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INTERVIEW - Bulgaria's Devnya Cement Sees New 256 Mln Euro Production Line Hitting Full Capacity in '12, More Projects Likely

Nov 27, 2009, 5:10:00 PMInterview by Iva Doneva
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November 27 (SeeNews) - Bulgaria's Devnya Cement, part of Italy's Italcementi Group, expects a new 500 million levs ($380.9 million/255.6 million euro) production line to reach its full annual capacity of some three million tonnes of cement in 2012, a senior company executive said on Friday.

INTERVIEW - Bulgaria's Devnya Cement Sees New 256 Mln Euro Production Line Hitting Full Capacity in '12, More Projects Likely

The group, which is the world's fifth largest cement producer, could also consider other building materials projects and possibly a stab at the renewables market in the country at a later stage, Italcementi General Manager for Bulgaria Alex Car told SeeNews in an interview on the sidelines of Bulgaria 2009 - 2013 Economic Visions for European Development, a two-day conference organised in Sofia by the Bulgarian Economic Forum (www.biforum.org).

"Actually we are targeting [to wrap up the Devnya project at] the end of 2011 but to be fully operational in 2012," Car said.

The company had initially planned to build the line by the end of 2010. "But then we came into early 2009 and what began as a global crisis became a significant recession in eastern Europe and in Bulgaria so the decision was made at a corporate level to postpone the project by one year."

The new dry-process production line at the company's plant in Devnya, some 25 kilometres west of the Black Sea port of Varna, also has the capacity to produce 7,000 tonnes of clinker daily. Devnya's current production line, with an annual capacity of two million tonnes of cement, uses the highly energy-intensive wet process.

Once the new line is in place, the company plans to shut down the existing one, Car said.

MARKET OPPORTUNITIES ABROAD

Devnya Cement, which ships cement to the U.S. as well as across the Black Sea and Mediterranean basins, expects that the new line would be a boon to its business abroad as one export destination could be eastwards, to Russia's Sochi which will host the 2014 Winter Olympics.

"If you had asked me one year ago, I would be able to tell you that a large portion of that capacity would have been utilised within Bulgaria and maybe in the surrounding neighbouring countries - southern Romania, Macedonia and parts of Serbia, and maybe 20% to be used for exports out of the Black Sea," Car said.

"Today, however, the Bulgarian market has declined by more than 40% and although we expect [it] to begin to recover [...] it can't recover to those [pre-crisis] types of levels so quickly," Car said.

Bulgaria's cement industry has been steadily growing by an annual margin of 25% in the past six years, thriving on a boom in the real estate and tourism sectors that preceded the country's 2007 entry into the European Union.

"I will be happy if 2010 remains at 2009 levels," Car said, adding a recovery in the market could be expected after 2011 when the growth engine will be the infrastructure sector.

"Italcementi sees Devnya becoming a very significant part of the global export trade strategy for the group," Car said, adding that, depending on the evolution of the market, the company could see 60-70% of its sales at home and the rest abroad.

"The fact that we are located on the Black Sea is of strategic importance for Italcementi because Devnya has always historically been significant exporter of cement."

VULCAN CEMENT AND OTHER PROJECTS

In Bulgaria, Italcementi also owns Vulcan Cement which has an annual capacity of 500,000 tonnes of cement.

Italcementi acquired Devnya Cement (www.devnyacement.bg) in 1998. A year later, the group bought Vulcan Cement, located in the southern town of Dimitrovgard.

"I think a similar scenario exists with Vulcan. Depending on the evolution of the market, we will asses the future of Vulcan," Car said, adding that the parent company has already initiated a process to get an environmental permit to upgrade the plant with a new production line. "If we are to build a new plant, I don't want to put a number [on it], but it will be close to one million tonnes."

"It is still premature to talk about Vulcan," Car added and explained that the upgrade would be the way to go if the market continues to grow, otherwise the development of a grinding centre is a fallback option.

The project at Devnya Cement will be in the focus of Italcementi in the next two years and after that the group could have a clearer vision of possible new projects in Bulgaria.

"I think it will be a natural progression to go into concrete and aggregates production," Car said.

Italcementi, through its electricity production unit Italgen, is also considering entering Bulgaria's renewable energy market, he added.

Italcementi Group (www.italcementigroup.com) operates in 22 countries worldwide. The group has 62 cement plants and over 22,000 employees. It closed 2008 with a consolidated turnover of 5.779 billion euro and a net profit of 272 million euro, down from 6,001 billion euro and 613 million euro, respectively, a year earlier.

($ = 0.6711 euro)

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