Displaying items by tag: India
India: The Adani Group is likely to launch an US$3.8bn open offer to acquire a 26% stake in each of Holcim's two Indian listed entities, Ambuja Cements and ACC, from public shareholders. The group announced that it had clinched a deal to acquire a controlling stake in the businesses for US$10.5bn in May 2022.
As per the revised schedule submitted by ICICI Securities and Deutsche Equities India, the managers of the open offer, tendering of the shares in the open will start from 26 August 2022 and end on 9 September 2022.
India: Shaurashtra Cement's results for the first quarter of its 2023 financial year have shown a 30% year-on-year increase in the company's revenues to US$26.9m from US$20.6m in the first quarter of the previous financial year. Meanwhile, it recorded a US$128,000 net loss, compared to a US$1.61m profit in the first quarter of the 2022 financial year.
India: The board of directors of UltraTech Cement has approved the addition of an extra 22.6Mt/yr-worth of cement production capacity across the company's footprint. The new additions will span all of India and consists of both new plant builds and expansions. New capacity will commence production in a phased manner from mid-2024. UltraTech Cement expects to invest US$1.61bn in the growth phase.
Chair Kumar Mangalam Birla said "The Aditya Birla Group’s pace of activity, range of businesses and depth of global presence provide a useful compass to navigate this age of disruption. Against the backdrop of our long history as a group, dynamism leaps out as a common theme. Over the years, we have witnessed multiple business cycles. Across businesses and markets, our evolution is a story of continuous renewal and regeneration, as we aggressively invest in growth and create long-term value for all stakeholders."
India: JK Cement’s consolidated sales were US$272m in the first quarter of its 2023 financial year, up by 33% year-on-year from US$205m. The company sold 3.56Mt of cement, up by 18% from 3.02Mt in the first quarter of the 2022 financial year. Its costs per tonne rose to US$62.32/t from US$51.32/t. This restricted the group’s earnings before interest, taxation, depreciation and amortisation (EBITDA) growth to 0.1% year-on-year, at US$50.3m, compared to US$50.2m one year previously.
JK Cement forecast 10% year-on-year cement volumes growth in the 2023 financial year as a whole. It said that it expects to accelerate its rate of sales growth from September 2022. Its focus throughout the financial year will be on capturing new markets and increasing its blended cement share.
Fuel costs in India, August 2022
17 August 2022Fuels procurement and costs have been weighing on the minds of Indian cement producers since the start of the Russian invasion of Ukraine in February 2022. Two news stories this week show some of this. The first concerns recent imports of petcoke from Venezuela. The second covers the closure of captive power plants due to domestic shortages of coal.
At the same time, as the financial results for cement companies for the first quarter of the Indian 2023 financial year have been released, one constant has been hefty hikes in power and fuel costs. Graph 1 below gives a rough idea of the jump in costs major producers have been contending with. One point to note is that, possibly, the larger cement companies may have been better at slowing down the cost inflation from fuel. However, the prevalence of waste heat recovery installations and alternative fuels usage may also be a factor here. Finally, the company approved to buy Ambuja Cement and ACC, Adani Group, also runs India’s biggest coal trader. It will be interesting to see in the medium term how this might affect the fuel costs for its new cement division.
Graph 1: Comparison of Power & Fuel costs for selected Indian cement producers in first quarter of 2022 and 2023 financial years. Source: Company financial reports.
The Venezuelan story demonstrates the greater lengths that Indian cement producers are now going to secure fuel supplies. Reuters reports that cement companies imported at least 160,000t of petcoke from the South American country between April and June 2022 and that more was on the way. JSW Cement, Ramco Cements and Orient Cement are among them. The Venezuelan oil industry has been under US economic sanctions since 2019 but byproducts such as petcoke are not covered by this. Its petcoke has apparently been discounted by 5 - 10% below the price of US alternatives.
Indian cement producers have been prepared to risk US sanctions further by importing coal from Russia. The Business Standard newspaper, using data from Coalmint, reported that Russia became India’s third largest source of coal imports, at 2.06Mt, in July 2022. Before the war it was the sixth-largest source of coal to the country. Again, Reuters covered how cement companies were doing this in July 2022, when it revealed that UltraTech Cement had used India-based HDFC Bank to purchase coal using Chinese Renminbi, not the US Dollar as is more common for international purchases of commodities. In a conference call for the release of its first quarter results, UltraTech Cement’s chief financial officer Atul Daga confirmed the purchase and described it as “opportunistic.” He added that, “If something more surfaces, we will pick it up.” As the data for July 2022 shows, it may or may not be UltraTech Cement that is buying Russian coal right now but other parties in India certainly are.
Some of the wider economic implications about India buying Russian coal in the face of US and European sanctions include whether any retaliation might be forthcoming and a general sign that the dominance of the US Dollar as the world’s reserve currency is not guaranteed. The former seems doubtful given the size of India’s markets. Yet if the sanctions against Russia drag on then a shift in the global economic status quo becomes more likely, especially if opportunistic purchases become regular ones.
The situation facing captive power plants illustrates one more turn of the screw on energy costs for industrial manufacturers. 30% of captive power plants in India are reportedly closed due to the high cost of coal or an inability to even import it. Although it is worth noting that it is unclear whether, proportionally, more or less of these are serving cement plants. As N Srinivasan, the vice-chairman and managing director of India Cements told the Business Standard newspaper, “Most of our plants have coal based captive power generation. The cost of captive generation is now more than the grid cost. Hence, we shut down all captive power units and resorted to grid power.”
The International Energy Agency (IEA) forecast in July 2022 that Indian coal demand would grow by 3% year-on-year to 1.16Bnt in 2023 due to expanded electrification and economic growth. In its view, global coal demand will be driven principally by China but also by India to a lesser extent. However, unhelpfully, it added that uncertainty was also rising with ongoing developments in the war in Ukraine having a prominent effect. This is unlikely to assist Indian cement producers and their fuel buyers who will be asking themselves: how long will the current situation last and can the prices be passed on to consumers? There is one small silver lining in the current group of economic storm clouds hanging over cement producers at least. The second quarter of the Indian financial year is monsoon season, when economic activity slows down. It won’t slow the trend down but it may reduce the fuel bill a little.
Visaka Industries to build cement board plant in West Bengal
17 August 2022India: Visaka Industries plans to spend US$15m towards building a new fibre cement board plant in the Paschim Medinipur district of West Bengal. The unit will be the company’s fifth cement board plant and the first in the state, according to the Press Trust of India. The project will include solar power generation via roof panels.
India imports Venezuelan petcoke
16 August 2022India: Indian cement producers imported four shipments with a total of 160,000t of petcoke from Venezuela during the first quarter of the 2023 financial year. Reuters News has reported that a fifth shipment of 50,000t of petcoke is due to arrive in Mangaluru, Karnataka, in mid-August. A further, 30,000t, delivery is also scheduled for shipment from Venezuela during the month. Shipping takes around 50 days.
Ramco Cements enjoyed a US$15 – 20/t discount on its two 50,000t shipments of Venezuelan petcoke in June and July 2022, for which it paid US$10.7m and US$11.1m respectively. Its chief financial officer Sivaraman Vaithiyanathan said
"The quality of petcoke is very good and it has very low sulphur."
Adani Group receives Competition Commission of India approval for Holcim India acquisition
15 August 2022India: The Competition Commission of India (CCI) has approved Adani Group’s US$10.5bn deal to acquire Holcim’s Indian business. Holcim holds a 63% stake in Ambuja Cements, which holds a 50% stake in ACC. Holcim also holds a direct 4.5% stake in ACC.
Adani Group launched a new company, Endeavour, to assume ownership of the new share capital from Holcim’s holding company Holderind Investments.
30% of Indian captive power plants close
15 August 2022India: 30% of plants in India’s 78GW captive power plant network have temporarily closed due to high coal prices. 40GW-worth of capacity (55%) is coal-fired, with an annual consumption of 200Mt/yr. The Business Standard newspaper has reported that total Indian coal imports fell by 10% to 23.8Mt in July 2021 from 26.3Mt in June 2021. Deliveries of coal to non-power sector consumers fell by 33% year-on-year at the beginning of August 2021. The Indian Cement Manufacturers Association (CMA) and nine other national industry associations have contacted the government to urge the formation of policies for the equitable distribution of available coal.
India Cements has imported two shipments of Russian coal for use in cement production. The company’s power and fuel costs rose by 54% year-on-year in the first quarter of its 2023 financial year, which began on 1 April 2022. Its vice-chair and managing director Narayanaswami Srinivasan said “Most of our plants have coal-based captive power generation. The cost of captive generation is now more than the grid cost. Hence, we shut down all captive power units and resorted to grid power.”
India: Grasim Industries recorded consolidated sales of US$3.52bn in the first quarter of its 2023 financial year, up by 41% from first-quarter sales of US$2.5bn a year previously. Dow Jones Institutional News has reported that the group’s cement business contributed a net profit of US$402m, down by 8.8% year-on-year from US$441m.