The cement industry is one of the world’s biggest emitters of carbon dioxide.
With increasingly urgent warnings about the need for action, it’s an industry under the spotlight as pressure grows to cut emissions.
Donal O’Riain’s pitch is that he can help.
O’Riain is the founder and managing director of Ecocem, a producer of a type of environmentally-friendly cement.
The product is called ground-granulated blast furnace slag (GGBS) – made from a byproduct of steel production and then blended with ordinary Portland cement (OPC) to create concrete with a lower carbon footprint. In visual terms it is whiter than OPC – making it more attractive for use in certain projects.
O’Riain discovered GGBS during a six-year stint at CRH – the global behemoth that is Ireland’s largest listed company and the major player in the cement industry here via its subsidiary, Irish Cement. After college he worked with KPMG before going into industry. He left CRH and started his own consultancy, helping companies who wanted to use the product.
Then, after the Kyoto treaty made plain that the world wanted to reduce its carbon footprint, he took the plunge and started Ecocem.
“The cement industry had invested millions in capacity and was producing cement at very high margins, and it was impossible to get those high-profit margins with this technology [GGBS] so they, for economic reasons, weren’t particularly interested in it.
“And so the door was open in terms of somebody else who wanted to come in and develop it,” O’Riain says.
The problem was quite simply that GGBS has to be blended with OPC in order to work. A concrete manufacturer who has one silo for his cement now has to buy a second silo for GGBS before he can use the product.
“Not everyone is equipped with extra silos to be able to handle extra raw materials in concrete manufacturing. So you really had to go and talk to people to get them first of all to accept to invest some money before they could use the product … we took on the challenge of doing that and we even in many cases subsidised them initially to get them over the initial hump,” says O’Riain.
The gamble has paid off and now Ecocem has built a business with growing revenue, focused mainly on Europe. Last year group turnover rose 9pc to almost 80m, though operating profit fell from €4m to €2.8m.
Investors in the privately held group include the French building materials giant Saint-Gobain (30pc), and the well-known Irish financier Dermot Desmond (18pc). O’Riain and his family own 39pc. O’Riain lives in France, where Ecocem has a plant. His Irish accent is infused with a slight Gallic lilt.
With growth comes challenges and one of the main ones Ecocem is facing is in California.
The company wants to build a plant in the city of Vallejo in what would be its first foray into North America.
California has ambitious plans to cut emissions, so Ecocem feels like a good fit for the State.
But the plan has run into stout local opposition, facing claims that it would violate Californian pollution laws, a claim backed by the local attorney general.
Politicians will have the final say on the project, but O’Riain is confident Ecocem will get the approval it needs to finally move on with the plant after a number of years’ effort.
“From a technical point of view there’s a very thorough examination, not just of the project, but of alternatives to the project that has to go on. For us that’s not a problem,” says O’Riain.
“In parallel with that you have a political process because the ultimate decision is taken by elected politicians.
“Our job is not to play politics out there. Our job is to concentrate on the environmental impact study and to provide all the technical data necessary for a full and fair evaluation of the project.
“And we’re very confident that we will be vindicated in that approach once the final environmental impact study is published which we expect early in the New Year.”
In Europe, the company’s growth has been helped by a joint venture in France with giant steelmaker ArcelorMittal. That makes sourcing raw materials for GGBS easier, and helps with funding expansion. Opportunities to work with ArcelorMittal outside of France exist, says O’Riain, given its global footprint.
But growth isn’t just about entering new markets. The cement market is very competitive and Ecocem isn’t the only supplier of GGBS.
Competing on price (once the initial investment hurdle is overcome) is hugely important. But alongside that Ecocem is looking to transform itself from a product supplier to a ‘solutions’ supplier. In other words, it wants to supply the technical expertise and innovation that customers need to achieve their goals.
One example of this is a ‘self-levelling floor screed’, a product essentially sprayed into position to create a concrete floor that requires drastically less manual labour to level it out.
The product is being launched in the Netherlands and O’Riain says he will look to introduce it in other markets, including Ireland, in 12-18 months.
The cement industry is capital-intensive. Expanding is costly, because it requires a new plant to be built. The bill for a plant is €40m, O’Riain says.
The most recent plant, in Dunkirk in France, opened this year, eight years after the last one. The company’s target is to get that gap between plant openings down to three.
All of this raises the question as to whether Ecocem is an IPO candidate, one of the next generation of big Irish businesses like Ryanair, Smurfit Kappa, or indeed CRH.
That would help shareholders like Saint-Gobain or Desmond get an exit, and it would also provide a source of capital for growth.
“We haven’t ruled out any possibility at all, including IPO. But specifically in relation to an IPO, given the growth and value we still can build up on a private financing basis, the earliest we would look seriously at that would be 7-10 years,” O’Riain says.
“Our idea is that if we go to the market it’s because we’ve already created a lot of value, so we can get the best possible return for our shareholders. So our shareholders understand that situation and are with us in the view that we don’t need to rush.
“Now we’re in a phase of building value and we need to continue that before we go to the IPO market. And we can satisfy our financial requirements without having to float.”
Major climate change talks, seen as the most important since the signing of the 2015 Paris agreement, are taking place in Katowice in Poland this week.
The stronger the rules agreed, the more potential there will be for Ecocem to grow.
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