Displaying items by tag: Ambuja
Closing the demand gap in India
04 October 2017It’s been a pessimistic month for the Indian cement industry with Ministry of Commerce & Industry data showing that cement production has fallen year-on-year every month since December 2016. This was followed by the Cement Manufacturers Association (CMA) saying that the industry was sitting on 100Mt/yr of excess production capacity. Now, the credit ratings agency ICRA has followed the data and downgraded its forecast for cement demand growth to not more than 4% for the 2017 - 2018 financial year.
Graph 1: Annual cement production in India. Source: Ministry of Commerce & Industry.
Graph 2: Monthly cement production growth rate year-on-year in India: Source: Ministry of Commerce & Industry.
Graph 1 shows a production peak in the 2015 - 2016 financial year before falling monthly production broke the trend in the 2016 - 2017 period. Graph 2 pinpoints the month it started to go wrong, November 2016, when the government introduced its demonetisation policy. Production growth went negative the following month in December 2017 and it hasn’t managed to right itself since then and grow. It’s convenient to blame the government for the slump in production but it troughed in February 2017 before taking a lower level of decline since then.
The Reserve Bank of India (RBI) annual report in August 2017 suggests that the policy failed in its principal purpose of reducing the kind of corruption that a cash heavy economy can hide such as tax avoidance. People reportedly managed to find ways to bypass the bank deposit limit and may have successfully laundered large amounts of cash without being caught. However, as commentators like the Financial Times have pointed out, the longer term implications of forcing the economy towards digital payments and increasing the tax base could yet be beneficial overall.
Graph 3: Cement production capacity utilisation rates in India. Source: UltraTech Cement.
Moving on, the CMA has blamed production overcapacity for the current mess and Graph 3 shows the problem starkly. If anything the CMA appears to have downplayed the over capacity crisis facing India, as UltraTech Cement’s figures (using data from the Department of Industrial Policy and Promotion) show an overcapacity of 155Mt in the 2016 – 2017 year and this will grow to a forecast 157Mt in the next financial year, even though the utilisation rate is expected to rise slightly. UltraTech Cement’s estimates don’t see the utilisation rate topping 70% until the 2020 – 2021 financial year. Analysts quoted in the Mint business newspaper concur, although they reckoned it would the rate would bounce sooner, in 2019 - 2020. Last month when the CMA moaned about the industry's excess capacity it pinned its hopes on infrastructure schemes like the Mumbai-Ahmedabad bullet train. This prompted an official at JK Cements to say that he didn't think that one train line was going to make much of a difference.
This is one reason why ICRA’s and the other credit agencies’ growth rate forecasts for cement demand are important, because they indicate how fast India might be able to close the gap between production capcity and demand. Unfortunately demonetisation scuppered ICRA’s growth prediciton for 2016 – 2017. It forecast a rate of 6% but it actually fell by 1.2%! So downgrading its forecast for 2017 – 2018, with fears of weather and the implementation of the Goods and Services Tax (GST) in the second half of the year, is ominious. Major cement producers such as Ultratech Cement and Ambuja Cement have based their road to recovery in their latest investor presentations on a 6% growth rate or higher. Pitch it lower and the gap doesn’t close. Here’s hoping for a brisk second half.
Ambuja Cement wins Harima Peethasar limestone block after delay
03 October 2017India: Ambuja Cement has won an auction for Nagaur's Harima Peethasar limestone block in Rajasthan following a procedural objection. JSW Group claimed that it was unable to place a counter bid in the online auction due to problems with the computer servers of Metals and Minerals Trading Corporation (MMTC), the state company running the sale, according to the DNA newspaper. After examination the claim was dismissed.
Two workers killed at Ambuja Cement’s Bhatapara plant
18 September 2017India: Two workers have died in an accident at Ambuja Cement’s Bhatapara plant in Baloda Bazar Tehsil, Chhattisgarh. Five labourers were inside a crushing mill at the site making repairs when it suddenly started operating, according to the Press Trust of India. Two of the workers, identified as Dhirendra Verma and Dilip Kumar Verma, came in contact with the machine leaving them with critical injuries. They subsequently died in hospital. A police investigation is underway.
India: Ambuja Cement has purchased a limestone block in the Chandrapur district of Maharashtra. An estimated limestone resource of 42Mt was acquired via state auction for a price of 125% of the value of mineral dispatched. Formal confirmation via the state government is expected to follow soon.
India: Odisha’s State Level Single Window Clearance Authority (SLSWCA) has approved a proposal by Ambuja Cements to build a 1.5M/yr cement grinding plant at the Industrial Growth Centre, Jharsuguda. The proposed unit will use an area of 125 acres, according to the Press Trust of India. It is expected to create 300 direct and indirect jobs. Once complete the plant will join the company’s five integrated cement plants and eight grinding plants.
India: Members of the Cement Manufacturers Association (CMA) have met with Nitin Gadkari, the Minister for Road, Transport and Highways, to discuss price concerns around the country’s road building campaign. Local producers stand accused of increasing prices despite no rise in input costs amidst a national plan to build more roads, according to the Hindu newspaper. Producers dismissed these concerns, saying that price were lower than they had been in 2015. Instead they bashed discrepancies in export taxes between India and Pakistan.
Delegates from the cement producers at the meeting included N Srinivasan, managing director of India Cements, HM Bangur, managing director of Shree Cement, KK Maheshwari, managing director of UltraTech Cement, Ajay Kapur, managing director of Ambuja Cement, Mahendra Singhi, Group chief executive officer and wholetime director of Dalmia Cement, Ujjwal Batria, country chief executive officer and managing director of Nuvoco Vistas Corp and Aparna Dutt Sharma, Secretary General of the CMA.
ACC and Ambuja Cement consider merger options
08 May 2017India: LafargeHolcim’s subsidiaries ACC and Ambuja Cement have started exploring the options for a merger. The cement producers have initiated a study to assess the benefits of the move. A special committee of directors, of which the majority are independent directors, has been constituted to commence the evaluation. The boards of both companies will make a decision once a recommendation is received from the special committee of directors and the Audit Committee.
India: Ambuja Cement has launched Ambuja Compocem, a composite cement made from fly ash and slag. The product is being produced at its Chhattisgarh plant and it has been introduced to markets in Bihar and Jharkland. It is being marketed to all market segments including individual house builders, real estate developers and infrastructure projects.
“With the launch of Ambuja Compocem, we have achieved a three pronged sustainability approach by conserving natural resources, creating a greener product and fulfilling customer needs for a superior performance product. We call this approach delivering true value,” said Ambuja Cement’s managing director and chief executive officer Ajay Kapur.
India: Ambuja Cement says it has ‘largely’ put demonetisation behind it as its net sales rose by 5% year-on-year to US$395m in the first quarter of 2017 from US$375m in the same period of 2016. Its cement sales volumes rose by 3% to 6.02Mt from 5.86Mt. However, the subsidiary of LafargeHolcim’s operating earnings before interest, taxation, depreciation and amortisation (EBITDA) fell by 13% to US$61m from US$70m due to higher petcoke and imported coal prices.
“Improving sales volumes, combined with favourable pricing, contributed to a positive quarter despite rising costs. With demonetisation largely behind us, we are well placed to serve both small and large customers,” said Ajay Kapir, managing director and chief executive officer of Ambuja Cement.
India: Ambuja Cement, a subsidiary of LafargeHolcim, supplied over 0.3Mt of cement for the Chenani-Nashri tunnel project that was opened in early April 2017. The company’s technical services teams provided technical support for the project by conducting cement mix design trials to achieve optimised mix proportion. It also held self-compacting concrete workshops to aid engineers and to provide support at the construction site to identify, diagnose and resolve problems. The group started providing materials to the project in 2010.
The new 9km single tube bi-directional Chenani-Nashri tunnel with a parallel intermediate lane escape tunnel of 29 cross passages, is considered one of the most challenging infrastructure projects in India in recent years. It is intended to make road travel safer and reduce traffic disturbances caused by unpredictable landslides, sharp bends, vehicle breakdowns and accidents on the existing mountainous route.