Responsible business boosts performance

July 7, 2015 MORTEN JESS NIELSEN

Egypt’s ACC Ramliya cement plant doesn’t just deliver a utilisation rate 10 percent higher than the industry average, it beats industry norms in energy consumption and emission reductions.

Cement plant operations have a significant impact on the local environment and the economy. But although this has long been recognised, exactly what that impact is has been the subject of much debate. With cement production predicted to increase by at least 50 percent towards 2050, the challenge for the cement industry is how to balance the world's requirements for cement and the need to reduce CO2, waste and other gaseous emissions.

In a bid to gain a comprehensive understanding of a cement plant’s impact, FLSmidth commissioned a ground-breaking impact assessment of the Arabian Cement Company (ACC Ramliya) Cement Plant in Egypt. The assessment was performed by the consultancy firms Deloitte and Qbis, who have considerable experience in assessing a business’s impact on society. 

Morten Jess Nielsen, CSR Advisor at FLSmidth, explains why the assessment was initiated: “Responsibility to the environment and society is central to FLSmidth’s strategy, and we wanted to understand the impact of our offering and specifically how we create value.” 

ACC Ramliya Cement Plant
Built by FLSmidth, the Ramliya plant consists of two production lines, which together have a production capacity of 4.2 million tpy.

Following its construction, Arabian Cement Company chose to outsource ACC Ramliya’s clinker production to FLSmidth through a comprehensive operations and maintenance (O&M) contract. In addition to managing the plant’s daily operations, FLSmidth recruits and employs the plant’s entire operational staff. This 360-degree knowledge of the ACC Ramliya plant meant FLSmidth was ideally placed to conduct a study of the plant’s impact on its surroundings and stakeholders. 

Shared value benefits all
The study identifies and describes four essential aspects of the plant’s total impact. In addition to economic, environmental and social impacts, it defines the business value proposition delivered to the plant’s owners. 

Thomas Westergaard-Kabelmann, partner at Qbis, was responsible for the impact assessment in collaboration with Deloitte. He explains the importance of understanding the entire perspective of a cement plant’s operations and not just the economic value delivered to the owners: “The customer is only one part of the puzzle; it’s important to see the complete picture. Cement plants have a large impact on the local environment and society, and if you do good in one aspect of the plant’s impact, it is likely to have a positive impact on all the other aspects.”

He continues: “Delivering profits and socio-economic benefits results in shared value, and if ACC Ramliya can optimise its social and environmental impacts, not only will the customer benefit, but it will have a positive impact on economic activity in the region.”

Per Mejnert Kristensen, Group Executive Vice President at FLSmidth sees the performance of the ACC Ramliya plant as the result of a long-term focus on responsible business. He says, “We believe strongly there is a co-relation between the big picture of corporate social responsibility and the bottom line performance of our customer, and we are pleased to see that the impact assessment from ACC Ramliya demonstrates this co-relation.”

Outstanding utilisation
Not surprisingly, the study revealed that for ACC Ramliya to make a positive contribution to its surroundings, it needs to perform well commercially. And ACC Ramliya’s commercial performance tells an outstanding success story. In the period 2010 to 2013, during which Egypt’s cement production capacity expanded by 40 percent, ACC outstripped its competition, increasing market share from 2.9 to 7.8 percent. Notably, Egyptian cement consumption in this period increased by only two percent. 

Several factors contribute to ACC Ramliya's excellent performance. The plant operates at a significantly higher  utilisation rate than its industry peers. Measured over 2012 and 2013, it operated at 83 percent utilisation, significantly higher than the industry standard of 73 percent (Auerbach & Greyson, EFG Hermes, 2014). Most of its cement is then sold to areas of high demand, such as Greater Cairo and the Nile Delta. 

At ACC Ramliya, production manager Mahmoud Abdel Ghany explains his production philosophy: "We work to keep our customers satisfied and to sustain the plant performance. High production is not a challenge, but it is not that simple. We can easily produce 7,000 tonnes of clinker a day, but if the machines break down the next day due to overproduction, we cannot meet our customers' demand for cement."

"The challenge is finding the optimum point of production where everything is in balance, and the machines keep on running. At this point we have sustained performance, the lowest energy usage, lowest heat consumption, optimal production and lowest cost" - Mahmoud Abdel Ghany, Production Manager, ACC Ramliya

It is the combination of high utilisation and a highly effective sales strategy that has boosted ACC Ramliya's market share and profitability. And indeed, the success of high utilisation rate can be attributed to FLSmidth, who is responsible for the clinker production enabling ACC Ramliya to deliver high quality cement.

Egypt Country Manager at FLSmidth Salem Sousou says, "The cooperation between FLSmidth and ACC Ramliya is essentially a partnership, because what benefits one part benefits the other. As operator of the plant, FLSmidth is able to act on behalf of our customer and we see that as having an intimate relationship with our customer."

Environmental impact
Sine Bøgh Skaarup, Process Manager at FLSmidth, identifies emissions as one of the key areas that the cement production industry needs to address. 

“Carbon emissions from cement production currently represent about five percent of global emissions. With global cement production still on the rise, we have to maintain focus on reducing these emissions, which we can do by closely monitoring cement plant operations and always trying to do better,” she says. 

Measurements at ACC Ramliya from 2011 showed that NOx emissions are not always under the required limit, while SO2 and CO2 emissions have been well under the limit. And despite Ramliya in 2011 delivered six percent of Egypt’s total cement production, it was only responsible for two percent of total suspended particles (TSP), which was unrivalled in the industry. 

Read more about reduction of NOx and SO2 emissions>>

Read more about FLSmidth and SO2 emission control>> 

Coal – the sustainable choice?
A particular challenge for not just the ACC Ramliya plant, but also most cement producers in Egypt is the gas supply, which is too unreliable to support stable operations resulting in low utilisation and production rates. 

So in 2013, FLSmidth and Ramliya’s owners made the bold move of switching from a gas supply to coal. This has in effect increased Ramliya’s CO2 emissions by 10 percent. And even though more cement plants are likely to make this switch, leading to an estimated 15 percent increase in CO2 emissions nationwide, the use of coal provides greater socio-economic benefits.

“The impact assessment estimates that a 30 percent switch from domestic cement production to imports will cost nearly 19,000 jobs and a loss in gross value added (GVA) of EGP 16.5 billion,” explains Thomas Westergaard-Kabelmann, continuing, “Importing clinker and cement emits at least six times more CO2 than the amount emitted by coal-based cement production.”  

Better skilled workforce
A key driver of ACC Ramliya’s social impact is its contribution to employment. FLSmidth’s ability to operate the plant efficiently depends on the presence of a qualified labour force. But this was not always a given as there is a shortage of workers with the experience and skills needed for the cement industry.

So in 2009, FLSmidth established a cement training and recruitment centre in Egypt  aimed at enhancing plant workers’   professional and technical skills in all aspects of operations and maintenance. 

At least 85 percent of plant staff has passed through the training centre since its opening. This means that FLSmidth can confidently employ local technicians and engineers, rather than importing foreign labour. 

To help develop competencies at an even broader level, FLSmidth has partnered with the Helwan University in Egypt in establishing the world’s first Postgraduate Cement Plant Engineering Degree. It is initiatives such as these that have been instrumental in building the skills and know-how that have become the backbone of the plant’s high utilisation rate. 

Salem Sousou elaborates, “The development plans we have developed for all employees at the plant increase their skill level and ultimately their employability over time. We’ve seen this result in an employee turnover rate of 1.5 percent, which is very low. That means we’re retaining our valuable competencies, which boosts the plant’s performance further.” 

ACC Ramliya’s Production Manager, Mahmoud Abdel Ghanry, explains how people are central to maintaining stable production: "The key to finding the optimum point of production is having the right people operating equipment. That is why we have development plans for all our employees and why we put tremendous effort into training them. They will determine how it will run and that takes the right knowledge and experience.” 

Thomas Westergaard-Kabelmann points out that contributing to the development of local skills also has other impacts beyond just cement plant operations. 

“Improving a person's competencies gives them more opportunities for employment and career development. As their income is increased, their standard of life improves,” he says.

Perfect partnership
According to Per Mejnert Kristensen, Group Executive Vice President at FLSmidth the study has great significance for FLSmidth, acknowledging FLSmidth’s partnership with Arabian Cement Company and long-term presence in Egypt. 

 “We are highly satisfied that this study shows that ACC Ramliya is delivering value to its owner as well as the society in which it operates. This is, after all, why we are in business. However, the study also shows that we and our industry peers must be vigilant in improving the way we do things to reduce our environmental footprint and remain economically viable. We are equally driven by this quest.” - Per Mejnert Kristensen, Group Executive Vice President, FLSmidth 


The illustration shows ACC Ramliya's impact on the local environment and society and how the delivery of profits and socio-economic benefits result in shared value.

About Arabian Cement Company
Arabian Cement Company (ACC) was established in 1997 by a group of Egyptian entrepreneurs, who aspired to establish a leading Egyptian cement company. 

The cement factory is located in the Suez Governorate. It produces five million tonnes of first quality cement, approximately 10 percent of Egypt's production. 

The company is a joint venture between Cememtos La Union, a Spanish investor holding the majority of shares, and a group of Egyptian investors. The company was listed on the Egyptian stock exchange in May 2014.

Impact assessment
Deloitte and Qbiz conducted a socio-economic impact assessment of the operations and maintenance of the ACC Ramliya cement plant in Egypt. The overall objective was to determine the total impact of FLSmidth’s products and services, including the impact on a cement plant’s competitiveness and financial performance, on the supply and value chain, and on society as a whole.

 

 

 

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