Adbri (ASX:ABC) is investing $199 million to consolidate WA Cement ops 

Summary

  • Adbri is consolidating cement operations in Western Australia at its Kwinana site, where the company has a long term lease.
  • The $199 million investment would deliver state-of-the-art new generation cement facility, which would deliver cost-saving and lower carbon footprint.

Adbri Limited (ASX:ABC) has unveiled a $199 million investment in Kwinana Upgrade Project to consolidate two cement operations in Western Australian into one. 

A final investment decision was approved by the Board for Kwinana Upgrade Project, which would increase the production capacity by ~400,000 tonnes to 1.5 million tonnes per annum. 

One year after the commission of the Kwinana Upgrade Project (KUP), Adbri expects cost savings of around $19 million. These savings are attributed to lower energy, maintenance and transport, and better unit production costs. 

Source: ABC Presentation, 17 December 2020

Adbri would have 20% lower carbon footprint than current operations. The project will continue with the supply of high-quality cement products in the WA market. 

It will be a fully integrated and automated facility, eliminating road transport and minimising clinker handling through mobile equipment. KUP will have new generation cement mills for grinding slag and clinker. 

It will have a new 20,000 tonne finished product storage, weighbridge capability and truck loading. Adbri expects to fully commission the project by mid-2023. 

Investment Rationale

For 65 years, Adbri has been supplying through its Cockburn Cement business, which is one of the leading suppliers of cementitious materials in WA. 

Its production facilities in Kwinana and Munster serve the WA market. Clinker is supplied from Kwinana Bulk Terminal (KBT) to the plants by trucks. Now cement production will be consolidated at Kwinana site, which is close to KBT import facility. 

Source: ABC Presentation, 17 December 2020

The investment will drive down production costs by inducting new equipment and replacing over 50 years old equipment. The new equipment will lower energy, repair, and maintenance costs, while also eliminating the need for replacing old Munster assets. 

The production costs would also be lower as clinker transfer will move to the conveyor system from road transport. The new site will also eliminate the handling of clinker and cement at two sites. 

Adbri’s existing debt facilities would fund the investments. With more efficient logistics and equipment, carbon emission would be lower. 

At the time of writing, ABC was trading at $3.575, up by around 4.5% from the previous close.

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