Blue Circle in pounds 330m shake-up

Blue Circle launched a pounds 330m investment programme yesterday in a bid to become Europe's most cost-efficient cement producer. The restructuring of Blue Circle Cement is the second big shake-up in the division in four years.

Keith Orrell-Jones, chief executive, said: "The programmes we have agreed will ensure that Blue Circle Cement will be as competitive and efficient as any in Europe in the years to come."

Analysts were sceptical of the company's claim that it had identified cost savings worth pounds 50m a year, but they broadly welcomed the programme which involves the construction of a pounds 180m state-of-the-art cement works in Kent to serve the South-east market.

The new site, probably at Holborough in the north of the county, will replace two existing sites at Northfleet on the Thames and one near Ipswich. Holborough will have a capacity of 1.4 million tonnes a year and is designed to protect Blue Circle's share of the lucrative south-east cement market. Ian McKenzie, chief executive, said: "We shall end up with a collection of core cement works that will be very efficient indeed in comparison with other producers in Europe.

The consolidation is expected to cost 150 jobs in addition to the 1,300 the company warned were at risk from a proposed shake-up of the troubled heating division.

Mr McKenzie said Blue Circle had "benchmarked" its performance against Europe's other suppliers - which include Germany's Heidelberger Zement and France's Lafarge Coppee - and was aiming for a doubling of productivity in the long term.

The seven works designated "core" by Blue Circle are located around Britain from south Wales to Northern Ireland and Scotland. Three more smaller plants will operate in niche markets and receive lower investment than main works.

Mr McKenzie said that its overall capacity of around 7.5 million tonnes per year would be unchanged as a result of the restructuring. He added that a 4 per cent increase in cement prices introduced in April was "sticking well" in the market.

Blue Circle last rationalised its cement business in November 1992 in a move that cost 550 jobs, around a fifth of the then workforce. It said at the time it was reducing capacity in response to expected lower demand for cement.

The new restructuring, which takes place against continued uncertainty in the construction sector, is designed to exploit new efficiencies in distribution, working arrangements, plant reliability and savings in energy costs. Blue Circle said it had announced that Holborough was its preferred site at an early stage to enable further evaluation and the detailed site investigation required for an environmental assessment to be concluded.