in Britain with the belief that demand for its products will grow, regardless of the country's changing relationship with the EU.
The company manufactures something called ground granulated blast furnace slag (GGBS) - a type of cement that has a much lower carbon footprint than the more commonly used ordinary portland cement (OPC). It also has a whiter finish, making it more visually pleasing for use in certain projects.
Most of the company's product is sold in bulk to concrete manufacturers, who then blend it with OPC (this has to be done in order to get the GGBS to 'activate') to make their product. It also sells a bagged cement product, itself a blend.
The company is pushing both its bulk and its bagged product in the UK and Ireland. Bags are about 5pc of the mix in the UK and 15pc of the mix here.
Asked why the company sticks with the bags, McKittrick says they return higher margins.
"It's a growing part of the business. It's quite a competitive part of the business - not a market that's growing very strongly. A lot of the housing developments that are happening at the moment are reasonably large scale, they don't really have bags on the site.
"You need to get your small builder in Louth or in Monaghan or in Tipperary or in Cavan to be building the one, two, three, four house developments again to use bags. Anything bigger and people are bringing in a concrete manufacturer. The bag market is not strong for anyone just yet, I think it will start to grow in the next 12-18 months but it's been a reasonably challenging market."
Another challenge for the company has been a recent decision to change the packaging on the bagged product. Most of the bags in the Irish market are made from paper but this can pose a problem if they are exposed to rain. Plastic bags are more expensive to produce and McKittrick says the ultra competitive market here won't support the extra cost.
"It's helped both sustain sales and add quite a few customers over the last three or four months since we launched earlier this year," McKittrick says. "We also see the growing desire from end consumers to have a more environmentally sustainable product or a technically better product for certain scenarios that they wouldn't be able to get maybe normally.
"If the market grows and we keep our market share we'll be happy enough to be perfectly honest. I think we'll grow on the back of the technical benefits and the environmental benefits. When people hear the story as to what our product is and what it can do and they use it, then it's very well got in that regard.
The company's major competitor is of course CRH which has itself moved into the GGBS market in recent times. Another company in the South East called O'Brien Cement is also active. That's presented a challenge for Ecocem which was once the only supplier of GGBS here.
"There's space in the market for all three ... all are surviving. No problems whatsoever. There's very little interaction between us and them being perfectly honest - the market's growing so it leaves space for all to operate within it," says McKittrick. To grow in such an environment, the company needs to provide additional services beyond just supplying a product.
"We bring a high level of technical expertise and innovation to our customers. Most of the industry know a lot about ordinary Portland cement, but we're the experts in the GGBS. So we can bring the benefits of that to different customers for different needs that they might have, whether they be in Ireland or the UK," says McKittrick, citing an example of how the company has helped customers to produce sulphur-resistant products - important in the UK where the soil can have high sulphur levels.
McKittrick has been at the company for about 10 months and is driving its efforts to expand in the UK. It's opened its first two import terminals there in the last year, one covering the North West and one covering the South East.
Brexit has thrown something of a spanner in the works but McKittrick sees a big market opportunity.
"The UK market is very much a net importer of cement. The chances of the UK market actually getting planning permission for further cement plants, I've heard the market over there say that will just not happen so they're always going to be a net importer of material," McKittrick says.
"That coupled with the fact that they produce very little of their own GGBS, and that we have a very long-term strategic and secure supply of GGBS made it an easy market for us to expand in.
"Is Brexit an ideal scenario in that? Certainly not - and the lack of clarity as to what might happen is somewhat worrying but we have the flexibility, we have a product that they need, we have a lot of very, very strong contacts with those in the industry that know the benefit of our product."
Ecocem also sees an opportunity to grow sales on foot of a falling supply of pulverised fuel ash (PFA) - a by-product of coal-powered electricity generation that is combined with cement to make concrete. With electricity moving away from hydrocarbons, the supply of PFA is bound to decline and McKittrick sees an opportunity for GGBS to replace it.
"The production of PFA is reducing every year. And that could run out, some say five years from now, others say less than that. Technically they need other replacement products to fill the gaps - so when there's less PFA being produced the market for GGBS grows strongly.
"I suppose post-Brexit the UK is likely to increase its expenditure on infrastructure to help support the local market so that should assist us in ways," he adds. "But in terms of free movement of people, free movement of materials, we don't know what is going to come out of a post-Brexit era but we'll be keeping our ears close to the ground on that.
"We've put the investment in. We're there for the long term. We think there could be blips over the next couple of years, of course there will, but we think we have a robust enough business plan, a robust enough product, to survive the ups and downs."
Sunday Indo Business