Forum APAC des CCE - Discours de Guy Sidos (29 nov. 2024)

You'll tell me we're going to talk about innovation with an industrial process that dates back centuries. Well, it's worse than that. Our business is highly standardized, so there is very little room for modifying products. And in the loops there is a specialist, Mr. Senator of continuous innovation in feedback loops. We are supposed to modify products based on customer feedback. In our field, it's standardized, it's very complicated. But that's not all; we are also in an extremely capital-intensive industrial sector. A plant costs at least 300, 400, 500 million euros. Clearly, the tools are not there for a few years or a few months; they are there for a long time. Our time scale is the century. An aggravating factor: our field is prosperous, and prosperity brings a comfort that is not the best catalyst for innovation.

Innovation at Vicat has nonetheless been marked by the founding event of the company's creation. So from generation to generation, we have passed on know-how and expertise to improve product quality, improve services, but also reduce costs and make products that are quite accessible. Today, Vicat has three businesses: cement manufacturing, manufacturing of aggregates (gravel and sand), and when you put it all together, you make ready-mix concrete. That's our core business. We are present in 12 countries, including France of course. Our cement group employs 10,000 direct employees, and the ratio of direct to indirect employment in our business is 1 to 10. So 10,000 jobs generate 100,000 jobs in our catchment areas. And we have a consolidated turnover of 4 billion euros. Cement allows us to build housing and infrastructure at low cost. It is the second most consumed product in the world after water. The growth in consumption is directly linked to population growth and the enrichment of populations. An interesting curve shows cement consumption per capita as a function of GDP per capita. So the creation of a middle class is a catalyst for the development of cement markets.

We had conferences yesterday reminding us that the world population will continue to grow. We can talk about 2, 3 billion more inhabitants on the planet. Population growth between now and 2050 is roughly equivalent to the entire world population in 1950. That's the scale of what's coming. And on top of that, urban concentration will be coastal. According to UN data, 75% of the world population in 2050 will be on a coastal strip, with a coastline that will be severely affected by the consequences of climate change. 15% of the population in 2050 is the equivalent of 100% of the current population. So at the scale of time and needs, there is no alternative to cement. An industrialist fears the Kodak syndrome a bit: I am a leader in my film photography market, I perfectly master my production chain and sales chain, I invent digital imaging but I abandon it and I disappear. So the Kodak syndrome is: does my product have a future? Believe me, if there is a cement company that is looking... I know it. At the scale of time and volume needed, there is no alternative to cement. There may be examples, we can go to Savoy and build some buildings in wood, but cement is indispensable for building housing and infrastructure necessary for the life of this growing world population that will concentrate in urban areas.

The paradox: cement, a carbon emitter, is indispensable for resilience measures. We had a long and brilliant presentation on policies, but without cement we will have problems. That's the accelerating factor of our innovation, and thus of continuous innovation. In one word: transition. We are at a crossroads of transitions in all areas. The term is overused, but I'll focus on the ecological transition, which for cement makers translates into what we call decarbonation. There are terms often confused: I'll come back to it, decarbonation and decarbonation. The entire industry is changing to integrate resource economy and especially decarbonation, and the economic means to do it. We've heard a lot about innovation from startups; often the startup crosses its valley of death, disappears, and we never hear about it again. But the cement industry has quasi-institutional means; it can support an innovation that will lose money for 15 years and will be the game changer in 15 years. We can do that, and we are doing it. The industry is sincere in its transformation, which hides many innovations. And it works in a very cross-functional way, that's a characteristic of these transitions. We are using new logics where one person's waste is another's raw material, and where tools, including digital tools, find new uses not foreseen by the designer. I see the cement industry as a kind of crucible where certain innovations find their usefulness.

These innovations touch a number of areas. First, our industrial process. I'll focus on cement, which is our core business. We could talk for hours about concrete and other things, and logistics which is important for us. But our industrial process covers a spectrum of engineering sciences that is absolutely exceptional, from geology to artificial intelligence, passing through all degrees of chemistry, mechanics, electricity. And all of this must communicate correctly and be implemented to reduce production costs. These innovations also affect our products—obviously linked to the industrial process. The product is often an assembly. Cement today is an assembly, like blending fine wines. There are gourmets among you; you know what I'm talking about. We must satisfy a demand for material performance. We also have innovations in services, while respecting regulatory constraints or expectations. And finally, in management—whether financial, commercial, or logistics management—innovations, particularly digital ones, are very important.

I'll take an example to illustrate our daily life in a cement plant. The common thread of our industrial policy is decarbonation. The capital sin of cement is what we call decarbonation. The industrial process of manufacturing cement is the extraction of carbon from limestone. Many of you are too young to have seen the teacher at her blackboard with chalk. Chalk is limestone. There is 40% carbon in this stone. The principle of our industrial process is to heat it, mix it with other materials, first extract that carbon, and manufacture an intermediate product called clinker, which is the active principle of cement that allows cement to act as glue for stones. So this original sin, added to the fact that we are heirs of hot chemistry, which in the 19th century was discovered and allowed heat in an industrial process to be the catalyst creating reactions that reorganize matter. All this means that a ton of cement in the 1990s was 800 kg of carbon into the atmosphere; we cared little about that then. Today we have four levers. The first three allow us to reduce by half, to 400 kg, and the last allows us to get to zero.

The first lever is equipment modernization. Cement equipment is heavy and expensive. Let me give an example: a cement plant grinds, agglomerates material, and regrinds. To grind a ton of material in the 1950s was 50 kWh per ton ground. Today in India, I'm at 15 kWh per ton ground. Take a kWh at, say, 4 or 5 cents, multiplied by 35 times 5 million tons, and you get 70 crore, about 10 million euros for a plant. The challenge is there. So it's good for energy consumption, good for the climate, good for the economy and profitability of other plants. So equipment modernization is the first lever we have. The second lever is defossilization. To provoke our reactions, we heat. Today we live in a crazy world: the cheapest energy is coal bought in South Africa or Australia. Can we accept that? Today we are replacing this coal or petroleum coke with the energy fraction of urban waste that feeds our cement plants. You immediately see this circularity being created, and this circularity is profitable. We are paid to permanently eliminate, with no residual product, waste that was previously pushed into holes. I'll come back to that when I explain what we are doing in India on this.

The third is a bit more brutal: reducing the clinker factor. That's the percentage of active principle in the cement assembly that makes up modern cement. I'll skip the use of slag or fly ash. Those of you who understand know that we cannot base a decarbonation policy on secondary products from coal combustion. As long as they exist, we take them, but it's not long-term. We agree. So we are replacing these with truly decarbonated materials. Let me give some examples. For instance, in France we launched a carbon-negative cement. If you remember, I said it was 800 kg, then 400 kg. With the cement we named Cara, we are at 325 kg for a standard cement and -15 kg of carbon per ton of cement for a structural cement that allows building buildings, for example the Olympic Village that Gérard Wolff mentioned yesterday. It wasn't easy because this product was recent, and insurers were reluctant. But we succeeded. Other examples: the activation of clay. Clay is used to make bricks, all that works as a construction material. Today we are able to incorporate it into cements by activating it thermally or mechanically, making very interesting cements. A clay-based cement has 40% less carbon per ton of cement for equivalent use, meaning equivalent performance and equivalent implementation conditions.

Because our business is very conservative; a mason learns a gesture he will repeat all his life. You can show him the most beautiful innovation in the world; he'll say it's great, go home, and lay his bricks. I'm caricaturing a bit, but we must provide a material that doesn't change the implementation conditions. Let me give you a few more examples. We developed a cement that is half cement, half concrete, replacing polystyrene. It's a very cheap cement foam with thermal and acoustic properties equivalent to polystyrene, without petroleum products, it doesn't burn, and at the end of the building's life it can be completely recycled as a raw material for cement. And it's already decarbonated. We have other products. Parisians among you, imagine a city where you see construction work progressing, no work zones, you can circulate. So you have furtive construction sites, done at night when there's no traffic. For that, you need materials. We developed a material that is a specialist artificial sulfoaluminate, where in an industrial process handling thousands of tons per day, we introduce an iron atom into a crystal, giving rapid setting conditions. We repaired the runway at Istanbul Airport with interruption times of less than 5 hours between the time the site was made available to the contractor and the moment an A380 could land on the repaired section. 5 hours. For a road, the military is very interested; in 2 hours, tanks can drive on a road repaired with this product. So it's very specific, but it's what we know how to do. I'll make you dream of furtive construction sites in our cities. The material exists. We have many other things; I won't go into detail. Once we've done these three steps, the carbon footprint of the material is 400 kg. In some countries, like Switzerland, we are at 370 kg of CO2 per ton of structural cement. The rest is more complicated. For the rest, we need to capture for storage or better, transform. Let me detail that.

Please follow me because there are several pieces of a technical puzzle that define what the cement plant of tomorrow will be, simply to have 100% decarbonated cement. A cement plant that will bring something else: I'll talk about hydrogen, SAF (sustainable aviation fuel), or methanol for ships. The principle is simple: you produce hydrogen by electrolysis—water, continuous electricity, hydrogen on one side, oxygen on the other. You capture the carbon from the chimney and recreate hydrogen-carbon bonds to make a fuel. It could be methanol for ships or kerosene for planes. Vicat is working on this, but in a more refined way. We invested in Genvia—I don't know if some of you know Genvia, it's a French gem of high-temperature electrolysis. Instead of electrolyzing liquid water, we electrolyze steam. By doing so, we save 30% of the electrical energy needed for electrolysis. We go from 55 kWh per kg of hydrogen produced to 38 once the whole chain is well developed. That's 30% less electricity. Do the math with a kWh at 5 cents, which we can still hope for. The variable cost per kg of hydrogen in industrial tariff is about 2 euros, which is the estimated competitiveness limit with other fuel formulas for mobility. I am convinced we won't have hydrogen mobility without major industrial applications. So we are always in this cross-cutting approach where the development of hydrogen for carbon capture in cement plants will enable regionally—and that's French policy by basin—the possibility of developing hydrogen mobility.

Once you've made that, the cement plant is perfect because we have hot gases, we release them into the atmosphere. So this vaporization of water is free. And the icing on the cake: we need oxygen in our processes because in parallel we are developing a process called oxyfuel, which replaces the nitrogen in the air in our kilns with oxygen. Doing so, we get a carbon concentration at the chimney above 95%. So we no longer need a carbon capture step at our kiln chimneys, and we save 250 million euros on the billion that the entire installation costs. That deserves consideration. I see some bankers who seem to agree. So these innovations have varying degrees of maturity, from TRL 5 to 9 depending on the puzzle pieces, but they converge. We will get there. So Vicat is on this journey towards total decarbonation, helped in some countries like California where I got half a billion dollars in grants from the DOE on a dossier processed in less than 9 months. In other countries it's a bit longer; we've had identical dossiers in France for over 5 years, but we'll get there. I cite this to give you a precise example of the underlying movements affecting our industry. So in a context where the product doesn't change—cement will be the same, it will have the same uses, probably—but it will be completely decarbonated by deep innovations.

Now I also wanted to talk about our presence in India. I don't know if the slides are showing, but anyway. The Vicat group has been present in India for over 15 years. We spent 10 years finding a suitable deal. We are present in northern Karnataka, in the district of Kalburgi, and in southern Andhra Pradesh, in the district of Kurnool, with two plants totaling almost 10 million tons of capacity. Our headquarters are in Hyderabad. So we are in the south of India, but in the north of the south—thank you. Our success story began in 2008. I chose to invest in India between Malaysia and India, and we chose India for several reasons. The potential for growth at the time was 150 kg per capita per year, double that of France and three times that of China. Today we are approaching 300 kg in India. Population growth does the rest. The liberal character of the economy was a motivation, and we are in a rule-of-law state that is generally respected as long as you don't dabble in politics. Our success was also due to having good Indian partners. We spent over 10 years finding them, helped by Proparco and the World Bank. So it's going well overall. We have 2,400 employees ready to supply cements meeting the growing needs for infrastructure and urbanization in the booming markets of southern and western India. We have invested nearly a billion dollars in India since 2008 and plan to invest another 500 million dollars in the next 5 years. We are involved in major infrastructure transport projects. For example, the Mumbai Trans Harbour Link—22 km of bridge, 27 m wide, 70,000 vehicles per day. There's Vicat in there, it will hold without any problem. There are many other projects. You see a photo of a train wagon—logistics is an important aspect of decarbonation. In a country where distances are long and cement is produced in clusters where the raw material is, we ship cement 600 to 800 km by rail. The percentage of our shipments by rail today is already a third, and it's set to grow. We send by rail to Mumbai and Coimbatore. We also have a cement terminal. For comparison, in France we are below 5%.

Technology transfers in recent years in India have focused on energy efficiency. See the photo of a solar plant. A small nod: we hear a lot about administrative complexity in India. Installing a 10 MW solar plant on each of our sites took 36 days from order to connection to my internal network in Andhra Pradesh, and 38 days on the other site. So you can criticize India for its administration, but when you want to, you can. It was extremely easy, at a third of the price elsewhere. In France, that would have cost me $440,000 per MW, which is absolutely unbeatable. So we have that. We install what we call waste heat recovery systems, where we recover the hot gases from our kilns. And as a principle, I put about ten megawatts every year into the piggy bank, which gives us free electricity ultimately, with only depreciation of the systems. That improves productivity and profitability. In India, the defossilization I mentioned started with a partner, the Indian company Zigma based in Chennai, which valorizes urban waste as a replacement for coal. We are at 30% and will quickly reach 40%. It's really muscular economics. What Zigma does, besides direct urban waste valorization, is a kind of bio-mining of landfill recovery. Landfills have accumulated around urban areas for decades. There are places around Mumbai with a century of waste on spaces the city needs. You can't build on these landfills, so you have to start by reclaiming these volumes. Fortunately, we have developed technologies to use these volumes. The biological part has already disappeared, so what remains is fabric, plastics, and wood. That makes a fuel that replaces imported coal from Indonesia, South Africa, Australia. And all this allows us to reduce energy costs by 30 to 40%. So it's a win-win; there is no opposition between ecology and economy. The scale we are talking about is not small—the tonnage we process is 400,000 tons per year, and it's set to grow.

Regarding innovation, we've talked a lot about digital. There is so much skill in digital transformation and data processing that we use it for the entire group. Developing a CRM—a customer management software—for Brazil from India cost me 20 times less than what was quoted in Brazil or Europe. 20 times less, and it works. It's fantastic. An example of what we do in India, and it's unique: we know the operational profitability per customer per day, which allows us to adjust in real time and always be in the green, rather than discovering at month-end that a customer is losing us money every day. This is thanks to the agility and ability of the teams to develop very useful digital tools. We are also testing automated systems for process management in cement plants, logistics management, customer experience. Our plants are fully automated for loading; in some plants, it's like a gas station. Things move very fast.

Before concluding, I also want to talk about CSR. There is also societal innovation. You recognize our president in the middle of our employees' wives—she does other things, but it's very important. On one of our sites, we see also we built schools, temples, a dialysis center. India is great because we are obliged to spend a certain percentage of turnover on CSR actions. We can choose them, and we bring services to the rural areas where we operate, since our plants are rarely in city centers. I'll also mention something that may not be sexy but is very important: we committed to the Swachh Bharat Abhiyan mission, launched in 2014 by the Indian government, which aims to improve hygiene and health by building 100 million toilets, mainly in rural areas for women. This is typical of our approach: we listen to what is asked of us, we do it, and it is very appreciated.

To conclude: continuous innovation is the tool of transitions. It often clashes with the inertia of a situation where things are going well—why change? But it must be inscribed in the management of the parameters of our lives, which is time. Time is a great master, especially in India. But the very long time of industry is not the very short time of commerce, nor the indefinable time of innovation, which sometimes remains stuck in a pre-industrial stage because the inventor does not have the time of the developer, and the developer does not have the time of the manager. So sometimes you have to snatch the invention from the inventor to get it started. This also shows the human dimension of the continuous innovation process. We were invited to put philosophy into technology. A speaker whose comments I appreciated enormously invited us to do so. So I will allow myself to say that this whole relationship with technology questions our evolution of our worldview. When we look at our relationship with information technologies, it's obvious. Also our societal behavior is influenced by technology. I invite you to read Jürgen Habermas's work 'Science and Technology as Ideology'—it's from the 1990s, I think. 'Ideology' in the Dumézilian sense, meaning worldview. Without saying more, it questions the relationship between technology and democracy. Saying from cement to democracy is a bit hazardous, but is not democracy the cement of our society? Thank you for your attention.