Upload
aravindraj40
View
213
Download
0
Embed Size (px)
Citation preview
8/14/2019 Cement and Construction
1/23
Cement & ConstructionCement & Construction
industry profileindustry profile
8/14/2019 Cement and Construction
2/23
A primer on the IndianA primer on the Indian
cement industrycement industry Highly fragmented (low entryHighly fragmented (low entry
barriers)barriers)
Cyclical industryCyclical industry
Highly capital & energy intensiveHighly capital & energy intensive
Heavily taxed sectorHeavily taxed sector
High bulk (volume) low valueHigh bulk (volume) low value
productproduct
Heavy dependence on 3 sectorsHeavy dependence on 3 sectorsviz. coal ower and trans ortviz. coal ower and trans ort
8/14/2019 Cement and Construction
3/23
Indian cement industryIndian cement industry
Major players in 2006 Major players in 2006
12.6
9.7
10.6
10.34.73.65.94.5
3.2
34.8
ACC
Ultratech
Gujarat Ambuja
Grasim Industries
Century Textiles and
Industries
Birla Corp Ltd
India Cements
Jaiprakash Industries
(Jaypee)
Lafarge
Others
8/14/2019 Cement and Construction
4/23
Market consolidationMarket consolidation
Flurry of consolidation in the lastFlurry of consolidation in the lastcouple of years. Notable ones include:couple of years. Notable ones include:
o
Gujarat Ambuja picking up 14% in ACCGujarat Ambuja picking up 14% in ACCo Grasim acquiring cement business ofGrasim acquiring cement business of
L & T forming UltratechL & T forming Ultratecho Holcim taking minority stake in GACLHolcim taking minority stake in GACL
and 67% stake in ACCand 67% stake in ACCo Heidelberg Cement acquiring 50% inHeidelberg Cement acquiring 50% in
Indorama CementIndorama Cement
8/14/2019 Cement and Construction
5/23
Financial performanceFinancial performance
Returns dependent on vibrancy ofReturns dependent on vibrancy of
the economy as a wholethe economy as a whole
High returns during boom timesHigh returns during boom times(1994-96 and 2004-06) and low(1994-96 and 2004-06) and low
returns during lean periods (1997-returns during lean periods (1997-
01)01) Returns dependent on salesReturns dependent on sales
realisation and capacity utilisationrealisation and capacity utilisation
8/14/2019 Cement and Construction
6/23
Financial performanceFinancial performance
Cost structure Cost structureThe 2 major costs in cementThe 2 major costs in cement
industry areindustry are
(i) Energy costs(i) Energy costs(ii) Freight costs(ii) Freight costs
Over the years, the share ofOver the years, the share of
energy costs have gone upenergy costs have gone upmarginally while that of freightmarginally while that of freightcosts has declinedcosts has declined
Other costs more or less stableOther costs more or less stable
8/14/2019 Cement and Construction
7/23
Financial performanceFinancial performance
- Margins- Margins Industry margins very sensitive toIndustry margins very sensitive to
sales realisationssales realisations
On the whole (except 2003 due toOn the whole (except 2003 due tolow sales realisations), marginslow sales realisations), margins
firming up due to consolidation,firming up due to consolidation,
capacity utilisation and highercapacity utilisation and highersales figuresales figure
8/14/2019 Cement and Construction
8/23
Margins over the yearsMargins over the years
(Source: ICRA)(Source: ICRA)
8/14/2019 Cement and Construction
9/23
Recent performanceRecent performance
(2005-06)(2005-06) Lower interest costsLower interest costs
Higher infrastructure spendingHigher infrastructure spending
Higher sales reportedHigher sales reported
Increase in fuel prices offset byIncrease in fuel prices offset by
higher priceshigher prices
All these translated into higherAll these translated into higher
profits for cement companiesprofits for cement companies
8/14/2019 Cement and Construction
10/23
Recent performanceRecent performance
(..continued; Source:(..continued; Source:
ICRA)ICRA)
8/14/2019 Cement and Construction
11/23
World cementWorld cement
productionproduction World cement production is aboutWorld cement production is about
2.27 billion metric tonnes2.27 billion metric tonnes
(Source:(Source:www.researchinchina.com)www.researchinchina.com)
China (40+ % of worldChina (40+ % of world
production)production) IndiaIndia
USAUSA
8/14/2019 Cement and Construction
12/23
Global bigwigs inGlobal bigwigs in
cementcement La Farge, FranceLa Farge, France
Holcim, SwitzerlandHolcim, Switzerland
Cemex, MexicoCemex, Mexico
Italcementi, ItalyItalcementi, Italy
Heidelberg Cement, GermanyHeidelberg Cement, Germany
8/14/2019 Cement and Construction
13/23
What is in store forWhat is in store for
2007?2007? GDP growth expected to fuel the boomGDP growth expected to fuel the boom Increased spending on roads andIncreased spending on roads and
housing expectedhousing expected Bharat Nirman and concomitantBharat Nirman and concomitant
rural development also can push uprural development also can push upthe figuresthe figures
On the whole infrastructure spendingOn the whole infrastructure spendingexpected to drive growth in cementexpected to drive growth in cementand construction activitiesand construction activities
8% growth rate in 2007 and 20088% growth rate in 2007 and 2008
8/14/2019 Cement and Construction
14/23
A primer on IndiasA primer on Indias
construction industryconstruction industry Worth USD 50 billion p.a. and accountsWorth USD 50 billion p.a. and accounts
for 6% of Indias GDPfor 6% of Indias GDP
Industry status granted only recentlyIndustry status granted only recently 100% foreign investment permitted100% foreign investment permitted
since last yearsince last year USD 4 billion per annum set to flowUSD 4 billion per annum set to flow
into this sectorinto this sector Employs 40 million peopleEmploys 40 million people Unorganised & low-skilled workforceUnorganised & low-skilled workforce
8/14/2019 Cement and Construction
15/23
Construction industry Construction industry
Drivers of growthDrivers of growth Booming Indian economyBooming Indian economy
Growing housing and commercialGrowing housing and commercial
space (like malls, multiplexes)space (like malls, multiplexes)requirementsrequirements
Govt. thrust on infrastructure, GQGovt. thrust on infrastructure, GQ
project, infrastructure outlay etc.project, infrastructure outlay etc. Airport modernisation projectsAirport modernisation projects
8/14/2019 Cement and Construction
16/23
Indian constructionIndian construction
industry - Playersindustry - Players Companies like L & T, GMRCompanies like L & T, GMR
Infrastructure, HCC, GammonInfrastructure, HCC, Gammon
which undertake huge projects.which undertake huge projects. Companies like IVRCL, Nagarjuna,Companies like IVRCL, Nagarjuna,
DLF, Omaxe dealing in flyovers,DLF, Omaxe dealing in flyovers,pipelines, apartments andpipelines, apartments andhousing/office spaceshousing/office spaces
Other smaller companiesOther smaller companies
8/14/2019 Cement and Construction
17/23
er ormance gures aer ormance gures a2005-06 figures in2005-06 figures in mnmn
INRINR
Source: Edelweiss Source: Edelweisscapital)capital)
13717,90053,789PunjLloyd
85218,17439,339Nagarjuna
84017,11231,873IVRCL
86119,08247,521HCC1,06715,98346,552Gammon
8,884164,852345,826L & T
PATSalesM CapCompany
8/14/2019 Cement and Construction
18/23
Indian constructionIndian construction
industry (Source:industry (Source:
Edelweiss)Edelweiss) Aggregate order book for 2006-07Aggregate order book for 2006-07
at Rs. 50,000 cr.at Rs. 50,000 cr.
Y-o-Y revenue growth at 48%Y-o-Y revenue growth at 48%Y-o-Y earnings growth at 62%Y-o-Y earnings growth at 62%
8/14/2019 Cement and Construction
19/23
Construction industryConstruction industry
growth Global trendsgrowth Global trends Overheated housing market startsOverheated housing market starts
cooling off in the USAcooling off in the USA
Fall in sales coupled with higherFall in sales coupled with highermortgage rates make the goingmortgage rates make the goingtough.tough.
Europes housing market coolingEuropes housing market coolingoff after the steep rise in 2005off after the steep rise in 2005 China and India remain theChina and India remain the
primary drivers.primary drivers.
l b l l k f
8/14/2019 Cement and Construction
20/23
Global outlook forGlobal outlook for
cement & constructioncement & construction
industryindustry Annual cement demand to growAnnual cement demand to grow
4.7%4.7%
Construction boom in ChinaConstruction boom in China(Olympics) & India (housing,(Olympics) & India (housing,infrastructure) to drive projectsinfrastructure) to drive projectstill 2010till 2010
Half the worlds concreteHalf the worlds concreteproduction and a third of the steelproduction and a third of the steelproduction goes into China for herproduction goes into China for her
construction projects.construction projects.
l b l l k f
8/14/2019 Cement and Construction
21/23
Global outlook forGlobal outlook for
cement & constructioncement & construction
industryindustry Reasonable growth inReasonable growth in
construction sector in Brazil,construction sector in Brazil,
Argentina, Mexico and the MiddleArgentina, Mexico and the MiddleEastEast
All in all, a great decade aheadAll in all, a great decade ahead
for the cement and constructionfor the cement and constructionindustry fuelled by massive Govt.industry fuelled by massive Govt.
spending and privatespending and private
infrastructure investmentsinfrastructure investments
8/14/2019 Cement and Construction
22/23
References:References:
www.edelcap.comwww.edelcap.com
www.pinsentmasons.comwww.pinsentmasons.com
www.icra.inwww.icra.in
www.hinduonnet.comwww.hinduonnet.com
Survey of Indian industry, 2006Survey of Indian industry, 2006published by The Hindupublished by The Hindu
http://www.edelcap.com/http://www.edelcap.com/http://www.pinsentmasons.com/http://www.pinsentmasons.com/http://www.icra.in/http://www.icra.in/http://www.hinduonnet.com/http://www.hinduonnet.com/http://www.hinduonnet.com/http://www.icra.in/http://www.pinsentmasons.com/http://www.edelcap.com/8/14/2019 Cement and Construction
23/23
Thank You!Thank You!