CSN, identified as a consolidator, could seek a partner, aiming to reduce debt
03/05/2025
The future of InterCement assets, part of the Mover group (formerly Camargo Corrêa), currently undergoing court-supervised reorganization since December, is poised to redefine the landscape of the cement sector, which is currently dominated by a few key players, Valor learned.
The format of InterCement’s sale hinges on its reorganization process. The company ranks third in market share, following Votorantim and Companhia Siderúrgica Nacional (CSN), and is second in production capacity.
InterCement was on the verge of being sold to Benjamin Steinbruch’s group. However, negotiations fell through last year due to the appreciation of the company’s assets in Argentina, specifically the cement company Loma Negra, and disagreements between bondholders and Mover shareholders, according to sources.
Four other groups—Votorantim, Polimix, Buzzi, and Vicat—competed for InterCement’s assets piece by piece last year. The company’s debts amount to approximately R$14.2 billion. Except for Votorantim, which has a significant national presence with factories in 17 states, the other three companies are seeking to expand their businesses in the Central-West, Northeast, and Southeast regions, according to a person familiar with the matter.
In the scenario of a piecemeal sale of InterCement’s assets, Votorantim Cimentos, which faces restrictions on new acquisitions in the sector, would acquire units in the Central-West and Northeast regions where the company’s businesses do not overlap.
Buzzi, Polimix, and Vicat were eyeing factories in the Southeast, particularly in Minas Gerais and São Paulo, considered strategic.
Until last year, CSN was considered the clear favorite to acquire the rival company, according to another informed source. However, with high leverage at the holding level, CSN is not currently seen as an obvious buyer for the business—up until last year, the company was interested in acquiring operations in Brazil and Argentina.
Sources close to CSN assert that the company does not rule out seeking a partner for its cement division, which has grown significantly in recent years through key acquisitions, including the assets of LafargeHolcim and Elizabeth Cimentos. Selling a minority stake, as happened with its mining arm, could help Mr. Steinbruch’s group accelerate its deleveraging process, enabling potential new acquisitions.
Although debt reduction is currently a priority within CSN, asset purchases are not entirely off the table, one source said. “As long as the agreed leverage levels with creditors are respected, it would be a possibility,” they said.
According to another insider, the first attempt to acquire InterCement was also thwarted due to the impact it would have on the group’s indebtedness. CSN proposed to restructure the cement company’s debts and acquire the assets without disbursing cash or raising new capital, but no agreement was reached with the creditors.
InterCement’s court-supervised reorganization request, filed in early December, marks the third such filing by cement companies since 2021, following Tupi and João Santos. For experts interviewed by Valor, this is not a problem specific to the cement segment but rather longstanding management issues within the companies.
The sector had a positive year in 2024. According to the Brazilian Cement Industry Association (SNIC), 64.7 million tonnes of the material were sold, a 4% increase, exceeding expectations. In 2023 and 2022, the balance had been negative at 1.7% and 2.8%, respectively.
A modest 1% increase is expected in 2025. Paulo Camillo Penna, president of SNIC, notes that the amount sold is still far from the sector’s peak in 2014 when 73 million tonnes were sold, “with less production capacity.” At that time, Brazil had a production capacity of 89 million tonnes, compared to the current 93 million. The sector operates with 30% idle capacity.
This unused capacity is one reason the market is skeptical about the entry of new investors into the cement industry.
According to an industry expert, who requested anonymity, Benjamin Steinbruch’s company is still likely to acquire InterCement’s assets sooner or later. If the cement company manages to recover through court-supervised reorganization, a scenario he considers “remote,” it is expected to make another sale attempt when possible, with CSN remaining the most likely buyer.
If the court-supervised reorganization process does not go well, InterCement’s creditor banks are expected to claim the assets and auction them off—a prime opportunity for CSN to acquire the assets at a lower price.
According to a source close to the group, CSN is interested in new acquisitions, provided they respect leverage limits, to further expand in cement. In the third quarter, the latest available data, the division accounted for 11% of the consolidated net revenue of R$11 billion and 15.3% of the R$2.3 billion in earnings before interest, taxes, depreciation, and amortization (EBITDA). CSN currently can produce 17 million tonnes of cement annually, with plans to expand this amount to 26 million.
Despite a challenging pricing environment in 2024, the company saw synergies in integrating the assets acquired in recent years and the business margins.
Votorantim Cimentos, the leader in production volume in Brazil, may have an interest in assets in regions where it does not have factories, according to the source, but has focused more on international expansion, particularly in the United States, rather than in Brazil. As the largest producer, with 24 factories (compared to CSN’s 13 and InterCement’s 15) and double the installed capacity of its main competitors, the company could be blocked by Brazil’s antitrust regulator CADE.
CSN is also subject to remedies, depending on the region of the assets.
Smaller cement companies are seen as potential buyers of InterCement assets if they cooperate. According to an industry source, they could acquire plants that may be part of possible remedies imposed by CADE on another larger buyer.
The sector is concentrated—the three largest producers hold over 50% of the market share and 74% of the country’s installed capacity. Still, smaller local producers dominate their regions, as cement is known for “not traveling well.” Due to its weight, freight is expensive relative to the product’s price, and it spoils if it gets wet during shipping. Producing companies need to have factories near sales locations, making national coverage difficult.
Local companies like Mizu, part of the Polimix group, have been performing well. In 2023, the company had nine factories in nine states and was one of the country’s five largest producers. In November, it reactivated a factory that belonged to the João Santos group in Sergipe, acquired at auction. It also purchased Cimentos do Maranhão (Cimar) in 2024, formerly owned by the Cornélio Brennand and Queiroz Galvão families, and two quarries from the Queiroz Galvão group in Ceará and Rio de Janeiro.
The Chinese company Huaxin Cement also invested in quarries, acquiring the Embu quarry for $186 million in mid-December. It is the country’s second-largest quarry. During the initial negotiations for InterCement assets, Huaxin was among those interested in the factories.
According to experts, the entry of a Chinese competitor would be good news for cement consumers but “a risk” for domestic producers, as it could impose intense price competition. An industry source considers that the Chinese could be attracted by the cement industry’s “relatively good” margins, noting that China “generally invests in what it can import,” and cement does not fall into that category.
Construction businesspeople interviewed by Valor under the condition of anonymity do not see the possibility of a new competitor entering the market given its high entry barrier. A further concentration of production in a few companies is not concerning—the analysis is that it would make little difference in a sector already seen as a cartel.
The three major companies mentioned, Votorantim Cimentos, CSN Cimentos, and InterCement have either gone public or are expected to do so. InterCement and CSN attempted to advance the process in 2021 and 2022 but withdrew due to the market window closing.
InterCement’s reorganization is not expected to affect the market’s perception of the other two, according to the analyst. Being part of holding companies that operate in diversified segments helps. “If cement underperforms, iron ore or steel does well, ensuring balanced results,” the source says. Even if the IPO represents a separation of the business, investors would have a different perspective. That does not apply to smaller companies, the source notes.
The president of SNIC points out that these companies’ reorganization is not expected to impact cement supply in the country as there is high idle capacity. “The market is well-served,” Mr. Penna stated.
Contacted by Valor, Votorantim Cimentos stated in a note that in February 2024, it announced through a notice of material fact it had made an individual and independent offer to acquire part of InterCement Brasil’s assets. “The offer was made within a competitive process, and its confidential terms outline usual precedent conditions for such a deal, including express prior approval by the Brazilian antitrust regulator, the Administrative Council for Economic Defense (CADE).”
The company also stated that “it is not part of and does not lead any consortium aiming to acquire these assets” and that “to date, no documents have been signed with any counterpart that would generate a firm obligation or commitment to acquire the assets that were the subject of the offer.”
CSN Cimentos and InterCement said they would not comment, as did the French company Vicat, which acquired a majority stake in Ciplan in 2019.
Valor also reached out to Huaxin—who did not respond to the interview request—and was unable to contact Polimix. Buzzi said it does not respond to press inquiries.
*By Ana Luiza Tieghi, Mônica Scaramuzzo e Stella Fontes — São Paulo
Source: Valor International