Theatre and music halls were all the rage in Victorian times. But few benefited from electric lighting. Instead, they would heat quicklime until it emitted a brilliant white light, known as limelight.
Quicklime has more of a backstage role in modern times but, behind the scenes, the chemical also known as calcium oxide plays an essential part in almost every aspect of our daily lives.
Made by heating limestone, quicklime is used as a purifier to create products as wide-ranging as glassware, crockery, kettles, ovens, milk and sugar. The compound is also deployed to create steel bridges, buildings and roads. It is an essential component of paper production, ensures water is pure enough to drink and acts as a fertiliser, making soil less acidic and grass tastier for cattle.
Historically, most leading players in this industry have been privately owned. Now, however, SigmaRoc is set to become a top-tier lime and limestone producer, following an audacious deal announced late last year. The shares are 57p and should move considerably higher as the transaction beds in and the business grows.
SigmaRoc was founded in 2016 by Max Vermorken, a Belgian, now 40, who came to the UK to do a PhD and decided to stay put. Formerly at cement giant Holcim, Vermorken joined with building materials veteran David Barrett to create SigmaRoc, an innovative aggregates and quarrying firm.
Bright future: SigmaRoc produces limestone needed for products from roads to crockery and kettles
With 40 years’ experience in the field, Barrett is known for founding and developing successful companies. Both he and Vermorken felt that businesses in their industry had become too centralised, with decisions taken by directors far away from the coalface.
From the start, SigmaRoc encouraged regional managers to develop their own networks, build relationships and make decisions based on local customers’ needs. The strategy worked. In 2017, SigmaRoc generated sales of £27 million and profits of £2.6 million. By 2022, revenues had increased to £538 million, while profits had soared to £63 million.
Growth came organically and by acquisition but Vermorken wanted more and, last year, he found it, when Irish building group CRH decided to offload its Northern European lime operations.
Vermorken pounced and last November unveiled an £870 million takeover of the CRH businesses, funded by shares and debt. With SigmaRoc valued on the stock market at less than £400 million, the deal was ambitious but big investors signalled their faith in Barrett and Vermorken, approving the acquisition just before Christmas.
Now, the duo just have to make it work. Their task will not be easy but the rationale behind the deal is clear, creating a business with sales of £1 billion and sites in 14 countries. SigmaRoc already had a reasonable position in the limestone and lime industry. Following the CRH deal however, the group will become the number one operator in the UK, Ireland and Scandinavia and number two in Germany and much of Eastern Europe.
Vermorken and his team have also proved that they can buy and integrate businesses, having acquired about 20 over the past seven years.
This is the biggest, but it has been structured in three tranches. The first and largest was completed last week – the others will be finalised later this year. Payments are staggered too, with £580 million due now and the rest falling due over the next six years.
The combined business will generate significant economies of scale and lower transport costs, creating a company with more than 2.5 billion tons of mineral reserves and resources. Size matters in this field. Many industries cannot function without lime so firms need to be confident that the right products will be delivered on time to their plants and factories.
SigmaRoc has already developed a reputation for efficiency. Extra heft should bolster that – to the benefit of customers and investors alike.
Vermorken has green credentials too. Lime absorbs carbon dioxide and is expected to play a key role as companies strive to reduce their carbon footprint.
Brokers are optimistic about SigmaRoc’s future, with sales and profits forecast to more than double this year and beyond.
CRH has signalled its support too, spending £82 million on a 15 per cent stake in SigmaRoc, as part of the takeover deal.
Midas verdict: Lime and limestone are essential components of daily life and SigmaRoc has now become a market leader in this sector. At 57p, the shares are a long-term buy.
Traded on: AIM Ticker: SRC Contact: sigmaroc.com or 020 7129 7828
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