Blue Circle: cementing its place in history

Best known for the Blue Circle brand, Associated Portland Cement was the largest manufacturer of cement in the world throughout much of the twentieth century.

Associated Portland Cement (APC) was formed from the amalgamation of 24 British cement manufacturers, mostly based in the Thames area, in 1900. The consolidation was triggered by increased Continental and American competition, and created the largest cement company in the world.

The merger was organised by Henry Osborne O’Hagan (1853 – 1930) who became vice chairman of the company.

APC held a 45 percent share of the British cement market and employed 6,147 people in 1903. It had the eighth highest capitalisation of any publicly quoted company in Britain in 1905, ahead of Guinness, Dunlop and Lever Brothers.

The company made its first overseas investment when it acquired the Tolceta works in Mexico in 1909. In the following years before the First World War, works were also acquired in South Africa and British Colombia.

APC acquired a further 33 British competitors in 1911, giving it control of 80 percent of the productive capacity of the British cement industry. The company was a cartel, with the intent to maintain prices in the domestic market at just below those of foreign imports.

O’Hagan stepped down in the post-war period, after he opposed the proposed further expansion of the company.

Alfred Cecil Critchley (1890 – 1963), a board member in the post-war period, suggested that the company use a single brand name, Blue Circle, for its cement products.

APC controlled 75 percent of British cement production in 1922.

The company opened the largest cement works in Europe at Bevans, Northfleet in 1926.

APC was the 15th most valuable public British company in 1930, with an estimated market value of £13.9 million. It employed 6,720 people in 1935. The company had 16 managing directors, and no central chairman. Instead, each managing director was allocated responsibility for a committee within the company, i.e. sales or finance. Because APC consisted of numerous component companies, there were an additional 40 ordinary directors .

P. L. Payne argued that the company failed to turn its monopoly power to its advantage. It has been argued that APC’s acquisitions destroyed, rather than added, value. The economist George Stigler calculated that between 1900 and 1960, APC acquired 125 percent of British cement production capacity, yet its market share in 1960 was only 70 percent.

Following the Second World War, cement works in Australia and New Zealand were acquired. A new cement plant in Malaysia was established in 1954.

APC employed 11,000 people in 1955. It was the largest cement group in the world in 1960. It was the 15th largest public company in Britain in 1965, with a market capitalization of £138.3 million.

APC built plants overseas, and became known for expertise in low-cost cement manufacturing. APC built the Aswan Dam in Egypt using 150,000 tons of cement.

In 1974 APC employed capital of £246 million, and had a workforce of 18,325 in the United Kingdom alone.

APC struggled when the 1970s oil crisis led to increased fuel prices, due to the highly energy intensive nature of cement production. It was also overdependent on a shrinking domestic market which accounted for 52 percent of profits in 1975.

John Milne was appointed managing director in 1975. He relocated company headquarters from London to Berkshire, on the basis that it was closer to his own home. The site chosen, at Aldermaston, also housed the Ministry of Defence’s nuclear weapons research facility. The company staff association protested such a risky relocation during the Cold War. Milne stood up at the annual general meeting and declared that if nuclear war was announced, he wanted to be under the first bomb, and the move went ahead. The company was forced to leave the site in 1993, following a nuclear leak from the MOD facility.

The company changed its name to Blue Circle in 1978.

By 1982 the UK workforce had more than halved in eight years to 6,500. It was announced that 1,198 more jobs would go in 1983, including 400 office jobs.

From the 1980s the company diversified, following advice from McKinsey, the American management consultants. In 1980 it acquired Armitage Shanks, the Staffordshire manufacturer of ceramic baths, sinks and toilet bowls, for $68.3 million. In 1987 it acquired Bermid Qualcast, a cooker and lawnmower manufacturer, in a hostile takeover which valued the company at £217 million.

Diversification aided profits in the short term, but disguised the fact that cement sales were declining. In 1992 the company was forced to pay £58 million to reduce its cement production capacity by 15 percent.

Blue Circle had dropped to the world’s third largest cement manufacturer by 1991. That year the bathrooms business was sold to American Standard for £253 million, and the heating business was sold to Baxi for £480 million.

Blue Circle employed 19,690 people in 1992.

Blue Circle was the sixth largest cement manufacturer in the world when it was acquired by its French rival, Lafarge, for £3.4 billion in 2001.

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