The cement industry in Chile: Cbb and its vision of the future

2022. Estudios de Administracion. Vol n?2. 64-95

Karla Ramírez H, Ismael Oliva B, Ángeles Briones

Abstract:

In 2019, Cbb (previously known as Cementos Bío Bío) was one of the biggest producers of cement, concrete and lime. It had the best coverage, logistics-wise, in Chile and the highest installed production capacity with 3.5 million tons of cement per year and dispatches of 1.3 million tons. It employed more than 2,800 collaborators, of whom 1,344 provided services as contractors. Its annual sales for 2019 were CLP 263.18 billion, generating net operating revenue of CLP 13.1 billion and an EBITDA of CLP 36.32 billion. Cbb had been able to position itself in the industry thanks to its lengthy presence in the market and its innovative vision, creating high-quality products by recycling waste such as slag and ash. As in any other sector, understanding the industry in which the company competed was essential for defining its strategy. Until 2010, there were three major players in Chile’s cement industry: Melón S.A., Cemento Polpaico S.A. and Cbb. The three companies operated according to a traditional business model that covered everything from the extraction of raw materials from their own mines through to their actual dispatch. In 2011, Chile no longer only produced cement, but also imported it, as a result of low freight costs and the reduction of cement prices due to overproduction in countries such as South Korea, China and Japan. These new conditions allowed other competitors to enter the industry with a different business model based on the importation of cement to produce concrete or the importation of clinker and installation of cement grinding plants. Clinker, obtained from the calcination of limestone, was one of the key raw materials in the middle of the cement production chain. As clinker was now imported, it was no longer necessary to exploit limestone mining. At the end of 2019, the General Manager, who had arrived at the company on January 1, 2018, had to propose to the Board the actions required to continue with the implementation of the so-called ‘Transforma 2021 Strategic Plan’. The plan included a set of six initiatives whose purpose was to revitalize the company, given the external changes that were already starting to negatively impact financial performance. Two years after evaluating the implementation and the results obtained, the General Manager needed to define the work focus for each of the initiatives. Several questions bothered him: What was happening in the industry? How would changes in the industry affect a consolidated and long-established company such as Cbb? He also wondered where he ought to direct his effort to achieve the goals and results aspired to in the plan? Would the Transforma 2021 Plan succeed in taking Cbb to where it was supposed to arrive?

Palabras claves: Cement, Cbb, Strategic Change, Cement Industry in Chile

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