IFC and Construction

Materials:
Helping Expand
Infrastructure
Enhancing Economic Growth
in Emerging Markets

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IFC and Construction Materials: Helping Expand Infrastructure

IFC and Construction Materials:

Helping Expand Infrastructure
Developing countries cannot make progress on their poverty
reduction and economic growth strategies without roads,
ports, schools, hospitals, and other community institutions.
And without an affordable and ready supply of the basic building blocks of
infrastructure and housing cement, metals, glass, and other materials even the most
well-intentioned infrastructure development policies will fall short.
IFC has invested almost $6 billion in the construction materials sector. This has helped
increase the availability of affordable local sources, which are critical to developing a
thriving construction sector and to building the physical infrastructure that countries
need for economic growth and poverty reduction. Better infrastructure, in turn, drives
GDP growth, creates jobs, and encourages additional foreign investment. IFCs worldclass sustainability standards also help client companies reduce their environmental
footprint, enhance their social responsibility efforts, and improve governance, all of
which contribute to a strong triple bottom line.

What We Offer
IFC, a member of the World Bank Group, is the
largest multilateral source of loans and equity
finance for private enterprises in emerging
markets. We offer clients the strength of our own
$18.3 billion net worth, global focus, local
presence, and industry expertise.
T
 ailored solutions that respond to client needs.
These include long-term debt, quasi-equity, and
equity financing products; local currency
financing in a growing number of cases; and
tenors of up to 12 years. IFC offers construction
materials and country expertise across multiple
subsectors and can support financial
restructuring efficiencies.
A
 strong track record. IFCs commitments span
the globe. Our $2.3 billion construction
materials portfolio represents 100 investments
in 77 companies and 42 countries.

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L eadership in sustainability: IFC can help clients

improve their environmental profile, reduce
waste, strengthen corporate governance, and
build stronger relationships with local
communities. For an industry with a significant
environmental footprint for example, cement
plants produce 5 percent, and metals 4 percent
of man-made carbon dioxide worldwide
sustainability is an increasingly critical issue.
IFCs guidance can help companies interested in
elevating their environmental and social
standards beyond compliance, which can
enhance their brand and improve their public
image.

Development and Economic Impact

IFC is a development institution, with a mission
to promote growth in private enterprise and
create jobs in the developing world. We help
clients understand the business case for social
and environmental responsibility: lower costs,
less political risk, higher productivity, and brand
enhancement. In 2008 IFCs construction materials
projects have created:

Supporting the
Construction
Industry in Developing
Countries
Cement, metals, and glass are usually
consumed close to where they are
manufactured because of the high
relative cost of transporting such
goods over long distances. But these
industries are capital-intensive and
require long-term funding, which is
not always available in developing
countries. Through long-term
investments in cement, metals and
glass industries in emerging markets,
IFC is increasing the availability and
affordability of locally produced
construction materials.

2
 6,200 direct jobs and thousands of indirect
jobs
 ur client companies contributed to
O
$547 million in taxes, and purchased local
goods and supplies totalling $1.2 billion
B
 etter local infrastructure, including roads,
schools, hospital and community centers that
meet basic needs in developing countries
M
 ore residential and commercial construction,
which contributes to the growth of the
middle class through broader access to
homeownership and helps countries become
more attractive locations for foreign direct
investment
 etter environmental management systems,
B
which lower ozone emissions and improve
energy efficiency
E
 nhanced community development, which
reduce client companies reputational and
business risks

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IFC and Construction Materials: Helping Expand Infrastructure

IFCs Environmental
Leadership:
IFCs involvement and
expertise in environmental
and social management
brings value to construction
materials companies that
have recognized the benefit
of investing in strong
sustainable development
programs.
IFCs partnership with clients extends
beyond environmental, health, and
safety management systems to
encompass energy efficiency, control
of gas and dust emissions, quarry
rehabilitation, resource recovery,
and local community development
programs. IFC has consistently found a
strong business case for environmental
and social sustainability. Benefits to the
environment and local communities
enhance worker productivity and often
improve a companys bottom line.
IFC investments often add a seal of
approval to a companys operations,
giving investors and consumers
confidence in the companys integrity.

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Expertise across the Subsectors

IFCs sectoral expertise, regional knowledge,
and leadership in sustainability offer significant
value to our clients, in addition to the full suite
of financial products we offer. We invest in the
following subsectors: cement, metals, glass, and
other construction materials, such as ceramic
tiles, sanitary ware, and glass fiber. IFCs portfolio
features projects in Sub-Saharan Africa, the
Middle East, Asia, Southern and Eastern Europe,
and Latin America.
IFC helps global and regional players such as
Lafarge, Vicat, Holcim, Taiheiyo, Titan, Mabati
and Industrial Union of Donbass establish or
expand their presence in emerging markets by
offering flexible financing instruments.
We focus on cultivating long-term partnerships
with market leaders, recognizing that healthy
companies grow in stages and often need
multiple rounds of financing to support their
continued growth.
We also support local players, either within
their countries of operations or in their plans to
expand to other emerging markets. For example,
IFC has teamed with Orascom Construction
Industries, a leading Egyptian construction
materials and construction company, whose
cement activities are now a part of Lafarge, to
support its growth and strategic development
through several expansion projects within Egypt
and elsewhere in the region, including Algeria.
We also cultivate partnerships between local and
global clients not only at the origination stage
but also at the exit stage. For example, IFC can
explore selling its equity stake in one cement
client to another cement company.

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Italcementi: Long-term
Partnerships with a
Global and Regional
Player
With IFCs help, Italcementi,
the worlds fifth-largest
cement producer, is
implementing an aggressive
strategy to expand into
emerging markets.
With 2006 revenues of $8.45 billion and
total cement capacity of 70 million tons
in 19 countries, the company saw an
opportunity to expand its footprint
where demand for cement is growing
fastest. With new operations in India and
Kazakhstan and the recent purchase of a
Chinese cement company, Italcementi has
positioned itself to compete in important
emerging markets.

IFCs flexible financing and efficient structure have

enabled Italcementi to act rapidly as acquisition
opportunities arise. This is critical to successful
implementation of the companys strategy.
The agreement allows Italcementi to mobilize
financing rapidly on a cost-and resource-effective
basis within pre-agreed parameters. IFCs $200
million debt and equity facility will finance
Italcementis expansion in several emerging
markets over the next three years .
Italcementi has also elevated sustainability to
a strategic level. It is listed on the Dow Jones
Sustainability Index and a member of the World
Sustainability Council. With a strong revenue
outlook and growth strategy, the company is
demonstrating the business case for sustainability.

The company has turned to IFC for emerging

market experience and knowledge of local
companies and conditions, as it seeks to intensify
its investments in places where demand for
cement is booming.

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IFC and Construction Materials: Helping Expand Infrastructure

Cement: Supporting
Local Construction
Sector Growth
Cement is critical for the
construction sector, the
worlds largest industry, and
a shortage of supply could
hinder the industrys growth.
For developing countries, construction
offers tremendous potential for job
creation, infrastructure, housing
development, and revenue growth.
The strong economic performance of
emerging economies has fueled recent
industry expansion, elevating the
importance of an uninterrupted supply
and local availability of raw materials.

Yemens Construction Boom

Middle Eastern investors have started to take
notice of opportunities in Yemen, one of the
regions poorest countries, and this has fueled a
small boom in construction. But with little local
industry, builders have been importing more than
60 percent of the cement they use.
With IFCs help, the situation is changing. Arabian
Yemen Cement Company Limited, sponsored by
a Saudi businessman and his Yemeni and Saudi
partners, recently received $70 million in longterm IFC financing for the companys integrated
greenfield cement plant. IFC also mobilized
$55 million from commercial banks; our first
syndication in Yemen is expected to establish a
demonstration effect in a country where business
risks are perceived as high.

As it is difficult to obtain long-term

financing for such a large project
in Yemen, IFCs support is a critical
component of this project. IFC has also
been instrumental in advising on the
projects technical, environmental, and
social aspects.
Abdullah Ahmed Said Bugshan.
AYCC chairman

IFC is supporting cement investments in:

T
 urkey: IFC provided a $175 million financing package to Sanko Group
and its cement subsidiary to acquire an existing plant and build a new one
capable of producing 3.1 million tons of cement each year.
Albania: IFCs proposed investment in Antea Cement, an Albanian
subsidiary of Titan, will support construction of a cement plant with an
annual capacity of 1.4 million tons. This would help stimulate FDI, generate
employment, reduce the countrys dependence on imports,
and strengthen the regional export market.
S
 enegal: IFCs $26 million long-term loan to Vicat will help the French
company expand its Senegalese subsidiary Sococim. IFC also issued the first
local currency bond in West Africa as non resident issuer, with $42 million
of the bond proceeds directed to this expansion project. Sococim plans to
install a new cement line with the capacity of 1.4 million tons per year. It
will also build a 24-megawatt power plant and carry out environmental and
equipment upgrades.

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The landmark project a first for eastern Yemen

is a major step forward for the country and its
construction industry. Located near Mukalla, the
capital of Hadramout Governorate, the plant will
generate employment in one of the countrys
least-developed regions while reducing reliance
on more costly imports. It will run on state-ofthe-art, energy-efficient technology with an
annual production capacity of 1.54 million tons.
Because construction has so much potential to
enhance economic growth, create jobs, and
reduce poverty in Yemen, IFCs support is not
limited to one company here. National Cement
Company Limited, sponsored by Hayel Saeed
Anam Group of Yemen, has also received IFCs
assistance through long-term financing and
an interest rate swap to hedge the companys
interest rate risk. NCCs plant will have capacity
of about 1.4 million tons per year and will be the
first privately owned plant operating in Yemen.

Climate change
strategy for cement:

Reduce Emissions,
Promote Innovation

Cement production is energy-intensive and

accounts for 5 percent of total man-made
worldwide CO2 emissions. The cement
industry faces long-term strategic challenges
particularly in the area of energy efficiency
and control of greenhouse gas (GHG)
emissions. Our focus is on:
Minimizing harmful GHG impacts from
direct and indirect CO2 emissions with
investments that:
Reduce the clinker content of cement
 Promote energy efficiency in clinker and
cement production
Promote use of alternative fuels (such as
biomass) Implement waste heat recovery
systems for power generation

State-of-the-Art Technology and Waste Heat

Recovery: Shanshui Cement Group, China
New technology and production process initiatives
are helping Shandong market leader Shanshui Cement
Group improve its environmental performance.
IFC financing is supporting these efforts, with a 2008
investment toward the companys $682 million project
involving the implementation of new cement lines,
self-power generation using waste heat recovery
generators, and specific cement acquisitions.
SCG, one of the top 3 largest cement producers in
China, has an annual cement capacity of about 30
million tons. It operates over 10 cement plants and
12 cement grinding units, all of which are located
in Shandong and Liaoning provinces except one
grinding unit in Tianjin.
This recent IFC-supported company initiative will
enable upgrades to cement technology to improve
quality and reduce emissions. The far-reaching energy
efficiency program includes new suspension pre-heater
technology as well as the installation of waste heat
recovery systems for power generation on all kilns,
having a range of 2,500 to 5,000 tpd capacity. After
completion of this program, the company will stand
out as one of the energy efficient and environmental
leaders in Chinas massive cement sector, which
produces more than 45 percent of the world market.
Shanshui is also well-positioned to take advantage of
the on-going market consolidation encouraged by
the Chinese government in order to rationalize an
industry having over 5000 companies. As larger, more
technologically-advanced players like Shanshui buy
up smaller, local companies, they upgrade processes
and promote clean production technology. This means
a shift from vertical shaft kilns, which accounted for
55 percent of cement capacity in 2005 and were a
considerable source of pollution, to energy efficient,
environmentally friendly NSP technology. Estimates
suggest that by 2010, companies will produce over 850
million tons of cement 70 percent of capacity using
this new, cleaner technology.

Local and second-tier producers to support

investments in modern, cost-competitive
and environmentally friendly plants,
especially in frontier markets.

IFC role and climate change benefits

Initiatives to promote best practices

and innovation, such as carbon-related
initiatives and energy efficiency audits.

Guidance on technology and environmental & social

best practices and on sustainability strategy

In addition to structuring appropriate

financing, IFC can offer guidance on
equipment and technology, and ways to
quantify potential efficiency gains based
on our track record.

Reduced reliance on external power sources: waste

heat recovery can be replicated in similar investments

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Two rounds of financing in support of its expansion

plans: $57.7 million in 2005; $62.6 million in 2008

Significant reduction in pollution: all of SSGs cement

plants use clean NSP technology

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IFC and Construction Materials: Helping Expand Infrastructure

METALS: LOW-COST
AND ENERGY-EFFICIENT
PRODUCTION
We support projects that
improve environmental
standards, including scrap
metal recycling, replacement
and modernization of
equipment.
IFCs metals investments span the globe.
We take a regional and country-specific
approach to our metals investments,
depending on identified needs and
unique market conditions.

Reducing Emissions, Achieving Cost

Efficiencies: Industrial Union of Donbass
Ukraines Industrial Union of Donbass cut
its operating costs by 5 percent through
blast furnace upgrades and a modernization
program that improved its energy efficiency.
IFC helped the company upgrade its production
technologies, reducing particulates by more
than 450,000 tons and achieving a 10 percent
reduction in carbon dioxide emissions, along with
other environmental improvements. The project
resulted in positive business outcomes as well-the
company upgraded the quality of its products,
and expanded its steel product line.

IFCs role:
$700 million financing package, including longterm financing that improved the companys
debt structure
Guidance on technology upgrades resulting in
environmental efficiencies

Climate Change strategy for metalS:

Reduce Emissions, Promote Innovation

The steel industry accounts for nearly 4 percent of the worlds GHG emissions; on average, 1.7 tons
of carbon dioxide is emitted for every ton of steel produced. Our focus is on steel operations, since
steel investments represent more than 80 percent of IFCs exposure in the sector, and as crude steel
production shifts to emerging market countries. Our focus is on:
Opportunities to improve environmental standards through replacement of open hearth
furnaces, modernization of coke production, enhanced energy efficiency, promotion of scrap
steel recovery and recycling, blast furnace and converter gas recovery for power generation
and others.
Investments that support the industry shift toward highly efficient production platforms, based
on the global industry cost curve.
Projects that minimize environmental impacts and enable client companies to adopt best
practices and invest in leading-edge technologies to improve energy efficiency and abate
pollution. Investments in these areas often result in operational cost savings.
Opportunities to provide additional innovative services and products such as energy efficiency
and cleaner production audits, knowledge sharing and guidance on carbon credits.
In addition to structuring appropriate financing, IFC can offer guidance on equipment and
technology, and ways to quantify potential efficiency gains based on our track record.

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New Cold Rolling Mill for Kenya: Mabati

Mabati Rolling Mills Limited is installing a new
6-High Cold Rolling Mill at its Mariakani Complex
near Mombasa. The new mill will expand the
existing capacity of cold rolling and will enable
higher and better production of Aluminium-Zinc
coated products. AZ coated steel is more resistant
to corrosion and lasts up to six times longer
than more traditional 100 percent zinc coated
galvanized steel. There is strong customer demand
for this steel, which is extensively used in roofing.
To date, Mabati is the only producer of AZ coated
steel in Africa. The total project cost is estimated at
$35.6 million. This is partly being financed by IFC.
Mabati is part of SAFAL Group and provides metal
roofing solutions across Southern and Eastern
African countries.

IFC role and development impact:

$5 million in long-term financing
200 new indirect jobs
Introducing new technology and new products
to local and regional markets
Superior product quality at affordable prices
will provide better shelter, especially for poor
communities that often use galvanized sheets
for roofing
G
 enerating increased foreign exchange earnings
and diversifying the countrys export base

Enhancing the Capacity of Albanias

Construction Industry: Konstruksione
Metalike
The cost of importing steel structures has impeded
construction activity in Albania, a country on
the cusp of positive economic change. Gaps in
the domestic steel industry have made it harder
to improve transportation infrastructure. New
commercial and residential developments have
been limited. Now, the situation is changing, as the
nations leading domestic supplier, Konstruksione
Metalike, increases its production capacity and
upgrades its technological capabilities, with IFCs
help. Using AutoCAD-based design technology,
Konstruksione is the only domestic producer that
can compete with finished imports, with cutting,
welding, painting and finishing capabilities. The
company employs 65 people. The $6.9 million
project involves construction of a new facility
adjacent to its existing plant, technical upgrades
and investments in the companys logistics
network.

IFCs role and development impact:

$2.95 million long term financing
Technical support and training on ISO-2000
through IFC Advisory Services in Southern Europe
Guidance on improving corporate governance
and transparency
40 new jobs when expansion is complete
Reduced reliance on more expensive imports,
encouraging increased infrastructure and
construction investment

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IFC and Construction Materials: Helping Expand Infrastructure

Glass: Meeting Demand

amid Rising Costs
Rising costs for energy
and raw materials, coupled
with higher prices for
minerals, metals, and timber,
are placing a strain on
construction materials
manufacturers despite the
current upturn in demand
in most markets.
IFC is providing innovative solutions that
help manufacturers in this subsector
respond to the changing environment.

Climate Change
Strategy for glass:

Reduce Emissions,
Promote Innovation

Carbon emissions related to glass production

result from the melting process itself as well
as fuel and energy usage, given the heatintensive nature of the production process.
Our focus is on:

Zhejiang Glass: Expanding Float

Glass Production
With $147 million in revenues last year,
Zhejiang Glass is one of Chinas largest float
glass manufacturers that is listed on the Hong
Kong Stock Exchange. The company, which
employs 5,800 people, is operationally sound
but financially weakened, both because it has
relied on short-term debt to finance long-term
capital expenditures that support its rapid growth
and because the glass market experienced a
downturn in 2006. IFC is helping Zhejiang Glass
strengthen its balance sheet by reducing and
refinancing $220 million of its short-term debt.

IFCs Role:
Investing $93 million in debt and equity
Rationalizing the companys capital structure
and reducing overall financing risk so that it can
continue to grow and weather future cyclical
downturns
H
 elping retain jobs for workers who might
otherwise have been laid off due to downsizing
M
 obilizing additional financing sources
G
 uiding improvements in energy efficiency,
quality management, and corporate
governance

Improvements in raw materials technology,

including new raw material delivery
systems and increases in cullet (waste glass)
collection and use by glass manufacturers.
Support for glass quality standards to
improve availability of high quality glass
and support for energy efficient glass
products (such as solar control and low-E
glasses) to help conserve energy and reduce
GHG emissions.
Promotion of energy efficiency of glass
manufacturing to reduce primary fuel and
power consumption.
Implementation of waste heat recovery for
power generation in selected cases where
cost effective.
In addition to structuring appropriate
financing, IFC can offer guidance on
equipment and technology, and ways to
quantify potential efficiency gains based on
our track record.

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re

Pilkington: Partnering with

a Global Leader in Russia
IFCs investments have reinforced our partnership
with NSG Group (including Pilkington), one of the
largest glassmakers in the world, as it entered a
new market. IFC financing has helped the company
build and outfit a state-of-the-art float glass plant
in Russia, creating 250 new jobs. Strategically
located in the Moscow region, where demand
growing, the plant is close to raw materials
suppliers and target markets. The plants state-ofthe-art emissions controls raise the bar for other
manufacturers in Russia. Now operational, the
plant is reducing the countrys reliance on imports
and contributing to expansion of the construction
industry.

IFCs Role:
Total financing of 59.5 million euros

Other Construction
Materials
IFC is also active in other
nonstructural construction
materials sectors such as
ceramic tiles, sanitary ware,
and insulation and
reinforcement materials.
Growth in these subsectors helps improve
living conditions, creates jobs, and enhances
the tax base. It also increases budgetary
support for critical infrastructure
improvements and expansion of social
and community services.

Assistance in structuring a financial plan and

reducing the projects overall risk profile

Owens Corning India: Supporting

a Market Leader
Owens Corning India Ltd is Indias largest fiberglass
manufacturer. With IFCs help, the company
is expanding its manufacturing capacity and
modernizing its factory to improve energy and
production efficiencies. Over the last few years,
demand for glass fiber in India has grown by 25
percent a year. Demand is expected to continue
to grow at a healthy pace of 18 percent over the
medium term, driven by expanding infrastructure
and automotive sectors. With OCILs expansion,
Indias installed glass fiber capacity will increase to
67,000 tons a year by the end of 2007.
OCIL is a joint venture between U.S.-based Owens
Corning, the worlds largest manufacturer of
fiberglass with a 28 percent market share globally,
and Mahindra & Mahindra, Indias leading
manufacturer of utility vehicles and tractors. OCIL
is not only the largest glass fiber producer in India,
but is also one of Owens Cornings most efficient
plants worldwide.

IFCs Role:
$12 million in long-term financing in support of
$39 million expansion and modernization project
Guidance on implementing environmentally
friendly technologies and processes

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IFC and Construction Materials: Helping Expand Infrastructure

Our Approach
IFC seeks to partner with
strong, stable firms that
understand local and regional
markets, with a track record
of success and an abiding
commitment to transparent
corporate governance,
social responsibility, and
environmental sustainability.

IFCs Construction
Materials Portfolio
IFCs portfolio in construction
materials companies totals
almost $2.3 billion. We
maintain a significant
presence in key countries.
Our $2.3 billion construction materials portfolio
represents 100 investments in 77 companies and
42 countries.

We look for:
Global

players interested in increasing their
presence in frontier markets

Construction Materials
by Sub-sector

Local

and regional players that are expanding
in their own markets or other emerging market
countries
Industry

players looking to enrich their public
image through better environmental and social
management and performance

in markets with strong demand and
Projects
high potential for economic growth
Projects

involving a viable partner of a niche
product, such as white cement

Other
$154,631

Metals
$615,582

Construction Materials
by Region

World
Sub- $200,000
Saharan
Africa
$174,131
Cement
$1,087,244

Glass
$403,284

Southern Europe
& Central Asia
$351,996

South Asia
$254,688

Central &
Eastern
Europe
$376,717

East Asia
& Pacific
$456,151

Latin
America &
Middle East Caribbean
& North
$182,702
Africa
$264,356

Projects with a sound import substitution strategy

Projects

that contribute to privatization or
restructuring of the industry

For more information please contact:

1-202-458-9625 or esiew@ifc.org
Eric Siew
Georges Zahar
1-202-473-7098 or gzahar@ifc.org
Rozita Kozar
1-202-473-2820 or rkozar@ifc.org
Michel Folliet
1-202-473-4614 or mfolliet@ifc.org
Garth Hedley
1-202-473-0640 or ghedley@ifc.org
2121 Pennsylvania Avenue, N.W, Washington, D.C. 20433 U.S.A.
Telephone: 1-202-473-1000, Facsimile: 1-202-974-4384

Printed on material that meets international

environmental standards and is from sustainably
managed commercial forests.

ifc.org

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2008

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