M. Erkam KOCAKERİM
Limak Cement R&D and International Operations Coordinator
How does the global Covid-19 crisis affect Limak Cement? Can you make an assessment in terms of both the company and the sector in general?
As Limak Cement, our preparations for the Covid-19 pandemic extend to mid-February. Especially in the African countries where we are operating, there is a dense population and mobility from the locations where the pandemic began, and our group also has important commercial and financial business partners in these locations. This entire fact has led us to initiate the preparations for prevention strategies and pandemic management business model in February. Caution and precaution are relative concepts, however, the first thing we did in those days was to review our supply chains and maximize our stock of spare parts and raw materials required for the continuity of our operation. We have seen players do just the opposite. However today, we are glad to be the party to use the right choice and read this period correctly.
In fact, in the early periods when we started business development in Africa, there were tropical diseases and different pandemics which we faced with. For instance, during the Ebola era, I was in Ivory Coast. Naturally, it was then that we understood and established a health committee to determine our health policies with the aim of managing these tropical diseases and pandemics; this culture and experience has always put us one step ahead in the Covid-19 process. We spent the first phase of the pandemic making efforts firstly on pandemic training in centers and factories and then adapting the number of employees, the concept of ‘working from home’, hygiene, and most importantly, remote management of our digital infrastructure and business management models. We are now, in the new normal, moving forward with a focus on testing methods with the discipline of social distance and mask use. Particularly, we have learned to use rapid diagnostic tests according to the periodic rule, where they give scientifically correct results, and we also achieve successful results in this area. We have a crisis desk of 31 people in our headquarters and factories. In this desk, we have 9 institutional physicians who specialize in public health. These committees manage the processes like filiation, quarantine implementation when necessary, contact with local provincial health centers, and treatment. They are reporting all these processes to our headquarters. Similarly, we adapt every measure we take in Turkey to our facilities in Africa simultaneously. We have completed the software and designs required for the management of all these processes and statistics on the digital platform, and we are commissioning this software, prepared with our own resources and having a mobile application, within this month.
Gradual abolition of restrictions on travel and curfew, efficient use of medical capacity, and gaining herd immunity with horizontal data are very important in terms of gaining time for research on vaccine. But of course, there is obviously no clear definition in the world to say that the first wave ends or the second wave begins. In April, the number of daily cases in Turkey rose to more than 5,000s. That number fell to below 900s in July. And we knew that this number would be triggered on Eid al-Adha and we took precautions accordingly. Indeed, this number had rose to 1,700s one more time. However, from the point of view of our crisis desk, this situation is not yet considered a second wave as of today.
During Covid-19, the importance of crisis and risk management increased dramatically, and companies practiced related applications in this direction. What kind of applications did you perform in this sense?
Considering the crisis management and risk management from the perspective of the pandemic period, I believe that the measures, adaptations and process management of both our state and Turkish companies have been quite successful. More importantly, I think that our organizations such as DEIK, for example, create an incredible synergy and unity among public and private enterprises. I mean, we stayed at home, but we had information from every channel, and we had the command of events.
Leaving the pandemic issue aside and considering the crisis and risk management in the big picture, frankly, I think we, as Turkish companies, have still a long way to go. Especially the mega projects carried out in our country over the last 20 years have created Turkish companies that have reached world-class operational and financing capabilities. We have Turkish companies that have successfully used this 20 years of experience all around the world. This is a very important stage and a huge success. Today, as Limak Group of Companies, we also employ 25 thousand people abroad. I think a significant generation of white collar has emerged in parallel with this development in terms of mid-senior executive departments. And I can say for sure that the operational capabilities of our country’s people are magnificent and can play to the top in the world. But if you would like to know what is missing in our country, in my humble opinion, I’d say that our planning terms are still not long enough, and our expectations for a quick return unfortunately outweigh. If we put this situation together with crisis and risk management, we need to make 20-30 year plans for sustainable radical achievements. We need to devote real time and think hard on business strategies. Along with the fact that we are going through the days when it is very difficult to plan here in the short term; another fact is that we have to gain the ability to manage variability and uncertainty within a certain standard deviation, one way or another. This is exactly what we, as Limak Cement, focus on. In particular, our central staff spends 40 percent of their business processes on corporate development, long-term business strategies, R&D and digital transformations. We highly concentrate on Fintech. Managing variability and uncertainty and achieving data quickly is key to success. Fast and secure access to live data is very important, especially if you are an international company and you have factories within 10,000 kilometers. This will be a long journey that requires patience and we will get the results gradually.
During this period, firms have had to make new decisions on the issue of employment. Employees start to concern more and more. How did you manage this process?
As Limak Group of Companies, we are a family of almost 65 thousand people. For this family, I think the message given by both our Chairman and CEO of Cement Group in the early days was very important. “We are strong together; we will successfully overcome this difficult period with our unity, synergy and integration.” Beyond a doubt, we have conveyed this message to all our employees. During the pandemic, our factories worked under the great measures taken. Our Headquarter team members working from home have demonstrated successful coordination with more intensive work than in their office days. But here I want to underline something important and send a big applause to our Turkish expats. Because during this period, it was seen that the expats of developed countries, in particular, left the countries on the last plane announced in the countries in which they were located, while our expats did not leave their ships and successfully managed this process. Thanks to each one of them …
The pandemic has had profound effects all over the world, especially on the economy. How do you think the Turkish cement sector was affected by this?
It is very obvious that the sector has been deeply shaken at the global level. Uncertainty and every vulnerability that influences the macro economy negatively affect the construction sector around the world. But the negative trend in the cement sector in Turkey has already been ongoing since 2018 due to macroeconomic effects. Therefore, the sector was caught up in the pandemic at a really bad time. In 2018, if you remember, we experienced an atmosphere of rising fuel prices, currency pressure, rising interest rates, high borrowing costs due to rising CDS’. Although our country has yet to enter a recovery phase with the measures taken, this time we are facing with a pandemic. A partly significant issue during this period was the export figures on the rise. In Limak Cement, as a group that does not have port operations, we anticipate that we will complete the year with an export figure of 2 million tons, a 100% increase compared to last year. In this data, the main success criterion for us is: the fact that this bar is highly sustainable with our Africa integration as a result of the strategy we have established, rather than the increase in exports brought by the conjuncture. But if we go back to the sector, we should keep in mind that this appeals only to industry players in export-friendly locations.
Could you tell us about your operations abroad? How did you manage this process?
We started our first business development activities in Sub- Saharan Africa and South Central America in 2010. Since then, we have traveled countless times. We analyzed almost 20 countries and lived in those geographies for months. As a result, we established our factories in Mozambique and Ivory Coast as the gateway to East and West Africa. We are in the fourth year of our operations. During this period, we realized turnkey business improvements. Obviously, many times we preferred learning and practicing ourselves instead of getting counseling. It gave us the opportunity to learn the cuisine very well. On the other hand, doing a contracting job is not really the same as being permanent at home. We are still going to these geographies with our excitement on the first day. Today, we are the flag carrier company of the Turkish cement sector in this geography with 1.7 million tons of operational cement production capacity in East and West Africa, ready-mixed concrete plant and R&D laboratory. Here we have equipped staff consisting of over 200 people from 6 different nationalities. We have a central structure that is selftaught by living in these geographies. In addition to that, we have gained a great knowledge here not only in terms of production, but also in terms of international financing, local law and sociocultural interaction. However, passports and transportation are important details. We have very active embassies in almost all of these countries. We have Turkish Airlines, which flies to 60 destinations on this continent, almost doubling its nearest competitor. I think these corporations are really stakeholders in our success story. One should keep this in mind.
On the other hand, we need to focus more on human resources on the way of becoming a global brand and think hard on it. And significantly, I would like to make a self-criticism here; at times we remain very focused on production or finance. Think about it; you have to create a sharing and multi-participation organization, regardless of religion, language, race or color. The feelings of staff open to quality development under the roof of your brand creates your report card. A good report card will surely bring operational and financial success afterwards.
Where do you position Limak Cement in the world cement sector?
Limak Cement is the second largest group in our country by capacity. At the same time, with 10 factories, it is one of the most widely distributed groups in Turkey in terms of geographical distribution. And that’s actually a significant achievement in a 20-year period. We’re a young company. On the other hand, we decided to become a global player 10 years ago, and today we are celebrating our fourth year of operations abroad. And we have already acquired important staff and savings in this area. We have a total of 5 R&D laboratories, one in Africa and three with international accreditation, and we are committed to increasing this number. And considering that almost all of our assets belong to us, we still have the power of public offering. I think today the Group having 18 million ton capacity obviously has a significant advantage to be at the forefront of the global big players’ league over the next 5-10 years.
In recent years, many of the cement factories have made several initiatives and investments in WHR (waste heat recovery) and the use of alternative fuels. Limak Trakya Cement factory is the only one to use alternative fuel, among all other factories. Also, there is no WHR established in the Limak Cement Group. What are Limak Cement’s plans on these issues in the future?
First, we are working on a new generation ORC WHR investment for our Kilis factory with a clinker production capacity of 2 million tons, which we have just commissioned.
But WHR feasibility is an investment that needs to be made rigorously. Although it is affected by a large number of dynamics, to sum up, your achievements depend on three main factors;
1- How low the energy efficiency of your rotary kiln is; because clearly, the more inefficient it is, the more a feasible WHR investment comes out, that is, you recover what you lost in the pyro-process with additional investment.
2- How large is your rotary kiln capacity and capacity utilization rate? For a high-energy efficient clinker capacity of 1 million tons or less, the WHR project internal efficiency rate is only 5% and below.
3- How high is your raw material humidity and how much drying gas do you need? When a low pre-heater tower outlet temperature is added to raw material humidity above 10%, the WHR project internal efficiency rate is low.
On the other hand, in the 2019 Turkish cement sector energy benchmark study, we take part in the top three with our two factories (first and second) in specific electricity consumptio and in the top six with four factories, also with our new Kilis factory entering the list, we anticipate that we will take part in the top 6 with 5 factories next year. In short, we have a disadvantag in WHR feasibility due to our high pyro-process efficiency, which I mentioned in the first article above.
But the difference between our Kilis factory and other Limak factories with clinker production capacity of 2 million tons and above is that it has a fairly low raw material humidity rate. But even with this advantage, it can only have an installed WHR capacity of 3.5-4.0 MW, depending on high pyro-process efficiency. Consequently, we are not sorry, yet happy that many of our rotary kilns have come out of WHR investment feasibility analyses with low internal efficiency rate for today due to high pyro-process efficiency. However, we will continue to monitor the investment costs that decrease with the changing and developing technology and competition in this area.
Last but not least, as you mentioned about alternative fuel, we have two kilns in our Trakya factory and we have alternative fuel use in both. Our new Anka and Kilis factories have just begun operations and alternative fuel projects are currently under way in the project phase. We are planning to realize for the next year. But on the other hand, we see that there is not yet enough and continuous alternative fuel sources to invest in our locations such as Kurtalan and Ergani in the Southeast.