Saving a packet

Holcim chief executive Bernard Fontana is turning waste into profit at the world's largest maker of cement by burning toxic baby dolls, contraband cigarettes and old sunglasses.

Fontana, who last year became the first outsider to run Switzerland-based Holcim in its 101-year history, is ramping up the use of waste materials, instead of coal, to heat cement kilns from India to Vietnam and cut costs. The expansion into waste management was generating revenues as companies such as cigarette makers paid to burn copycat and expired goods, said Aidan Lynam, an area manager for Holcim in South Asia.

"They watch to make sure every last cigarette goes into our kiln," he said, referring to manufacturers in Vietnam that pay to cremate contraband at Holcim plants. "It disappears like a grain of sand in the Sahara," he said, adding that at extreme temperatures, cigarettes become part of the cement.

Following more than US$10 billion of acquisitions in the decade to 2011, Fontana began a cost-cutting programme last year to boost operating profit by 1.5 billion Swiss francs (HK$12.8 billion) and adjust for declining demand amid the European debt crisis. Burning waste may make some cement plants in Asia as energy-efficient as in Europe, helping Holcim to free up cash and compete with rivals Lafarge and Cemex.

"Short term, it's a massive saving; over time it will slow down," said Ian Osburn, an analyst at Cantor Fitzgerald in London, adding that energy is about a third of the cost of making cement. "Holcim clearly have been leaders for this and early thinkers, but all the cement manufacturers move quickly to copy each other."

Alternative fuels contributed about 20 per cent of energy used at European cements plants, said Philippe Fonta of the WBCSD cement sustainability initiative, consisting of manufacturers representing about 30 per cent of world production. Alternative fuels represented less than 1 per cent in markets such as India, he said.