India Cement & Construction Materials (vol 1 / issue 1)

impression

& construction Materials

july / August 2011indiaCemWeek

ceMent

News | Analysis | Market Coverage | Interviews | People Moves

CemWeek: making an

India: too important not to do itCemWeek breaks neW, higher ground

Interview Martin GiersePresident & exeCutive direCtor khd humboldt Wedag india

Jaypee RewaimPlements slv Cement

logistiCs solution

2nd CemWeek

India Survey

gauging sentiment in the seCtor

A CemWeek Publication

launChing the india Cement & ConstruCtion materials magazine

VOl 1 issue 1

rOBErT MADEIrAcemweek publisherhead of cw group reasearch

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FEATURES

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gROWING WITH INDIAA conversation with Martin Gierse of KHD Humboldt Wedag India

SLV CEMENTImplementation of logistics system at Jaypee's Rewa plant

YOU SPOKE, WE SHARECemWeek's Second Annual India Cement Sector Sentiment Survey

Editor's LetterWhy it's critical to provide exclusive analysis of our sector

Numbers in BriefAn analysis of the road ahead, region by region

Market and CompetitionThe impact of an economic slowdown and sluggish demand

M&A and FinanceDetails on a mixed performance by key players in the sector

Projects and ExpansionsExpansions projects continue; environmental concerns presented

PeopleViolence in Bragga; cricketer working as brand ambassador

ProfilesIndia Cement: Thriving in a challenging environmentShree Cement: Turning efficiency into profits

updatesLafarge cleared to continue mining after environmental delaysClean technology highlighted by KHD at conference

Analyst RecommendationsHighlights of the latest in broker recommendations

Stock PerformanceComprehensive data on major companies throughout India

CEMENT VOLUMESIndustry rebounds after dip in first quarter: details and analysis

CW Group

the best talent an engineer can have is the will to learn something new every day

There’s always something new to learn in India. For further information please call +91 120 4018500, write an E-mail to [email protected] or visit www.loesche.com

AZ_Letter_2011_india_RZ.indd 1 24.06.2011 12:18:17 Uhr

the best talent an engineer can have is the will to learn something new every day

There’s always something new to learn in India. For further information please call +91 120 4018500, write an E-mail to [email protected] or visit www.loesche.com

AZ_Letter_2011_india_RZ.indd 1 24.06.2011 12:18:17 Uhr

And now we are doing it again.

The CW Group already offers a leading coverage of the dynamic India cement market through the widely trusted CemWeek.com platform. But India, being what we like to call the “world’s largest cement market, barring China” demands an even deeper commitment and level of attention. Drawing upon our research roots, the CW Group is pleased to announce yet another market-leading initiative, this time focused exclusively on the India cement market: the new India Cement & Construction Materials (ICCM) magazine.

TOO IMPORTANT NOT TO DO IT

ROBeRt MadeIRapublisher and head of research

The ICCM builds on CemWeek’s platform and extends it into a full-featured magazine dedicated to providing interviews, analysis, insight, technology and engineering updates as well as actionable perspectives. Additionally, a new section has been launched on the online CemWeek platform to further deepen the India market focus: www.cemweek.com/india.

In this inaugural issue, you will find an intriguing conversation with Mr. Martin Gierse, President of KHD Humboldt Wedag India, who provides a unique perspective on how KHD plans to stay on top of a challenging market. We also bring you information on a new traffic logistics management system that promises to make transportation in and out of cement plants safer and more efficient.

You also won’t want to miss our regular departments, which include the latest news in expansion projects, analysis of upcoming challenges to the market and

much more. We also take a closer look at the performance and upcoming plans of two important participants in the market, India Cement and Shree Cement.

As a unique publication solely dedicated to trends in our industry specific to the Indian sector, we hope to become a forum for discussion on the strengths and challenges unique to this market. We encourage your contributions and feedback. So go ahead: take a read through the magazine and see all that we have to offer. Then drop us a line at [email protected] and let us know what you think!

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LETTER FROM THE EDITOR

he CW Group and CemWeek like to lead. We were born with a level of energy that compels us to

do bigger and better. From our market-leading research to our print and online publications, we insist on continuing to raise the bar for excellent industry coverage.

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE BMWeekBMWeek



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JULY / aUGUSt 2011 1

Heading into tHe unknown

NUMBERS IN BRIEF

IndIan Cement Industry

As demand lags and input costs rise, the market appears to be headed for a slowdown. Here, a breakdown of the unique challenges

faced by each region illustrates the uncertain future

JULY / aUGUSt 2011 BMWeekBMWeek



CW Group Coal Week

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE2

he cement industry in India is feeling the pressure from sluggish demand growth and rising

input costs, although in certain regions demand has increased due to rising housing demand coupled with a rise in development and infrastructure spending by certain state governments. However, the southern region, which is the biggest market in the country, continues to face a demand slow down. Production discipline will be the key to the holding prices even as the industry faces cascading increases in input costs. The pricing environment in India is expected to remain firm over the next two years on the back of production discipline exercised by cement manufacturers in the country. While capacity has increased with the country adding 82 mtpy in the last two years, the trend in production reflects volumes that closely match domestic consumption levels.

Given the geographical expanse of the country and highly freight-intensive nature of cement, it becomes imperative to review the regional cement industry trends in the country. The cement industry in the north, east and central zones of India are expected to fare better compared to other regions, in particular the southern states will continue to reel under the impact of sluggish demand.

Cement production in northern region (main states of Haryana, Punjab, Delhi and Rajasthan) grew by two percent in 2011 over the previous year. This growth was in large part due to a combination of factors. First, real estate markets dropped overall due to housing loans becoming dearer and inflation levels of ten percent. Second, the central and state governments reduced expenditure on infrastructure projects. Finally, construction for the Commonwealth Games ended after they were held in New Delhi in October 2010. As a result, while cement prices for the zone increased across states between January and April 2011, there has been subsequent downward correction in prices owing to

lackluster demand growth. Demand over the next two years is expected to grow by eight to nine percent, fueled mainly by growing demand in other regions that are likely to have capacity issues (see the next section below for more information on this trend in the central region). Net outflow to other regions will grow to 10.7 mtpy in FY13 compared to 8.5 mtpy estimated for the the current year.

The cement sector in Central India (main states of Uttar Pradesh and Madhya Pradesh) grew by almost nine percent (production levels of FY11 compared to 2011) as a result of strong demand from the retail housing segment. The cement business is further expected to get a boost from planned outlays in FY12 by the state government in Uttar Pradesh towards rural and urban development schemes as well as road construction projects. Currently the cement manufacturers are operating well beyond existing production capacities. Despite strong growth in demand and capacity constraints, cement prices were kept in check owing to the inflow of cement supplies from the northern region.

In the eastern region, the 9.4 percent YOY growth in FY11 has been the product of the states of Bihar, Chhattisgarh and Orissa. Bihar and Chhattisgarh are the most mineral-rich states in the country, but also rank highly in terms of development indicators. There has been a recent increase in development projects backed by the local governments of these states. In particular, the incumbent chief minister of Bihar has sought to turn the state around by massive expenditures on infrastructure, improving law and order and focusing on social welfare projects like education. All these efforts have renewed investor and business confidence in the state and fuelled cement demand by nine to ten percent. The eastern state of West Bengal has lagged behind despite its inherent advantage of being a coastal region. Because of a lack of political interest in pursuing prestigious




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industrial projects, West Bengal has lost out on such projects to other states that have campaigned aggressively to attract investments. The western state of Gujarat has been particularly successful in winning industrial projects that could have otherwise gone to West Bengal. No additional cement production capacity additions are planned in the region over the next two years, which augurs well for the manufacturers in central and northern India.

Overall for the NCE region, capacity utilization rates in the cement industry dropped in FY11 due to sluggish demand from the north zone accompanied with the addition of capacity of 38 mtpy in the last two years.

In absolute terms, the southern states of India constitute the country’s biggest market. However, YOY growth levels in South India (at 1.1 percent increase in FY11) have been well below the other regions. The fall in demand from Andhra Pradesh resulting from political instability coupled with additions in capacities in other states has had an adverse impact on the overall capacity utilization and cement prices for the region. Yet, the industry managed to remain afloat by exercising good production discipline. Prices in the region have been volatile but are expected to stabilize over the next two quarters of FY11. The growth in demand in South India is expected to be on par with the other regions in the next two years; however, capacity utilization will remain well below other regions.

Unlike in North India, the real estate sector has fueled demand for cement in the western India states of Gujarat and Maharashtra. The region has seen an 11.4 percent increase in cement production in FY11. Demand in the region is expected to grow at a rate of ten percent per year backed by an increase in infrastructure development expenditure by the state government and increased demand for housing. With capacity utilization for west zone cement manufacturers at 93 percent in the same period, burgeoning demand in Maharashtra has also provided a business opportunity for cement manufacturers from southern India. Retail cement prices remained strong across the state of Maharashtra owing to demand supply balances. On the other hand, Gujarat struggled with some excess

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capacities, leading to a softening of prices in the state.

As the industry faces sluggish demand, it is also seeing an increase in costs across inputs. Energy costs have increased due to the rising cost of imported coal. Domestic coal prices increased as Coal India introduced differential pricing, with higher prices for non-priority sectors. Transport costs have increased, although diesel remains highly subsidized in the country compared to international levels, implying that here too the upward pressure on costs will remain. Raw material costs have also risen sharply, as most companies are now forced to pay for fly ash. Indirect costs like staff salary have also increased. Earlier cement manufacturers in the country had opted for captive power plants to save on costs; however, the potential here seems to have been exhausted. The way forward for cement manufacturers would now be to explore captive coal mines, which would have a lead time of three years to develop. The cost of production is expected to escalate by 80 to 90 INR per ton for the cement sector. In the backdrop of slow-paced demand and rising costs of production, per ton EBITDA has shown a downward trend over the last six quarters.

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Fives FCB, supplier oF innovative proCess equipment, now estaBlished

in india

www.fivesgroup.com

Fives FCB C/o Fives india engineering & projects pvt. ltd - Cement & minerals division anmol palani, level 6 - 88 G.n. Chetty road, t nagar - Chennai 600 01 7 - india - tel.: 00 91 44 4292 7272 - [email protected]

driving progress

Fives FCB has been serving the cement manufacturing industry for over 70 years.Thanks to its double expertise as Process Mechanical Equipment Supplier and Turnkey General Contractor, Fives FCB provides sustainable and reliable solutions combining technology, safety and cost-optimization in the production of a high quality product in environmentally friendly conditions.

The sustainable grinding mill

• lowest energy consumption (energy savings ranging from 30 to 70% compared to ball mill)

• Zero water consumption• Best product quality• automatic operation for highest process flexibility

and stability• reliability and extensive lifetime

Proven technological features for cement, raw meal, slag, coal, or any other mineral grinding

Can be driven: • by single pinion and girth gear (up to 3,900 kw)• by double pinion and girth gear (up to 5,000 kw)• by gearbox integrating 2 pinions (up to 8,000 kw)• by central drive (up to 12,000 kw)

the Fives FCB tube mill benefits from a wide range of applications from simple to most sophisticated

design: air swept mill with one filter to birotator mill.

The highest efficiency dynamic classifier• highest quality for raw meal, cement or solid fuels• easy installation• high resistance to wear • minimal by-pass• tromp curve very steep• very low pressure drop• very low power consumption

• achieves very low nox emissions without the need for snCr additives and without Co emissions

• enables the firing of a wide variety of types of fuel, including a high proportion of alternative fuels:

- oil, Coal, natural gas, petcoke, anthracite- alternative fuels: oils and solvents, plastic, wood or tyre chips, etc.the d-nox option allows the nox emissions at the stack to be cut by half

Fives FCB, the experience in supplying complete cement plants all over the worldFives FCB is recognized by the major world cement manufacturers as a general contractor and an equipment supplier able to manage turnkey projects throughout the world.recently, Fives FCB has implemented complete cement plants equipped with its latest technologies in vietnam (thai nguyen), qatar (umm Bab), egypt (Beni suef) and mexico (hermosillo).

Zero-NOx precalciner

reFerenCes• holcim (Costa rica) 3,000 tpd precalciner for petcoke and alternative fuels firing• qatar national Cement Co (qatar) 5,000 tpd gas precalciner and single string preheater

with chlorine by-pass• thai nguyen & hoang mai (vietnam) 4,000 tpd precalciner burning 100% anthracite• holcim-apasco (mexico) 3,500 tpd precalciner for petcoke and aFr firing

TSVTM classifier

reFerenCes• more than 200 industrial references worldwide

Horomill®

reFerenCes• over 50 machines in the order book for raw and cement grinding applications• more than 1,400,000 operating hours• installed worldwide in the plants of major cement manufacturers such as BuZZi-uniCem, CemeX,

holCim, laFarGe, viCat, etc.

Ball mill

reFerenCesholcim-apasco (mexico), Beni suef Cement Co (egypt), qatar national Cement Co (qatar), ihi-Bimson (vietnam), lafarge Cementos sa (mexico), nova Cimangola (angola), orbulk & orcem (netherlands), Cenosa (honduras), hatien 1 (vietnam)

Emissions control with this flexible piece of equipment

Fives FCB, supplier oF innovative proCess equipment, now estaBlished

in india

www.fivesgroup.com

Fives FCB C/o Fives india engineering & projects pvt. ltd - Cement & minerals division anmol palani, level 6 - 88 G.n. Chetty road, t nagar - Chennai 600 01 7 - india - tel.: 00 91 44 4292 7272 - [email protected]

driving progress

Fives FCB has been serving the cement manufacturing industry for over 70 years.Thanks to its double expertise as Process Mechanical Equipment Supplier and Turnkey General Contractor, Fives FCB provides sustainable and reliable solutions combining technology, safety and cost-optimization in the production of a high quality product in environmentally friendly conditions.

The sustainable grinding mill

• lowest energy consumption (energy savings ranging from 30 to 70% compared to ball mill)

• Zero water consumption• Best product quality• automatic operation for highest process flexibility

and stability• reliability and extensive lifetime

Proven technological features for cement, raw meal, slag, coal, or any other mineral grinding

Can be driven: • by single pinion and girth gear (up to 3,900 kw)• by double pinion and girth gear (up to 5,000 kw)• by gearbox integrating 2 pinions (up to 8,000 kw)• by central drive (up to 12,000 kw)

the Fives FCB tube mill benefits from a wide range of applications from simple to most sophisticated

design: air swept mill with one filter to birotator mill.

The highest efficiency dynamic classifier• highest quality for raw meal, cement or solid fuels• easy installation• high resistance to wear • minimal by-pass• tromp curve very steep• very low pressure drop• very low power consumption

• achieves very low nox emissions without the need for snCr additives and without Co emissions

• enables the firing of a wide variety of types of fuel, including a high proportion of alternative fuels:

- oil, Coal, natural gas, petcoke, anthracite- alternative fuels: oils and solvents, plastic, wood or tyre chips, etc.the d-nox option allows the nox emissions at the stack to be cut by half

Fives FCB, the experience in supplying complete cement plants all over the worldFives FCB is recognized by the major world cement manufacturers as a general contractor and an equipment supplier able to manage turnkey projects throughout the world.recently, Fives FCB has implemented complete cement plants equipped with its latest technologies in vietnam (thai nguyen), qatar (umm Bab), egypt (Beni suef) and mexico (hermosillo).

Zero-NOx precalciner

reFerenCes• holcim (Costa rica) 3,000 tpd precalciner for petcoke and alternative fuels firing• qatar national Cement Co (qatar) 5,000 tpd gas precalciner and single string preheater

with chlorine by-pass• thai nguyen & hoang mai (vietnam) 4,000 tpd precalciner burning 100% anthracite• holcim-apasco (mexico) 3,500 tpd precalciner for petcoke and aFr firing

TSVTM classifier

reFerenCes• more than 200 industrial references worldwide

Horomill®

reFerenCes• over 50 machines in the order book for raw and cement grinding applications• more than 1,400,000 operating hours• installed worldwide in the plants of major cement manufacturers such as BuZZi-uniCem, CemeX,

holCim, laFarGe, viCat, etc.

Ball mill

reFerenCesholcim-apasco (mexico), Beni suef Cement Co (egypt), qatar national Cement Co (qatar), ihi-Bimson (vietnam), lafarge Cementos sa (mexico), nova Cimangola (angola), orbulk & orcem (netherlands), Cenosa (honduras), hatien 1 (vietnam)

Emissions control with this flexible piece of equipment

kHd Humboldt wedag india Committed for tHe long Haul

mr. martin gierse of khd humboldt Wedag india

CemWeek India spoke to Martin Gierse, President and Executive Director of KHD Humboldt Wedag India, to learn what the company’s plans are in India

as well as to hear his thoughts on managing the business. Undoubtedly, dynamic growth prospects are buoying the Indian cement market, but

stakeholders are evolving and demanding ever more sophisticated solutions

FEATURE

grOwing with indiA:




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INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE8 JULY / aUGUSt 2011 BMWeekBMWeek



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CemWeek: KHD has seemingly made a big push in India and developed good traction in this key market. Tell us about your organization in India, KHD’s focus on the market and your long-term commitment to it.

Martin Gierse: Humboldt Wedag India Private Limited (HWI) is a wholly-owned subsidiary of KHD Humboldt Wedag, Germany, which was founded in 1856 and has delivered key technologies worldwide for more than 152 years. From the office in New Delhi, KHD Humboldt Wedag India caters today to clients in the Indian subcontinent as their main market.

Until the end of 2000, the sales of KHD’s cement machinery equipment had been handled through an agent, Cimmco Birla. From 2000 on, KHD Humboldt Wedag, Germany, repatriated the cement activities into the existing offices of their Indian subsidiary company, which, until then, was active only on the Minerals and Coal market. The organization has rapidly grown ever since and has at present more than 300 officials.

The major focus today is cement. Beyond that, KHD India delivers machines into the minerals sector. The total business stands today for a turnover for KHD India of more than US$150 million. India is one of the global cement markets with a comparably strong growth, and this growth will continue for some years to come, despite temporary weak spots.

KHD already has a large number of installations for its equipment in India, which combined with upcoming new installations gives superior references in the market and a solid base for the service business, which is so important for our clients to operate at optimal efficiency. The highest efficiency and sustainability for our clients’ operations is our ultimate commitment.

CW: How would you characterize KHD India’s competitive advantage? How does

your team help reinforce the advantage on a day-to-day basis?

MG: KHD is a technology focused company with a long history and an impressive installed reference base and expert services. Additionally, some of our core cement plant equipment for the pyro process, as well as the grinding and automation items are recognized as class “A” products.

We are, of course, not living just on our merits. To maintain the speed of the business, it’s necessary to have a clear organizational setup with the right mixture of local and global knowledge base and support. KHD India is among the preferred employers for talent within our segment. With good local expertise, a clear organization, the efficient support of our global network and clear performance targets on delivery and quality, the team is a strong partner for our Indian clients.

CW: What makes India a unique market from your vantage point, and how is your organization shaped to best address this quality?

MG: The Indian market participants have a great interest in technology questions. Some projects already represent the cutting edge of the technology. This is where KHD can make a point with its state-of-the-art technology. The Indian market is asking for the technology for bigger units to fulfill market needs. Furthermore, Indian sourcing abilities

are shaping up to support the necessary delivery times and readily-available spares and services.

CW: Is your strategy in India different from that in other markets?

MG: The way we conduct our business in India is not very different from the rest of the world, in principle. The difference comes from two facts.

First, we are running an office setup of more than 300 people, which is larger than in any other of our worldwide customer service centers, except our headquarters in Cologne, Germany.

Second, we do our non-European sourcing with a focus on India and with a local workshop in Delhi; whereas globally, a stronger sourcing strategy focuses on our procurement platform in China.

The future market will require more services over and above the pure CAPEX projects. Presently, our focus is on strengthening the plant service side of our local business in order to respond to our clients’ needs for high reliability and performance.

CW: India’s cement sector has gone through a bit of a turbulent year. How do you see the Indian cement sector now evolving and how will the role of equipment vendors evolve with it?

MG: KHD follows the judgment of the Indian Cement Manufacturers’ Association (CMA) in its growth assessment. It will sustain a level of growth between eight and ten percent for the years to come. Customers will look to highly efficient technology with the best balance of cost, performance and quality. KHD will serve the local market with better technology and the appropriate sourcing strategy. Our focus is “Clean Technology” – low emissions, energy-efficient processes and environmentally friendly technology.

« Jaypee’s Himachal (Baga) plant – First 10,000 tpd plant online in India

Highly efficient technology at the

best balance of cost, performance

and quality




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CW: Will we see Indian-developed cement technologies exported abroad in the next few years? How much of KHD’s typical cement plant solutions are “Indian content”?

MG: KHD has delivered equipment from India to other markets like Africa, the Middle East, Nepal, Bhutan and others and will continue to do so. I n d i a n - s o u r c e d equipment and technology can be a major part of the total deliveries; some of the upgrade jobs can be close to 100 percent Indian, and some originally German products have been “Indianized” to fit the local supply structure and provide a good balance of quality and cost.

CW: As a business leader, how would you describe your leadership style? How do you define “success”?

MG: Transparent, communicative, participative, but clear in the direction to take. Leadership is about creating enthusiasm for the business we are in and for the struggle towards achieving delivery and quality targets in the challenging Indian environment.

The local customer expects both a strong technical background to create the credibility of your decisions and clear lines of action to ensure the lineup of the organization for the common targets.

Everybody in the organization has to act as a role model to groom the upcoming internal talent and develop them to be our future leaders and expert partners for our clients. Continuous learning is both required and embraced by KHD India employees.

Success is, of course, measurable in financial terms. Over and above that I measure it in the feedback from clients and their inclination to choose KHD Humboldt Wedag as their strategic partner in development of their industrial bases.

CW: Thank you for sharing your thoughts in the launch issue of CemWeek’s India Cement & Construction Materials Magazine. We look forward to following KHD Humboldt Wedag’s initiatives in the dynamic Indian cement market.

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MARTIN GIERSEpresident & executive directorkhd humboldt wedag, india

Mr. Martin gierse, a Chemical engineer, is the President and executive director of humboldt wedag india. he has been leading the Khd organization in india since October 2008.

Prior to joining hw india, Mr. gierse worked at lafarge, Vienna, Austria for a period of about 10 years in different functions such as Performance Management and several years as Plant Manager at a major cement plant. in his 28-year career, Mr. gierse has also worked with Pillard, Khd in germany, steinmuller and studsvik in the areas of r&d, Process design, execution, Commissioning and sales as well as in Management Functions within the realm of Power generation and Cement Plants.

Indian-sourced equipment and

technology can be a major part of the

total deliveries

FEATURE




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E-Magazine is nice, but print copy nicer?

E-Magazine is nice, but print copy nicer?

We know the cement industry well. Let us guide you. For more information please contact us at [email protected], or on +1-702-430-1748

www.cemweek.com/india

Subscribe to the print edition of the India Cement & Construction Materials magazine and have it mailed directly to you for an annual rate of USD110/INR4,900 + Shipping & Handling. Contact CemWeek at [email protected] to place your order.

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SlV Cement HelpS improVe tHe Jaypee rewa Cement plant

Contributed by the CaChaPuz bilanCiai grouP and string automation

In early 2011 the Cachapuz Bilanciai Group and its Indian partner, String Automation, completed the implementation of their SLV Cement solution

at Jaypee Rewa unit, the flagship cement plant of the Jaypee Group. The project, which improves inbound and outbound dispatching and

logistics processes, has been a success for all participating companies

Jaypee Rewa Plant

FEATURE




CW Group Coal Week


THE PROBLEMThe flow of materials into and out of any cement plant can often be chaotic. Even the most well-orchestrated transportation plans are open to the risk of human error and require numerous man hours to run smoothly. For years, the transportation logistics aspect of plant management has been ready for an improvement in technology that would allow it run more safely and efficiently. Cachapuz helped the Jaypee Group bring these improvements to the Rewa unit through the SLV Cement system.

Located in the state of Madhya Pradesh, the Jaypee Rewa plant is the Jaypee

Group’s main cement production unit. The plant has a production capacity of 3.0 mtpy. Because of its importance for the company, this plant was the first selected to implement the SLV Cement system.

THE SOLUTIONCachapuz customized the SLV Cement solution to meet the needs of the Jaypee Rewa plant, providing the necessary tools and equipment for complete automation of its functional areas, such as dispatching, weighing, parking, entry/exit gates and raw materials unloading. The tools for process management, business analysis and integration with the SAP Enterprise

Resource Planning program were also fully customized. All required process operators use SLV Cement software front ends, which were tailored to ensure that the software modules are simple and well-focalized on the business processes.

Using the SLV Cement system, the truck driver performs the loading/unloading process in self-service mode, interacting with the system components. First, he identifies himself in the parking kiosk, which validates the permission to load/unload from SAP, and waits for the system or the operators to call him. When called, he drives to one of the entry weighbridges, identifies himself, and




CW Group Coal Week


FEATURE

the system registers the truck’s weight after checking with positioning sensors that the truck is in the correct position on the weighbridge. When a traffic light informs him to proceed, he goes to the indicated loading/unloading area, where he performs the operation assisted by SLV Cement unloading kiosks (in the case of raw materials unloading processes). Then he goes to the exit weighbridge, identifies himself in the kiosk, and the system registers the second weight and prints the necessary documentation. All information is automatically synchronized with SAP to ensure that the data is consolidated in the two systems. To conclude the process, the driver goes to the dispatch zone to collect the legal documents, which are prepared in SAP using the data registered by SLV Cement.

The installed SLV Cement solution comprised an SLV Cement framework with SAP-ERP integration; a parking zone with two large information panels that are fully visible at 150 meters, one SLV Cement parking kiosk and one digital signage information unit; seven weighbridges with SLV Cement check-in/checkout self-service kiosks (with color touch screen, RFID card/tag reader, collectors and thermal kiosk printer), 14 positioning sensors and traffic lights; and three raw materials unloading zones with SLV Cement raw materials kiosks (with RFID card readers and embedded traffic lights). The necessary SAP interface functions were developed by SAP Consultants of

JIL-Information Technology, an IT arm of the Jaypee Group.

SATISFACTION AND RECOGNITIONThe success of the SLV Cement implementation in the Jaypee Rewa plant was possible with the hard work, commitment and team spirit of all the teams of Cachapuz Bilanciai Group, String Automation and Jaypee SAP/IT and Maintenance teams. On April 4, 2011, almost three months after the successful launch of SLV Cement in India, officers from Cachapuz Bilanciai Group and String Automation visited the Jaypee Rewa plant and met Mr. Sunny Gaur, Hon’ble Managing Director of Jaiprakash Associates Limited (Jaypee Group), Mr. C. S. Jain, Senior President (Commercial) of the Jaypee Rewa plant, as well as other personnel from several plants of the same group. During the meeting the parties discussed the implementation of SLV Cement in the Rewa plant. The Jaypee Group provided very positive and motivating feedback. According to Mr. Sunny Gaur, “The SLV Cement solution is efficient, is running very well and we are very happy with it.”

Mr. C. S. Jain, Senior President (Commercial) of the Jaypee Rewa plant, has been highly satisfied with the SLV Cement launch. According to Mr. Jain, the processes through SLV Cement “take 30 seconds, save 15 minutes at respective weighbridges, reduce the manual interventions, chances of errors drastically

minimized while also eliminating chaos through disciplined movement of trucks inside the Plant area.”

“The Jaypee Rewa plant was the first Indian Cement plant to receive the prestigious award of BSC Five Star as well as Sword of Honour from British Safety Council, United Kingdom after successful implementation of SLV Cement Software. After analyzing satisfactory performance of the SLV Cement software implementation, the Jaypee Group placed an order with Cachapuz Solutions, Portugal, to roll out the solution across other cement plants in the Jaypee Group.”

Officers from Cachapuz Bilanciai Group, String Automation and Jaiprakash Associates

KEY ADVANTAGES OF SLV CEMENT FOR JAYPEE REWA PROJECT

■ Automated raw materials reception and cement dispatching processes

■ well-oriented and business-focal-ized software front ends

■ self-service operations 24/7 ■ increased organization of truck

movement ■ reduced turnaround time to com-

plete the loading/unloading opera-tions

■ improved safety and security at the plant

■ integrated with sAP erP ■ reduction of manpower and human

errors ■ remote support to the system




CW Group Coal Week


Truck driver interacting with an SLV Cement self-service kiosk in the weighbridge

Er. Bikramjit Singh, Director of String Automation, Cachapuz’s exclusive partner in India, has also expressed satisfaction with the SLV Cement arrangement and expects that it will be highly successful in the future. Er. Singh has recognized a tendency towards innovation and technology among Indian industrialists, stating that such technology “amounts to enhanced efficiency, better safety and health care for their workers.” String Automation is capitalizing on this trend by partnering with Cachapuz Bilanciai

Group to bring their SLV Cement product to the local market and customize it to local needs and culture. Er. Singh reports that the response has been “overwhelming” and that many more companies will be adopting the SLV Cement system in the near future.

NEW ORDERSBased on the success of this first implementation, Cachapuz Bilanciai and String Automation received new orders to implement SLV Cement in

Cachapuz is a Portuguese company that is a part of the Bilanciai group, one of the biggest industrial weighing groups with representation in more than 30 countries worldwide. Cachapuz develops and implements automated solutions in a wide range of business areas, including cement plants and quarries. Cachapuz Bilanciai group’s exclusive partner for the indian market is string Automation. For more information visit www.slvcement.com.

slV Cement is an innovative solution for cement plants that provides the complete automation of the main functional areas such as parking management, self-service weighing, dispatching, entrance, bulk loading, bagged cement loading and counting, raw materials unloading, exit, fleet tracking and management, erP integration and business analysis.

jaiprakash Associates is a 25,000 crore well-diversified industrial conglomerate with a significant presence in engineering, construction, and other industries. it is the third largest cement producer in the country, specializing in a particular blend of Portland Pozzolana Cement under the brand name jaypee Cement (PPC). its cement division currently operates modern cement plants with an aggregate capacity of 22.80 mtpy. the company is in the midst of capacity expansion of its cement business throughout the country and is slated to have a capacity of 35.90 mtpy by Fy12e with captive thermal power plants totaling 672 Mw.

ABOUT CACHAPUz BILANCIAI

ABOUT SLV CEMENT

ABOUT JAYPEE

two more Jaypee Group plants: Chunar cement plant, located in Mirzapur, Uttar Pradesh and Baga cement plant, located in Himachal Pradesh. Additionally, Cachapuz/String were also awarded new orders to implement an SLV Cement Bags Counting Module in Rewa and Chunar plants, with a total of 22 bag loading lines. These new orders reflect the satisfaction of Jaypee Group in SLV Cement and represent the consolidation of the Cachapuz/String strategy for the Indian market.

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The monsoon season, high supply levels and sluggish demand from the construction sector are chipping away at the cement industry’s growth. According to the Index of Industrial Production data, growth between October 2010 and April 2011 dropped 2.5 percent, from 18.5 to 16. Additionally, for the first time in several years, the demand for cement has lagged behind the country’s GDP growth. Prior to FY 2010, cement had generally trended one to two percentage points above GDP.

With cement demand lower during the June to September monsoon season, manufacturers have traditionally relied heavily on strong performance in the months leading up to the season. However, the weak demand experienced in April and May was expected to carry into June and the next few months.

Large cement enterprises may be growing at a steady pace, but for small cement manufacturers, rising raw material costs

and internal as well as external competition among major players have led to a decline in numbers. The Business Standard reported that around 80 small cement-manufacturing units were shuttered in the last six months, a significantly higher rate than usual. Small units were defined as having a production capacity of less than two million tons.

India’s cement market, which is the second largest in the world, currently operates under some of the lowest capacity utilization rates. However, cement prices continue to rise. The discrepancy has left more than a few people theorizing over the cause. One hypothesis, supported by the Builders’ Association, is cartelization. This theory has piqued the interest of the government’s Serious Fraud Investigation Office (SFIO), which is moving forward with an investigation of major cement manufacturers including Ultratech Cement, Ambuja Cements and ACC. Both Ultratech and Ambuja confirmed

the investigation and stated that they have already provided the SFIO with requested information and documentation.

Hundreds of construction firms under the auspices of the Builders’ Association of India are not waiting for the government’s finding on whether a cartel exists or not. Rather, these firms have decided to band together to set up a BAI-sponsored cement manufacturing facility. The proposed cooperative facility, announced in June, is the first of its kind in India. It is now seeking the support of the Andhra Pradesh government.

In Southern India, cement manufacturers were urged by investment firm IIFL Institutional Equities to explore more export opportunities in order to increase production. The region only exported 0.1 million tons in FY 2011 despite an annual surplus capacity of nearly 30 million tons. Further development of the region’s export market could help offset

revious projections that India’s annual GDP growth would reach 8.5 percent may have been too aggressive as signs point to a slowdown in the country’s economy. Domestic demand, generally viewed as the driver of the Indian economy, is sluggish. In FY 2011, the core

industries that have historically driven demand—coal, crude oil, natural gas, petroleum and refinery products, fertilizers, steel, cement and electricity—ha ve experienced slower growth. A year ago, these industries averaged a growth rate of 6.64 percent. This year, weak demand has resulted in a lower average growth rate of 5.72 percent.

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the recent slowdown in demand that is projected to continue into the near future. Ports in South India are already increasing handling capacity. Krishnapatnam, for instance, handled 16 million tons in FY 2011, and was capable of handling up to its target, 35 million tons. Moreover, it also plans to expand its capacity to 45 million tons next year.

While other markets, such as Maharshtra, exhibited positive signs of volume growth, Andhra Pradesh showed major decline in April and May. Orient Paper and Industries, however, remained optimistic that its performance in other provinces would offset the losses it experienced in Andhra Pradesh over the past few months. Bharathi Cement, a subsidiary of Vicat, is looking to its export markets to save the day, announcing plans to export 10,000 to 15,000 tons per month to Sri Lanka.

Birla Corporation warned of overcapacity in the next few quarters. While Birla moved toward completing its 1.2 million ton brownfield project at Chanderia, it announced plans to shelve a 2.5 million ton unit for Kesoram. Shiva Cement, viewing India’s current oversupply issues as only temporary, projected its revenue would grow to RS 300 crore from its current RS 55 crore once it concluded its planned expansion in 2013.

Dalmia Cement is also working to increase its current 14 million ton capacity to 30 to 40 million tons over the next five years. To expand, the company plans to explore both inorganic and organic growth opportunities. On the sales front, it is looking at ways to improve its performance in markets outside of India. Dalmia reaffirmed that its short-term focus is on consolidating its position and executing operations well.

Madras Cement, the flagship of the Ramco Group, may be entertaining the idea of selling its shares in the company’s grinding unit in West Bengal. Madras has received offers from several manufacturers,




CW Group Coal Week


including Lafarge and Holcim, for its shares. Lafarge was looking for merger and acquisition opportunities to expand its market in India and that talks had been initiated with Madras for its grinding unit as well as with Meghalaya-based Star Cement to buy a majority stake in its company. Lafarge calls the story nothing more than market speculation.

Wonder Cement, hoping to launch its brand nationally, is seeking a creative partner. It marks the first time the company has held a call for a creative pitch, and several companies have responded. For the time being, the company’s holding unit, RK Marbles, appears to have placed its plans of selling its stake to Holcim on the back burner.

Finally, India’s Supreme Court ruled that cement manufacturers in Rajastan would have to pay the government up to 24 percent from the royalty due on limestone mined since 1996. The lawsuit stemmed from the government’s February 1992 decision to increase the royalty on limestone from RS 10 to RS 25 per ton. Manufacturers including JK Synthetic, Birla Corporation,

CEMENT MARKET AND COMPETITION




CW Group Coal Week


MARKET SPELLS TROUBLE FOR SMALL FIRMSsmaller cement makers in india have been shutting down plants at an increased rate over the past six months. Plants with capacity less than two million tons, commonly referred to as mini cement plants, are struggling to survive amidst competition from bigger players. Although large enterprises are growing at a steady pace, more than 80 percent of small cement manufacturers in gujarat have had to shut down their units due to competition among major players and unviable raw material costs.

PARING OF CAPITAL INVESTMENTS OBSERVEDsigns indicate that cement firms are withholding their investments for new capacities. One indication is that new clinker capacity orders have stalled since April. According to director KC jain, BK Birla’s Kesoram industries is shelving a 2.5-million ton unit at a cost of rs 1,160 crore. On the other hand, the dalmia group, which has a capacity of nine mtpy in the southern region, had initially planned to add 10 mtpy in 2008. since the economic turmoil, however, it has not launched any project or equipment orders. “the cement demand environment was expected to improve from 2012-13, but now the situation does not look favorable and things are going slow," ravi sodah, research analyst with ellara Capital, said.

HIGHER FUEL COSTS AND CONTINUED OVERCAPACITY PRESENT CHALLENGESwith capacity additions continuing, the industry surplus is expected to rise until Fy 2013. this figure assumes a demand expansion that at least equals the anticipated growth in the country’s gross domestic product of around 8%. however, demand growth has halved to 5% compared with the past three years. the month of May saw scant growth in demand, and the monsoon is expected to further worsen the situation. Another problem is the rising clinker inventory

held by most cement firms, which adds to holding costs. Further, the hike in excise duty and the increase in coal prices threaten to negate the benefits of higher realizations in the last few months. Also, raw material costs are estimated to have surged by one-and-a-half times in the last five years.

SFIO CONFIRMS CARTEL INVESTIGATIONthe government has placed cement majors ultratech Cement (ultratech), Ambuja Cements and ACC on the radar of the serious Fraud investigation Office (sFiO) over allegations of cartelization. ultratech and Ambuja confirmed that an investigation is being carried out by the sFiO and that they have cooperated with the Office’s requests.

the sFiO, which is acting under the direction of the corporate affairs ministry, will examine the conduct of the cement companies over a 10-year period. while the companies have not been penalized for cartelization, the investigation’s announcement had a negative impact on the share price of most of the cement players. in 2007, cement manufacturers were under tight watch by the Monopolies and restrictive trade Practices Commission (MrtPC), which ordered an investigation into the business practices of 14 leading cement manufacturers that were alleged to have colluded to increase cement prices. the commission issued notices of inquiry against these companies after concluding that the price hikes were much higher than the rise in the cost of production. As we are seeing now, the share performance of the leading cement companies fell after the announcement of the investigation.

On july 28, the indian units of global cement giants lafarge and holcim were formally accused by local regulators of breaking the country’s antitrust rules. the companies will be subjected to a probe by the Competition Commission of india. the companies are disputing the allegations, but are cooperating with the authorities.

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JK Udarpur, JK Corporation and Shree Cement challenged the increase and took their dispute to the court. The decision applies to royalties due between 1992 and 1996.

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With the acquisition, Dang Cement became a subsidiary of Ambuja Cements, which is owned in part (50%) by Swiss manufacturer Holcim. Ambuja’s current capacity is 25 million tons, but it is adding two million tons of capacity. Holcim also holds a majority stake in ACC, which is also increasing its capacity from 27 million tons to 30 million tons.

ACC and Ambuja underperformed in the first quarter of the year as investors became increasingly nervous about the country’s economic outlook. Both companies were expected to post flat growth in the latest fiscal period. While ACC was projecting a 12 percent growth, Ambuja was expecting to see a two to three percent volume decline. A lack of government spending on infrastructure, especially in South India, was viewed as a major contributor to the overall flat growth rate of two percent for the quarter seen by ACC, Ambuja and other companies such as UltraTech Cement.

Birla warned shareholders that a lack of demand and overcapacity in the next few quarters is likely to exert pressure

on the company’s profit margins. Birla found itself producing less than its 7.5 million tons of capacity last year because of a lack of demand for cement. Cement generates the largest portion of Birla’s revenues. Birla’s capacity is projected to climb in FY 2011 to 9.3 million tons. Despite experiencing significant growth in both sales and net profit mainly due to the merger of its associate Amareswari Cement, Sagar Cement cautioned that lower margins from rising input costs, excess capacity and weak demand were likely for the June quarter.

JK Lakshmi Cement reported that its net profits dropped 54.52 percent for the quarter ending March 31st due to higher fuel and transportation costs, and they were not the only ones. Madras Cement reported a sales turnover of RS 702.64 crore and a net profit of RS 63.78 crore for the quarter ending in March 2011. For the same quarter in the previous year, the sales turnover was RS 582.19 crore and net profit was RS 29.37 crore. However, in the last three months, the southern-based market leader has underperformed despite a buoyant operating environment.

The monsoon season has affected prices in the past, but this year cement manufacturers in the southern region have maintained strict production discipline, which has helped to keep prices firm. Consequently, this should help manufacturers like Madras obtain improved realizations during the monsoon season, allowing the company to offset rising input costs. Analysts were skeptical, however, that companies could continue realizations at this level as the monsoon season progresses.

COALIn addition to concerns over increasing overcapacity in the industry, manufacturers are also faced with rising inputs costs, particularly coal and transportation prices. The coal industry continues to struggle with poor supply conditions. A drop in coal production has affected cement manufacturers who depend heavily upon coal as their main source of energy. Coal production fell 0.3 percent in FY 2011 compared to an increase of 8.12 percent in FY 2012. Natural gas production also registered a

mbuja Cements acquired an 85 percent stake in Nepal-based Dang Cement for RS 19.13 crore and as of July was in the process of acquiring an additional five percent stake for RS 1.13 crore. Presently, Dang Cement is not carrying out any business activity, but does hold

limestone-mining leases in Nepal.

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LAFARGE CONSIDERING ACqUISITIONSCement maker lafarge says it is looking at mergers and acquisitions to expand its growth. the firm is said to have initiated talks with Meghalaya-based star Cement for buying a majority stake and also with Chennai-headquartered Madras Cement for its grinding unit in west Bengal. lafarge declined to comment on the matter, calling it market speculation.

SAGAR CEMENTS RETAINS RATINGSCrisil research has kept its favorable ratings for sagar Cements, giving the company a top grade and maintaining the fair value of rs 202 per share. the company’s Q1Fy12 revenues and margins exceeded Crisil research’s expectations. solid growth helped the company to post a flat eBitdA margin of 23.5%. the absence of clinker sales during the quarter may be attributed to the merger with Amareshwari Cements, who used to buy clinker from sagar.

INDIA'S CENTURY PLYBOARDS q1 CLIMBS, ExPANSION ON TRACKCentury Plyboards reported a higher net profit of rs 53.70 crore for the first-quarter. Century Plyboards has interests in the plywood, decorative veneers and laminate sectors and is in the process of expanding its cement, plywood, laminate and pre-laminated board capacities. in a media statement issued after the company's board meeting, Century Plyboards officials said expansion plans to increase cement capacity are progressing as scheduled. the plan includes setting up of a new clinker unit and grinding units at guwahati and at Kahalgaon.

significant drop in growth. In FY 2010, production growth was 44.59 percent; in FY 2011, a modest 9.97 percent.

The drop in coal production has also affected India’s energy generation. In May 2011, thermal power stations only received 85 percent of their needed coal

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requirement. Reportedly by the end of the month, 26 power stations were at critical stock levels, including 17 stations that were at super-critical stock (i.e. supply for less than four days of production).

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everal manufacturers moved forward with expansion plans, including Amrutha, Ultratech, Shiva, Birla, ACC, Century Textiles and Cement Manufacturing. Ultratech started surveying land in the Pupunki areas of the Chas Block to potentially house a 2.1 million ton cement

unit while Amrutha Constructions received government approval to proceed with a proposed new cement factory and captive power plant near Maralbhavi village in Surpur Taluk of the Yadgir district. The RS 960 crore investment will include a two million ton capacity manufacturing facility as well as its own coal-based 50 MW power plant. It is expected to add 700 jobs to the area.

ACC is expanding its cement capacity to 30 mtpy with the completion of several projects, such as a 12,500 tons-per-day capacity kiln at Wade, a new 7,000 tons-per-day clinker line at Chanda, and a RS 280 crore plant with a one million ton capacity being built in the coastal area of Karnataka. Shiva Cement is expecting a similar capacity increase for its brownfield project, having recently increased its budget by more than 50 percent to RS

248 crore from RS 163.5 crore. Currently, its capacity is 0.132 million tons, but it has received environmental approval to expand its plant to handle one million tons.

Despite concerns over feeling pressure on its margins from a lack of demand and overcapacity, Birla reportedly has approached the government for approval to increase its Chanderia plant, which

has a current capacity of 1.2 million tons. Birla wants to boost capacity by 1.5 million tons. The company also proposes to set up a one million ton plant in Assam in a joint venture with the government and another one million ton plant in Tripura.

Century Textiles will invest RS 2,000 crore on upgrading its units in West Bengal and Maharashtra, which will include a 2.8 million ton capacity expansion at

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CENTURY PLYBOARDS TO BUILD NEW CEMENT UNITCentury Plyboards (CPil) is investing rs 1,630 crore for new manufacturing facilities for cement, plywood, particle board and fiber board. in an interview with Business line, CPil Managing director sajjan Bhajanka said the company's 70 percent-owned unlisted subsidiary Cement Manufacturing is putting up a new unit at lumshnong in Meghalaya through its subsidiary star Meghalaya Cement.

it is also setting up a clinker grinding unit at guwahati in Assam. it has planned to build a new grinding facility at Kahalgaon in Bihar as well. these improvements would take the company’s cement capacity to 4.4 mtpy from its current 1.2 mtpy at an investment of rs 1,100 crore. long-term loans from six banks worth rs 745 crore have already been tied up. the units would be commissioned by the end of next financial year.

INDIA'S BIRLA GROUP TO ExPAND CAPACITYBirla Corporation, the flagship company of the MP Birla group, has applied to the union Ministry of environment and Forests for approval of its plan to increase the capacity of its cement plant in Chanderia by 1.5 million tons. this change will take the total cement capacity to 10.8 million tons. BCl's turnover stood at rs 2,415 crore in 2010-2011 against rs 2,387 crore in 2009-2010. Profit after tax was lower at rs 319.88 crore against rs 557.18 crore mainly on account of lower realization on cement as well as an increase in coal and other input costs.

At the annual meeting, the shareholders approved the payment of a final dividend of rs 3.50 per share, in addition to the interim dividend of rs 2.50 already paid. Chairman harsh V. lodha said BCl's profitability was affected because of pressure on prices and also because of the costs of fuel and other inputs. significant

increase in capacities in the industry and poor demand from institutional buyers, including the government, compounded the situation.

INDIA: LAFARGE FACES 'GREEN' CHALLENGE FOR HICHAMAL PRADESH UNIT lafarge is facing headwinds for its proposed three mt cement unit in Minda, hichamal Pradesh, after a petitioner questioned the move on environmental grounds. in june 2009, the company got environmental clearance for the project.

however, a petitioner from an affected village filed a case before the national environment Appellate Authority and alleged that the plant was being built within 10 km of a wildlife sanctuary, which is not allowed without the permission of the national wildlife Board. Based on the petition, the neAA cancelled the clearance given to the project after a site visit. lafarge then went to the himachal Pradesh high Court pleading against cancellation of the environmental clearance. Petitioners claimed that lafarge hid the fact that its proposed cement plant was close to a wildlife sanctuary, which was later affirmed by the state forest department as well as the statutory Forest Advisory Committee of the union environment ministry and finally by the appellate authority.

SHIVA RAISES COST ESTIMATE FOR ExPANSIONshiva Cements has increased its budget for a brownfield expansion project by more than 50 percent to rs 248 crore. "the Project Co-ordination Committee (authorised by the Board) has approved revision of project cost from rs 163.5 crore to rs 248 crore in view of revision in the expanded capacity up to one mtpa," the company said in a filing to the Bombay stock exchange. shiva stated that it has received environmental clearance for expanding plant capacity to one mtpy.

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Manikgrah Cement and new equipment for the grinding unit at its Sonar Bangla Cement plant. Once the expansion is complete, the company’s total production capacity will be 12.8 million tons.

Cement Manufacturing will add 1.75 million tons of fresh clinker capacity at Lumshnong in Meghalaya, 1.6 million tons at Guwahati, Assam, and a new 1.6 million ton grinding unit at Kahalgaon in Bihar. Cement Manufacturing, a subsidiary of Century Plyboards India, will be able to increase its current capacity of 1.2 million tons to 4.4 million tons with this RS 1,100 crore investment.

Not all expansion plans are proceeding as smoothly. Both Lafarge and Jai Prakash have had construction halted over environmental concerns. Lafarge’s proposed three million ton plant in Minda, Hichamal Pradesh has had its environmental clearance cancelled after the permit was challenged. The National Environmental Appellate had originally issued environmental clearance, but later revoked it upon discovering the new plant would be built within 10 km of a wildlife sanctuary. Lafarge had also failed to obtain the necessary clearance from the National Wildlife Board. Lafarge pled its case against cancellation to Himachal Pradesh’s High Court. In early July, Lafarge received the green light to move forward with its mining project after the country’s High Court found the company’s revised environmental clearance to be satisfactory.

Jai Prakash’s plans for a 2.5 million ton cement unit in Uttar Pradesh ground to a halt because of environmental concerns. The proposed plants would have been built too close to the Son River and Kaimur Wildlife Sanctuary; therefore the project’s environmental clearance was revoked.

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CEMENT VOLUME AND PRICING

olume and pricing

Cement dispatches proved to be a mixed bag for manufacturers. For example, India’s largest cement manufacturer, Ultratech, saw sales decline 3.2 percent to 3.24 million tons in May. Production also fell 4.9 percent to 3.25 million tons. Ambuja also experienced a 6.6 percent decline in dispatches. In contrast, ACC enjoyed a 13.7 percent rise in shipments over the previous year. Production was also up to 2.01 million tons from 1.82 million tons.

In May, cement demand dropped 0.9 percent, causing prices to fall. It was the second month in a row that both demand and prices dropped. Prices were expected to decline further in subsequent months, as demand remained weak. Regionally, prices stayed strong in southern India due in large part to production discipline in May, but by June 1 prices in the region began trending lower with overcapacity and slow demand catching up. Chennai witnessed a drop of RS 10 per 50 kg bag for trade segment and drops of RS 15 per bag for non-trade.

Prices in eastern and central India declined. An increase in supply levels led

to prices declining by RS 20-30 per bag. Weak demand, the shortage of labor and a heat wave pushed prices down by RS 15-20 per bag in the central part of the country. Prices in non-trade agreements were down RS 35-50 bag.

Heidelberg Cement expected price corrections to continue in the range of RS 5-10 per bag in most regions of India in June. The company pointed to a history of price adjustments that have historically occurred prior to the start of the monsoon season as the main indicator of a drop in price. Heidelberg projected that month-on-month growth in the short term would trend between five and six percent and that strong demand growth would occur in the mid-term.

ACC and UltraTech turned in solid performance numbers for June. ACC shipments were up seven percent to 1.91 million tons and production rose to 1.89 million tons YOY. For UltraTech, dispatches climbed two percent, and a 1.9 percent growth in cement production was registered.

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n April, aggregate cement dispatches in the South declined nearly six percent YOY compared to a 0.3 percent decline noted by the entire country. For the fiscal year ending in March,

cement dispatches in the southern region had barely grown 1.1 percent YOY, which was lower than India as a whole.

MIxED VOLUME PERFORMANCE ExPECTED FROM TOP CEMENT MAKERSACC Cement, Ambuja Cements and ultratech are expected to post flat growth in the latest quarter. however, volumes are likely to pick up after monsoon and festival seasons. Overall, cement majors are expected to witness flat growth of two percent for the quarter owing to lack of government spending on infrastructure, especially in south india.

MADRAS CEMENT ExPECTS CONTINUED FALL IN PRICESdownward adjustments in prices are expected to continue in the southern region of india due to surplus capacity, which could indicate trouble for Madras as it derives 90 percent of its sales in the region. "with the capacity growth outstripping demand in the southern region, prices would continue to be under pressure," Madras Cement said in its recent annual report. "the cement industry would continue to experience lower capacity utilization levels. inflation would also affect the costs of various inputs of production and distribution, thereby affecting realization," it further said. Madras Cement’s stock has been under pressure, hitting a 52-week low of rs 80 in june.

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CEMENT CONSTRUCTION MATERIALS

onstructionmaterials

The Sahar Airport is going green when it comes to building its new airport terminal. The airport has applied for a green building certificate and is using recycled materials to construct the terminal, which will serve both national and international travelers. Recycled materials being used include fly ash blocks and environmentally friendly wood products. To ensure sustainable power usage, glass walls and ceilings are being used to capture natural light.

Lafarge launched a new Home Building Center in Chandannagar city in West Bengal’s Hooghly district. It is the third such facility developed by Lafarge in the area. The business gives advice and assistance to people in designing their homes. Meanwhile, a new FACT-RCF Building Products Limited’s production unit is close to completion. The new facility, which will produce gypsum-based wall panels and other building materials, is 97 percent finished and should be completed in October 2011.

Gujarat Mineral Development Corporation (GMDC) signed a supply agreement with Aril Ambani Group’s

Reliance Cementation, ACC and Adani to supply limestone. GMDC plans to distribute close to ten million tons of lime to four manufacturing projects. The long-term agreements to supply limestone were currently awaiting government approval as of mid-July.

Lafarge Umium was able to resume operations after the country’s high court lifted the 17-month-old freeze on limestone mining in Meghalaya. The company can now continue its exportation of lime products to Lafarge’s Surma cement project.

The Supreme Court previously imposed a stay on mining at the site, the report said. The decision was met with opposition from both France and Bangladesh.

Niraj Cement Structurals secured two road construction contracts through joint ventures. With partner ARSS, Niraj won a RS 897 crore contract from Madhya Pradesh Road Development corporation to reconstruct and widen the Hata-Patera-Kumhari and Raipura-Saliya-Bahuriband-Sehora Roads in Madhya

Pradesh. A separate RS 87.08 crore project in collaboration with Gangotri will handle the reconstruction and widening of the Mihona-Lahar-Daboh-Bhander-Chirgaon Road.

India signed a US$280 million deal with the Democratic Republic of Congo (DRC) to build a hydroelectric plant in the southern regions of the DRC. The Katende I plant will be located in the Kasai Occidental province and will have a capacity of 65 MW when completed. Work on the project will begin in November and take four years.

Meanwhile, road construction projects in Gaya have stalled. A shortage of bitumen is reportedly the culprit, but the Executive Engineer is blaming the current situation on a lack of funds. Activists assert that the situation is nothing more than a pre-election stunt. In the meantime, local officials are raising questions over the quality of construction materials used in the projects.

India’s government wants to decrease the cost of housing by 20 percent. The

ndia’s future growth may largely depend upon infrastructure development. According to a recently released JP Morgan Asset Management report, India may be able to garner 20 percent earnings per share growth in the next three to five years. Infrastructure spending is likely to spur

the country’s continued growth over the next five to ten years.

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Housing and Poverty Alleviation Ministry has started a program to promote cost effective technology for affordable housing. In addition to reducing costs, the program advocates the use of alternative technologies to increase the delivery of housing. Similar technologies have been used previously to construct homes in Amethi and Pinjore. The new program is to be implemented by the Building Materials and Technology Promotion Council.

The government’s housing focus is definitely sparking interest in other alternatives. Investors are turning to prefabrication facilities as a way to decrease construction costs and accelerate work in India. A decline in labor and a rise in material prices are cited as reasons why. From 2009 to 2011, labor costs increased by 50 percent and raw materials like steel, bricks, and cement jumped 25 percent. Furthermore, if the country experiences a medium rate of growth, a labor shortage of 18 to 28 percent will result. Prefabricated units are seen as a way to reduce construction costs by 10 to 15 percent, and to solve the typical 19-month delay encountered in delivering the estimated 930,000 residential units needed.

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ALLEGED BITUMEN SCAM ARISESthe rs 1.14 crore bitumen scam came to light when authorities discovered having no records of 1,427 bitumen drums given to civic body officials five years ago. Civic body authorities have reportedly failed to submit details concerning the raw materials provided to officials who were meant to use said materials for developmental work. Meanwhile, rti activist rohit sabharwal provided a report which said that a number of roads continue to be in bad shape; however, their rehabilitation remains incomplete because of a lack of funds. the report also suggests that the lack of records may have contributed to the irregularities in the provision of funds.

CONSTRUCTION COSTS, DELAYS ADDRESSED BY PREFAB UNITSA decline in labor and rise in material prices has led to increased project costs. Accordingly, prefabrication facilities are being established with the goal of decreasing construction costs and speeding project completion by methods which include providing concrete walls and slabs that are ready for installation.

Meanwhile, the country is expected to face a labor shortage of 18 to 28 percent if the country grows at a medium rate. the utilization of prefabrication units is expected to save a third in construction time while reducing costs by 10 to 15 percent. janapriya Projects and the Brigade group are two of the companies that have chosen to make use of prefabricated walls in order to make up for the labor shortage.

INFRASTRUCTURE MAY DRIVE GROWTH IN COMING YEARSinfrastructure may be the driving force behind india’s growth. According to jPMorgan, indian companies may be able to garner over 20 percent earnings-per-share growth in the next three to five years. the country’s growth in the next five to ten years may be caused mostly by infrastructure. jPMorgan remains bullish with coal, but believes that Chinese stocks remain cheaper than indian stocks due to the country’s government stimulus package, which has resulted in a slight slowdown of the Chinese economy. the company said that investors seem to remain unsatisfied by China’s growth.

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REGIONAL UPDATE

PAKISTAN: LOOKING TO INCREASE ExPORTS TO INDIA AS DOMESTIC DEMAND STAGNATESThe cement industry in Pakistan has been besieged with problems, causing an almost crisis situation for cement manufacturers there. Rising prices of input costs like coal, furnace oil, electricity, paper bags, interest rates, diesel and transportation coupled with a pricing war amongst industry players, have severely impacted margins. Capacity utilization at 76.1 percent is the lowest in eight years, with supply levels falling from 23.55 million tons in 2009-2010 to 21.97 million in 2010-2011.

Pakistan’s top cement company, Fauji Cement, has managed to buck the trend with a capacity utilization of 90.7 percent. The company has invested US$231 million in purchasing state-of-the-art plant equipment from ThyssenKrupp Germany. The company’s per day cement production has gone up from 3,885 tons to 11,560 tons.

Overall, the cement industry in Pakistan faces a stagnant domestic market and has seen significant decline in export levels. Cement exports are estimated to have fallen by 12.5 percent owing largely to higher transportation costs as the government failed to honor its commitment for payment of an inland freight subsidy. Fortunately for Pakistani

exporters, neighboring India is expanding rapidly and is also running out of lime and gypsum reserves. Cement exports to India are expected to improve this year thanks to the installation of scanners at the India-Pakistan border at Wagah.

BANGLADESH: OPPORTUNITY FOR INDIAN ExPORTERSLike India, Bangladesh is seeing a spurt in infrastructural projects like elevated expressways, flyovers and

bridges. However, prices of cement have increased in the country by US$0.25 to US$0.40 per bag as a result of increased import costs of fly ash, a rise in clinker prices and higher transportation costs. In a positive development for the industry, the Bangladeshi

government gave its consent for cross-border transportation of limestone from India via a 17 km long conveyor belt for production of cement at Lafarge Umiam Mining. Additionally, Holcim Bangladesh opened a new concrete innovation and aggregate testing center with the objective of setting international quality standards in materials and products used in the construction industry.

NEPAL, SRI LANKA AND BHUTAN: NEW PROJECTS AND ACqUISITIONSIn Bhutan, Dungsam Cement, owned by the Bhutanese government, is constructing a new cement unit in Nganglam, which is

No analysis of the state of the Indian cement industry would be complete without an examination of our neighbor’s cement sectors. Recent shifts in demand in Pakistan, Bangladesh and Sri Lanka should lead to changes in import and export levels, while new projects and acquisitions elsewhere could contribute to individual company growth.

expected to go live by January 2012. The site will have a cement capacity of 1.36 mtpy, as well as a clinker facility.

In Sri Lanka, the government has decided to reactivate the Kankesanthurai cement factory after it was discovered the region has substantial limestone deposits, enough to last another 100 years at a daily consumption rate of 3,500 metric tons per day). The country is also seeing a construction boom. Indian firm Bharathi Cement plans to export 10,000 to 15,000 metric tons of cement per month to tap the growing demand in Sri Lanka.

In recent acquisition news in the region, Nepal-based Dang Cement sold an 85 percent stake to India's Ambuja Cements for US$4.35 million. Dang Cement holds a valuable limestone mining lease in Nepal, placing this acquisition in line with Ambuja’s ambitious plan to increase its cement capacity from 25 mtpy to 27 mtpy within the year.

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JK Cement has a new endorser. Renowned cricketer Virendra Sehwag, who has promoted major brands such as Adidas, Hero Honda, Boost and Zandu Balm, has agreed to serve as the company’s brand ambassador.

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CW Group Coal Week

afarge India managing director and CEO Uday Khanna was appointed

as the new non-executive chairperson for Bata India. Khana replaces P M Sinha who took over in 2004. Sinha denied takeover rumors, instead indicating the company intended to move aggressively into the rural markets to achieve organic growth. Those efforts will include introducing two to three new sub-brands focused on meeting rural market

people

Pakistan, Bangladesh, Sri Lanka, Nepal & Bhutan:




CW Group Coal Week


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ndia Cement, established in 1946, is the largest producer of cement in South India with a market share of 28 percent.

The company has seven plants spread over Tamil Nadu and Andhra Pradesh that cater to major markets in South India and Maharashtra (West India). The company has access to huge limestone resources and plans to expand capacity to achieve a 35 percent market share in the near future. It has a strong distribution network with over 10,000 stockists of whom 25 percent are dedicated suppliers. The company

imProved realization amidst diffiCult market Conditions

sells under multiple brands - Sankar Super Power, Coromandel Super Power and Raasi Super Power.

India Cement has a current installed capacity of 15.66 mtpy, with a utilization rate of 64 percent. The company has seen a fall in demand. Its sales in FY11 were 10.0 mtpy, compared to 11.0 mtpy in FY10. While demand in the southern states of Tamil Nadu and Karnataka picked up in Q4 FY11, it remained sluggish from other states in the region, namely Andhra Pradesh and Kerala. To meet the challenge of negative demand growth, the company cut production volumes and hiked cement prices, which was in line with the pricing strategy followed by other cement manufacturers in South India. Also, the company showed a significant increase in its realization rates as demand fell. Realization per ton by the company improved from INR 3,273 in Q4FY10 to INR 3,913 in Q4FY11, an increase of 20 percent.

The company’s production costs have increased in FY11 by 11 percent year-on-

year, caused largely due to an increase in expenditure on power and fuel. Freight costs for the company increased by 14 percent compared to the previous year, as a higher proportion of its dispatches went through road transport. Raw materials like gypsum and fly ash also became more expensive. However, the company managed to keep its overall costs stable on a sequential basis, largely due to the strategy of reusing its significant clinker inventory to produce cement.

As a result of the corrective action taken on production volumes, recycling of inventory and realization rates, the company’s net sales increased by 3.5 percent to INR 9.98 billion in Q4FY11. Overall the company registered a 64 percent increase in its EBITDA per ton from INR 428 in Q4FY10 to the current level of INR 701 in Q4FY11.

Looking ahead, the company has recently commissioned a 1.5 mtpy cement plant in Rajasthan under its subsidiary Indo Zinc. The company is also setting up coal-based power plants in Tamil Nadu, Rajasthan and Andhra Pradesh. The plants are expected to become operational by September 2011. The company’s cement sales are expected to go up to 11.2 mtpy in FY 13E with a production utilization rate of 72 percent.

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CW Group Coal WeekCapacity utilization (%)

60

70

80

FY13

E

FY12

E

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PROFILES

INDIA CEMENT

India Cement plant locations

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hree Cement (SRCM) is the largest cement manufacturer in North India and is among the

top manufacturing companies in the country. The company began commercial production in 1985 and has a current manufacturing capacity of 13.5 mtpy.

The company has a multi-brand strategy: its umbrella brands of Shree Ultra, Bangur (named after its promoters) and Rockstrong together enjoy the largest market share in important North Indian states of Rajasthan, Delhi and Haryana. Overall, North India contributes 72

SHREE CEMENT

percent to the company’s sales, with the rest being contributed by Central Indian states of Bihar and Madhya Pradesh.

In its cement business, the key risk that the company currently faces is a dip in cement prices due to the monsoons in the next few months. In addition to capacity underutilization, the other risk the company faces is an increase in input costs as the company is entirely dependent on imported coal and pet coke for its fuel requirements. Given this backdrop and despite having lower realization rates, SRCM has achieved profitability that is on par with the top players in the country by ensuring better production efficiencies. Its power consumption at 80 kwh/ton is lower compared to 87-90 kwh/ton for peers. Similarly, the company’s fixed cost is INR 515/ton against INR 850-1,000/ton for peers.

It is expected that the company’s cement business will benefit from the firm pricing environment expected across the country due to production discipline by cement manufacturers. SRCM’s estimated EBITDA per ton in cement is comparable to other large players in the Indian market. EBITDA per ton for the company is estimated at INR 928 for FY12 compared to INR 783 for FY11.

Apart from maintenance capex costs, the company has no major capital expenditure planned for next two years. As a result, the company is expected to have positive cash inflows with its debt-to-equity ratio declining in the given period.

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PROFILES

SRCM EBITDA Break - Up

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We know the cement industry well. Let us guide you. For more information please contact us at [email protected] or on +1-702-430-17 48848 N. Rainbow Blvd., Box #1658, Las Vegas NV, 89107, USA

UPDATES

fter a long period of waiting, Lafarge of France finally got the green signal from India’s Supreme

Court to resume its limestone mining activities in the East Khasi hill forests in Meghalaya. On July 6, 2011, the Court ruled in favor of Lafarge, allowing the company to resume its limestone mining to feed its US$255 million cement plant in Bangladesh.

A HISTORY OF ROADBLOCKSLafarge’s mining projects in Meghalaya have seen a string of protests over the last couple of years. On February 5, 2010, the Apex Court stopped Lafarge from carrying out limestone mining in Nongtrai, Meghalaya. The local population in the region had protested that mining activities were damaging the area’s fragile ecosystem. The petition filed against the mining operation alleged that

Lafarge had obtained requisite clearances by misrepresenting the environmental impact of continued mining activities in the region. Subsequent to this ban, in April 2010 the Indian Ministry of Environment and Forests (MoEF), under direction from the Supreme Court, granted revised environmental clearance to Lafarge that considered stricter environmental norms. With its most recent ruling, the Court has now upheld the revised environmental clearances given to Lafarge by the MoEF.

THE BIGGER PICTUREThe ruling comes as India seeks to improve ties with Bangladesh, with the Indian Prime Minister slated to visit Dhaka in September of this year. Limestone from Meghalaya will be transported via a 17 km conveyor belt to Lafarge Umiam Mining in Bangladesh. Reacting to the Court’s ruling, a Lafarge spokesperson

stated that the decision had not only a positive business impact but also would help secure the livelihoods of thousands of people on both sides of the India–Bangladesh border. Lafarge entered India by acquiring the cement business of Tata Steel, followed by the purchase of the Raymond Cement facility in 2001. Lafarge currently has a three million ton clinker and a 6.55 million ton cement capacity from its four cement plants in India (two in Chhattisgarh and one each in Jharkhand and West Bengal). It is also present locally in other businesses like aggregates, concrete and gypsum plasterboard. Following the lifting of the ban on its limestone mining operations in Meghalaya, the company is now looking to step up its presence in India via organic and inorganic opportunities. It is said to be in talks with the promoters of Meghalaya-based Star Cement for a majority stake in that company.

THE NORTHEAST: AN EMERGING HUBThe decision to allow Lafarge to continue its limestone explorations is a significant one for the industry as a whole. The northeastern part of the country is quickly becoming a strategic hub for the cement industry. It is estimated that of the total 300 million tons in the Indian cement market, the eastern region has a total capacity of 40 million tons (as of FY 2011). Although the region experiences a plummet in demand during its long monsoon season, cement units in this part of India also enjoy various tax breaks and subsidies aimed at incentivizing industrial growth in the region.

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INDIA CLEARS LAFARGE LIMESTONE MINING OPERATIONSRevised environmental clearance allows Supreme Court to grant approval despite protests.




CW Group Coal Week


The recent Confederation of Indian Industry conference in Hyderabad, India, focused on adopting energy-efficient manufacturing processes and environmentally friendly techniques, which would allow the Indian cement industry to meet world-class standards on energy and the environment. The conference also showcased the latest technological developments in the cement industry and Dr. K. U. Mistry, Chairman

of the Gujarat Pollution Control Board, inaugurated the conference.

Several large players in the Indian cement industry were in attendance to share their vision of clean technology, including KHD Humboldt Wedag. Many visitors frequented the KHD stand, including Ultratech Cement, India Cement, Birla Corporation, ACC, JK Cement and Dalmia Cement.

A number of KHD delegates were on hand to speak with visitors, including Martin Gierse, P. V. R. Murthy, Shubhendra Panse, Gaurav Sood, Sameer Bharadwaj, Prashant Gadekar, Rajesh Rana and Dr. Stefan Seemann as a special guest speaker from KHD Germany. Dr. Seemann presented a paper entitled “Modern Slag Grinding,” which was well received by the conference delegates.

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It comes as no surprise that the exploding economic growth in the East is shifting the petcoke ”center of gravity” from its historical Western roots towards the East. This shift is inevitable; the question is whether the change is going to be an evolution or a revolution? Hence our conference title “Impending Change”.

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SURVEY RESPONSES REFLECT AN OPTIMISTIC SPIRITThe CW Group’s inaugural India Cement Sector survey last year showed high levels of optimism regarding volume and profits. These hopes have been realized in the past year, with almost 70 percent reporting that the industry’s recent performance met or exceeded their expectations for the year.

An optimistic outlook for the coming year continues, although not to the same extent as last year. Equipment manufacturers were the most optimistic subgroup, which perhaps reflects the recent growth in capital expenditure. Cement traders were the least likely to expect general improvement in the industry. It is worth considering that cement traders, being closer to the consumer, may be identifying a change in demand, while equipment suppliers base their opinions on existing demand.

Major capital investments are expected to continue across the sector, with 63 percent expecting their company’s capital budget to increase. Also, the survey sample was significantly positive regarding profitability. 56 percent expect an improvement in profitability, while only 13 percent expect to see a decrease.

CHALLENGES FOR THE YEAR AHEADOn the down side, survey participants named cost control as a challenge for the next year. Opinions vary on whether costs will continue to rise. Firms in East and West India are much more likely to have a negative opinion with regards to input costs. Other important issues included improvement of domestic sales

SURVEY

seCond (2011) CemWeek india Cement seCtor sentiment survey:

SURVEY FINDINGS

EXPECTATIONS FOR THE FUTUREIn general, the optimism is expected to continue over the coming year. 50 percent of the sample expect an improvement, 40 percent expect it to be much the same and the balance expect a small decline in performance. However, as discussed in the introduction, this does represent a drop in expectations compared to the 2010 survey.

As in the 2010 survey, equipment manufacturing companies were more optimistic than the rest of the sector, perhaps in part as they were reflecting the optimism of the recent and sustained growth in capital expenditure. Overall 83 percent of equipment vendors believed that future performance would be 'much' or 'somewhat' better in the coming year. In turn, 57 percent of analysts held this view (and a further 30 percent expected performance to be 'much the same'). 45 percent of manufacturers and 37 percent of cement traders expected the next 12 months to be 'somewhat' or 'much' better.

This response may reflect position in the production chain with cement traders being closer to the consumer market and identifying potential changes in demand while equipment suppliers are responding to existing demand for additional capital from the manufacturers.

CHART: Expectations for the next year

Much betterSomewhat better

About the sameSomewhat worse

A lot worse

20%33%35%11%1%

CHART: Expectations For The Next Year

Optimism is expected to

continue over the coming

year

cemweek 2011 india cement sector survey cwgrp.com14BMWeekBMWeek



CW Group Coal Week

INDUSTRY SURVEY INDICATES CONTINUED OPTIMISM FOR FUTURE GROWTHThe CW Group and CemWeek recently released the second CemWeek India Cement Sector Sentiment Survey. The purpose of the survey is to examine the state of the Indian cement market as observed by its participants. The results have produced a valuable snapshot of the trends, attitudes and outlook of this dynamic industry.




CW Group Coal Week


and operational improvements. Generally, few expect that the recent high growth will continue; rather, there is an overall agreement that softening of growth will have a negative impact on profits and employment.

Awareness of climate change and other environmental concerns have increasingly entered the discussion. The overall opinion of the impact of such changes on the industry was rather negative. The vast majority of respondents (76 percent) believe that the industry will have to sacrifice future profits in order to reduce CO2 emissions. Even so, over 65 percent of respondents believe that it is important

for India to meet US and EU emissions standards.

This year, the survey asked cement companies to rate the market’s major equipment vendors. Over 50 percent of respondents named FLSmidth in their reviews; most rated them as either good or the best of the firms they had worked with. KHD was another highly rated equipment supplier.

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For full survey results or to discuss the survey’s findings in more detail, the Cw group welcomes requests for additional information at [email protected].

SURVEY FINDINGS

RECENT PERFORMANCE

he great majority of the respondents believe that performance in the last six months has been at least satisfactory. Almost 51 percent of the sample indicated they believed it had performed well or excellent and only 7 percent believed it had done poorly. As discussed in the introduction, this matches the views largely expressed in the 2010 survey that the

industry would expand over 2010.

Despite the optimism about recent performance a sizeable number of respondents (30 percent) indicated it was "below my expectations" and 50 percent that this had met their expectations. There is a correlation between overall assessment of the last 6 months (above) and how well that performance reflected their expectations. Thus 36 percent of those who reported overall performance as 'excellent' or 'well' also indicated this was in excess of their original expectations. A further 56 percent of this category indicated that performance had met their expectations.

CHART: Recent Performance

CHART: Recent Performance And Expectations

ExcellentWell

OkPoorly

Far exceededExceeded

Met my expectationsBelow my

expectationsNowhere near my

expectations

12%39%42%7%

1%19%49%

30%

1%

51 percent believed the

industry had performed well

or excellent

cemweek 2011 india cement sector survey cwgrp.com10BMWeekBMWeek



CW Group Coal Week

SURVEY

delivered

A 12,000 tonnes per day lineHolcim’s new US cement plant in Ste. Genevieve, Missouri, has a four

million metric tonnes annual capacity, making it one of the world’s

largest clinker production lines. Its equipment and technology are

the world’s most advanced. Its operating costs and emission limits

are among the world’s lowest. And it was entirely designed, built

and supplied by FLSmidth.

The fact is, no other company in the cement and minerals industries

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to design, build and operate profitable plants.

For more information please visit us at www.flsmidth.com

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ABOUT THE SURVEY

india Cement & Construction Materials magazine is pleased to share the Cw group’s findings in its latest india Cement sector sentiment survey. the survey was completed in April and May of this year. Over 270 organizations participated in the survey, including representatives of all major indian and multinational companies currently operating in india. the respondents came from a variety of sectors, from direct manufacturers to industry traders and analysts.

iCCM would like to thank the Cw group and its survey sponsors: Cachapuz, Chryso, Flsmidth, Khd wedag, lindner, loesche, and siemens, for making these survey results available. some of the major points are highlighted herein. the full survey can be downloaded from www.cemweek.com




CW Group Coal Week


ANALYST RECOMMENDATIONS

ACCMACQUIRE

ACC gets an 'Underperform' recommendation from Macquarie Research. The company that was so far riding on parent company Holcim’s purchase of shares and the news of a possible merger with ACEM may face difficulties due to its high reliance on subsidized coal from Coal India that are expected to see higher prices. Price target has been set at RS 799.

STANTCHART

Recommends ‘Outperform’ on ACC on the strength of the company’s new capacity expansion projects as well as its cost efficiency measures that include captive power plants that should insulate the company from fuel costs. Moreover, the company’s pan India presence will offer adequate protection from regional demand dips. Despite the major capital expenditure of over RS 20 billion spread over the coming three years, the company is expected to enjoy free cash flows bringing net cash to around of RS 62 billion by December 2013. Price target has been revised to RS 1,170 from CMP of RS 969.20

AMBUJA CEMENTSTANTCHART

Ambuja Cement gets an ‘In-Line’ recommendation from StantChart that saw price target set as RS 159 against CMP of RS 126.25 on the basis of the company’s recently launched clinker units that are expected to save the company around RS 220 on each ton of cement produced. Furthermore, the company’s investment in a captive power plant, transportation of cement via ships and optimization of the fuel mix is likely to further give cost benefits to the company. Its pan India presence will also help it weather regional fluctuations. The company also has a low debt ratio as it has relied on internal accruals to finance it expansion projects.

rAtiNgS ChANgESUpdate date Cement Company analyst firm reCommenda-

tionpriCe on

report dateanalyst

target priCemarket priCe

retUrn %

29-Jul-11 Jk lakshmi iCiCi sec Buy 46 61 44.1 -4.13

29-Jul-11 ambuja iCiCi sec Hold 133 139 129.25 -2.82

28-Jul-11 Ultratech kotak accumulate 1028 1075 1028.8 0.08

28-Jul-11 ambuja motilal oswal Buy 133 148 129.25 -2.82

28-Jul-11 Ultratech iCiCi sec Hold 1027 1081 1028.8 0.18

28-Jul-11 ambuja emkay reduce 133 140 129.25 -2.82

27-Jul-11 Ultratech emkay reduce 1028 1050 1028.8 0.08

27-Jul-11 Jk lakshmi Jaypee Buy 43 53 44.1 2.56

27-Jul-11 Ultratech pinC Buy 1028 1318 1028.8 0.08

27-Jul-11 Ultratech motilal oswal Buy 1028 1385 1028.8 0.08

26-Jul-11 mangalam iCiCi sec Buy 119 139 107.7 -9.5

26-Jul-11 Heidelberg Cement iCiCi sec Buy 36 51 36.3 0.83

12-Jul-11 ambuja sCr Hold 126.25 159 129.25 2.38

12-Jul-11 india Cement sCr accumulate 74.4 134 69.75 -6.25

12-Jul-11 shree Cement sCr accumulate 1747.1 2280 1755 0.45

12-Jul-11 Ultratech sCr Hold 981.65 1127 1028.8 4.8

6-Jul-11 Jk lakshmi angel Buy 43.35 57 44.1 1.73

28-Jun-11 prism Cement Bpepl Buy 44.5 54.7 46 3.37

24-Jun-11 india Cement sharekhan reduce 69 na 69.75 1.09

23-Jun-11 india Cement macquarie Buy 70.05 93 69.75 -0.43

23-Jun-11 ambuja Ceme macquarie sell 128 110 129.25 0.98

23-Jun-11 Ultratech macquarie sell 956.05 740 1028.8 7.61

21-Jun-11 ambuja kr Choksey Buy 129 137 129.25 0.19

2-Jun-11 Jk Cement iCiCi sec Hold 115 123 106 -7.83

2-Jun-11 india Cement angel Hold 85 na 69.75 -17.94

1-Jun-11 india Cement iCiCi sec Buy 84 97 69.75 -16.96

1-Jun-11 india Cement UfipVt Buy 86 110 69.75 -18.9

KR CHOKSEY

Gives a green signal for Ambuja Cement with a recommendation of ‘Buy’ with price target set as RS 137 on the rationale that the company has witnessed a strong first quarter in terms of growth as well as sales. Operational performance also looked good with significant growth in EBITDA/ton in QoQ analysis though YOY analysis showed a dip, mainly due to a rise in coal prices. While increasing costs is a growing concern, Ambuja Cement, priced at a premium, is expected to narrow down in the future.

INDIA CEMENTEMKAY

Advises a ‘Hold’ on India Cements as

the company has posted positive growth in APAT figures, revenue and EBITDA though they fall short of the estimated projections. Of particular concern has been the demand in the southern region that continues to remain low. Price target has been set as RS 93 against the CMP of RS 84.

PINC RESEARCH

Recommends a Hold on India Cements setting price target as RS 90 against CMP of RS 84 based on the company’s future growth prospects in FY13. The company, which has majority of its sales in the southern region, is currently grappling with oversupply and subdued demand. Costs, mainly the coal prices and power tariff, have also escalated. However robust




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realizations paved the way for a strong balance sheet with net profits soaring by 44.3%. While FY12 is expected to bear the brunt of the high coal prices and low demand, prospects for FY13 look good, especially with the company’s acquisition of Indonesian coal mines that will begin delivery by the end of FY12.

JK CEMENTICICI

Higher than expected performance in net sales and EBITDA, largely due to lower than expected power costs, have resulted in a ‘Hold’ recommendation for JK Cement from ICICI Securities, with price target set as RS 123 against the CMP of RS 115.

JK LAKSHMIJAYPEE

With strong top-line figures that rose by 31% and a triple hike in operating profits, JK Lakshmi Cement gets a 'Buy' recommendation from Jaypee Research. Moreover the company has signed a 20 year agreement for a fixed cost coal supply with VS Lignite that will cushion the company from coal price escalations. The commissioning of a waste heat recovery plant and Thermal Power Plant will further provide advantages to the company in FY12. The company also has other expansion projects that will drive volume higher in the coming years. Price target has been revised from RS 66 to RS 53 against CMP of 43.

SRE RESEARCH

Strong net sales and net profit figures, higher realizations and three times more operating profit has lead SRE Research to recommend 'Buy' for JK Lakshmi Cement. Furthermore the company’s commissioning of a waste heat recovery plant and thermal power plant will provide additional benefits to the company from FY12 while higher capacity through its new Greenfield plant will further push

volumes higher. Price target has been set as RS 64 against CMP of RS 46.

MADRAS CEMENTEMKAY

Recommends ‘Accumulate’ on Madras Cement with a price target of RS 100 against CMP of RS 93. While muted demand that may impact prices remains a concern, Emkay’s price target takes into considerations price fluctuations. The company reported strong APAT figures that remained close to expectations. Though EBITDA was below expectations, better realizations drove up EBITDA figures.

SHAREKHAN

Assigns a ‘Hold’ on Madras Cements, banking on an expected slow recovery as infrastructure projects regain pace. While cost inflation is expected to keep margins under pressure, better realizations and operational efficiency is expected to stand the company in good stead. Price target is set as RS 95 against CMP of RS 92

PRISM CEMENTBP EQUITIES

Gives positive note for Prism Cement with a price target of RS 44.5 owing mainly to its capacity expansion program that is set to see a growth in sales volume. With a strong presence in Eastern and Central India, future demand prospects also look up, banking as it is on the government’s infrastructure building ventures. The company also enjoys a strong brand equity through its tile company, Tile Bath & Kitchen (TBK).

SHREE CEMENTPINC RESEARCH

Despite two weak quarters, the company has managed to tide over the lean phase with a recovery that was consistent with estimates pushing margins higher than expected. Earnings for FY12 have been

further revised downwards owing to the commissioning of two power plants, a grinding unit, high depreciation and cost pressure, but prospects seem better for FY13, that is expected to benefit with low depreciation figures. Price target is set as 2,291 against CMP of 1,877.

SHAREKHAN

Revenue growth and a tax break coupled with sale of excess power units helped the bottom line of the company, which suffered a setback due to a contraction of the Operating Profit Margin on account of higher costs. Going forward, the company is expected to improve realizations though oversupply of cement may dampen realization figures. Further, the power division is expected to earn higher with the commissioning of the 300 MW project. Price target has been set as RS 1,875 against CMP of RS 1,836.

ULTRATECHMACQUARIE

Strong expectations of organic growth that is set to surpass the current industry trend has lead Macquarie to recommend ‘Underperform’ for UltraTech Cement. However, the broking house has advised to wait for a downwards revision in cement prices that will see a likewise correction in stock prices. Target price has been revised from RS 870 to RS 740.

STANTCHART

Assigns 'In-Line' rating for UltraTech Cement with price target set as RS 1127 against CMP of 981.65. While the company’s merger with Samruddhi Cement has made it India’s largest cement company and the tenth largest in the world, the company is currently in the midst of major expansion projects. Furthermore, its proposed logistics infrastructure, modernization and additional expansion projects will impact the company’s cash flows to the tune of RS 64-65 billion.

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ANALYST RECOMMENDATIONS




CW Group Coal Week


PErFOrMANCE iN thE PASt 90 dAySCompany start date start priCe end date end priCe differenCe % CHange

aCC ltd 29-apr-11 1108.25 29-Jul-11 1012.05 -96.2 -8.68

amBUJa Ceme 29-apr-11 155.4 29-Jul-11 129.3 -26.1 -16.8

Barak Vall 29-apr-11 22 29-Jul-11 16.7 -5.3 -24.09

BHeema Cem 29-apr-11 25 29-Jul-11 20.6 -4.4 -17.6

Binani Cement 18-feb-11 86.5 20-may-11 90.5 4 4.62

Birla Corpor 29-apr-11 352.5 29-Jul-11 322 -30.5 -8.65

CCl inter 29-apr-11 37.65 29-Jul-11 36.95 -0.7 -1.86

CHettinad Cem 29-apr-11 476.5 29-Jul-11 440 -36.5 -7.66

dalmiasUg 29-apr-11 25.35 29-Jul-11 18.35 -7 -27.61

deCan Cement 29-apr-11 148.1 29-Jul-11 146.5 -1.6 -1.08

Heidel Cem 29-apr-11 50.05 29-Jul-11 36.3 -13.75 -27.47

india Cement 29-apr-11 99.25 29-Jul-11 69.75 -29.5 -29.72

Jk Cement 29-apr-11 127.2 29-Jul-11 106.4 -20.8 -16.35

Jk laksHmi 29-apr-11 51.05 29-Jul-11 44.25 -6.8 -13.32

kakatiya Cem 29-apr-11 72.9 29-Jul-11 70 -2.9 -3.98

kalyanpUr Ce 10-mar-11 26.9 5-Jul-11 25.6 -1.3 -4.83

keertHi 27-apr-11 33.55 25-Jul-11 27.85 -5.7 -16.99

madras Cem 29-apr-11 99.25 29-Jul-11 92.1 -7.15 -7.2

mangalam Cem 29-apr-11 122.1 29-Jul-11 107.7 -14.4 -11.79

n C l ind 29-apr-11 31.85 29-Jul-11 35.95 4.1 12.87

oCl india l 29-apr-11 107.1 29-Jul-11 98.1 -9 -8.4

panyam Cemen 29-apr-11 67.05 29-Jul-11 61.2 -5.85 -8.72

prism Cement 29-apr-11 55.8 29-Jul-11 46 -9.8 -17.56

rain Commodi 29-apr-11 35.55 29-Jul-11 36.1 0.55 1.55

sagar Cem. 29-apr-11 147 29-Jul-11 145 -2 -1.36

saUra Cemen 29-apr-11 21 29-Jul-11 16.5 -4.5 -21.43

sHree Cement 29-apr-11 2006.8 29-Jul-11 1778.6 -228.2 -11.37

UltrateCH Cm 29-apr-11 1086.8 29-Jul-11 1028.8 -58 -5.34

As a regular service to our readers, we will provide here a listing of the latest in stock performance, keeping you up to date with the latest in stock trends. Additional company stock performance information is available on our website: www.cemweek.com/india.

Stock performance of leading cement companies

STOCK PERFORMANCE




CW Group Coal Week


DESPITE NEGATIVE q1 TREND IN ALL-INDIA VOLUMES, IMPROVEMENT SEEN

The close of the first quarter of the current fiscal year brought with in a confirmation that the market is going through a soft patch. Lower demand and lower output, though the gap versus the same quarter last year has narrowed, with the first quarter ending with just a 0.6% YOY dip in demand while supply followed behind with a little over 1% YOY decline.

June 2011 dispatches rose 5.9% to 13.96 million tons from 13.18 million tons in the same month last year, the only real positive YOY figures recorded for the quarter. The new fiscal opened with a steep MoM sales drop of 15.2% in April dispatches, but improvement followed with a more modest 1.1% drop in May. June saw a further improvement in the trend (if not in absolute terms) as the slide

in volumes tapered to 0.4% from 14.02 million tons in May.

Similarly, the YTD dispatch trend, when compared with last year’s first fiscal quarter, recorded a 0.6% decline in total dispatches from 42.43 million tons in 2010 to 42.16 million tons in 2011 at the end of the first quarter, despite a drop of 5.9% and 3.6% in April and May, respectively. The monthly dip for cement production largely mirrored dispatches and started with a plunge of 14.5% in April to 2.2% in May. By June the decline reached 1.4% to end at 13.89 million tons for the month as against 14.08 million tons in May. Similarly, the YTD drop also tapered down from 2.1% in April and 2.4% in May to reach 1.4% at the end of the first quarter. Total output for the quarter was 42.36 million tons, while in 2010 it was 42.94 million tons. However, June 2011 did manage to outdo the June 2010 production of 13.77 million tons, managing a positive YOY of 0.9%

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CEMENT VOLUMES

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The below headlines are the most requested stories on CemWeek, during the past two months. The India column shows the 15 most popular stories from CemWeek featuring India-related coverage and the Global column shows the global events that gathered the most attention worldwide during the period. Visit CemWeek.com to access the full stories.

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2011 India Cement Sector Survey Cementos Argos waiting on US regulators on Lafarge deal

India probing alleged cartel behavior in the market Colombia’s Argos acquires stake in US based Ceratech

Cement price, demand drop in India FLSmidth confirms BUA order

India's largest cement makers post diverging May sales

Worker dies at Cemex facility in the US

India's ACC to put up new plant Report: Spain's FCC looking to sell US unit

India: Builders' Association to construct cement plant

United Cement enters Bahrain market

India: Cement production to hit 320 mm tons this year

Reports: Cementos Cruz Azul up for sale

Holcim gains majority stakes in ACC, Ambuja units Lafarge to start producing white cement in Morocco

India's Wonder Cement seeking creative partner Egypt: Cement sales fall between 30-50%

India's Birla Group to acquire overseas plants Votorantim improving process efficiency with new system

India cement prices fall as sales begin to slow South Africa cement prices to increase in July

India: Nirma Cement ordered to relocate US: Energy consumption of cement firms decreasing

India: ACC capacity to hit 30 million tons Dangote all set to start construction of Zambia unit

India's Ultratech turns in higher profits Mubarak's son may have profited from sale of cement plants

India: Heidelberg sees capacity buildup Lafarge acquires stake in Elite Cements

iNdiA glOBAl




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Documents

India Cement & Construction Materials (vol 1 / issue 1)