India Cement & Construction Materials (vol 1 / issue 4)

india CemWeek A CemWeek Publication

Cement VOLume 1

issue 4

january / february 2012

& construction Materials

CONSOLIDATION Sector Ripe for Another Round?

cement CAPACITY CW Group Maps Production

the road ahead India’s Foundation & Future Sustainable concrete roads News

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Analysis

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Market Coverage

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Interviews

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People Moves

india CemWeek

FEATURES 4 10

DEPARTMENTS

THE VITAL ROLE OF INDIA’S ROADWAYS The path to India’s future is increasingly paved and multi-laned

IS GREATER CONSOLIDATION OF THE INDUSTRY ON THE HORIZON? The market appears to be shaping up for another frenzied round of consolidation

14

AN ENGINEERING CONSULTANT’S PERSPECTIVE An interview with Soumen Karkun, DMD & Board Member at Holtec Consulting

1

EDITOR’S LETTER

2

NUMBERS IN BRIEF

22

WILL INDIA’S ROADS OF THE FUTURE BE CONCRETE? The argument for using concrete grows stronger

3

NEW INDIA CEMENT EVENT: Mumbai October 11-12, 2012 CemWeek backs “Cement Business & Investment” conference

24 26

EXCLUSIVE AGREEMENT MAXIMIZES WASTE HEAT RECOVERY

37

2011 CEMENT PERSON OF THE YEAR CemWeek’s picks of the most influential industry leaders

CEMWEEK PARTICIPATES IN AUCBM EVENT IN JORDAN Despite regional unrest, the overall outlook for the sector remains optimistic

construction & building materials

44

INFRASTRUCTURE & PROJECTS

48

EQUIPMENT UPDATES

Government approves construction of industrial parks in several major states

CCI: A Return to Profits

52

STOCK PERFORMANCE

Highlights of the latest in broker recommendations Comprehensive data on major cement companies in India

CEMENT 30 32

MARKET AND COMPETITION Sales are estimated to have grown by 12 percent in December

VOLUME AND PRICING Cement Planning Commission Working Group projects stronger growth for next five years

34

PEOPLE

36

M&A and FINANCE

38

PROJECTS AND EXPANSIONS

40

EQUIPMENT

42

REGIONAL UPDATE

FLSmidth expands energy efficiency portfolio

28

PROFILES ANALYST RECOMMENDATIONS

MOVING UPWARD A preview of the CW Group’s India Cement Facilities Review (2011)

Fourth quarter cement performance: details and analysis

50

FOCUS 8

The inevitability of change

New CMA leaders take the helm JP Associates is looking for a partner for its cement business Dalmia Cement to start expansion activities in Karnataka and Meghalaya soon DCT introduces new dust suppression device Update on cement markets in the broader South Asia region

Cement & construction Materials

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letter from the editor

The Inevitability of Change ndia’s cement sector ended the calendar year on a high note. On average, sales were estimated to have grown by 12 percent in December, and several companies pressed forward with plans to expand capacity. This is definitely welcome news for many in an industry that experienced its share of ups and downs in 2011.

However, the bigger question on everyone’s mind is: what will 2012 hold for the industry?

As change is inevitable, the only question is not if but how the industry will change this year. The expansion of capacity marches onward throughout much of the country, and optimism prevails that demand will keep pace, at least in the mediumto long-term. While expansion may be assured, numerous variables continue to have strategic implications and influence the final outcome.

One such variable is spending on real estate and infrastructure projects. Analysts are projecting muted demand for cement as a

result, but a potential bright spot may lie in the “Vital Role of India’s Roadways” (page 4). Over the next ten years, the National Highways Authority of India (NHAI) is planning to build more than 12,000 km of new roads. This expansion effort could potentially benefit the cement industry, if the government embraces the idea of creating more concrete roads. This possibility is explored in the article, “Will India’s Roads of the Future Be Concrete?” (page 8) Consolidation within the industry appears on the rise once again, with the fragmented and crowded southern region drawing much attention. With market conditions favoring M&A activity, ICCM looks at recent activity in the feature article, “Is Greater Consolidation of the Industry on the Horizon?” (page 10) In addition to our regularly featured departments, we offer an interview with Soumen Karkun, Deputy Managing Director and Board Member of Holtec Consulting. (page 14) Mr. Karkun provides us with a consultant’s insights into possible changes on the horizon.

Finally, to further shine light on the rapidly evolving dynamics of the Indian cement sector, the CemWeek Group is planning to assist with the new “Cement Business & Investment India 2012” conference in Mumbai, India scheduled for October 11 and 12, 2012. The global importance and sheer size of the Indian cement market needed a more insightful executive forum; therefore, the CW Group and CemWeek decided to back this exciting new event in order to fill this void.

As always, we welcome your contributions and comments. If you are interested in contributing to the ICCM magazine with an article, or simply want to share your feedback, contact us at editor@cemweek.com.

Robert Madeira publisher and head of research

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

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numbers in brief

Turning a corner?

Supply and demand Sales suffered a two percent decline in November, down from 14.38 million tons in October. Sales rebounded in December, however, increasing 11.9 percent from 14.09 million tons in November to 15.76 million tons in December 2011.

Output for December rebounded by 12.4 percent to 15.73 million tons. This followed a drop of 5.3 percent from 14.78 million tons in October to 14 million tons in November.

DEMAND (DESPATCHES/SALES)

20 2009-10

2009-10

2010-11

2010-11

2011-12

2011-12 in mm tons

20

in mm tons

SUPPLY (PRODUCTION) - CEMENT

15

10

15

10 Aug

Sept

Oct

Nov

Aug

Dec

Sept

Oct

Nov

Dec

Prices Regionally, in the north, prices in November continued to inch upward with another hike in the range of Rs 5 to 15. With the onset of winter, lower temperatures curtailed construction activities in the northern states, leading to a temporary reprieve from rising prices.

Cement prices declined by Rs 10 in December.

AVERAGE MONTHLY REGIONAL PRICING 300

South West East

225

Central North

150

2

June

JANUARY/FEBRUARY 2012

July

August

September

October

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November

December

E V E N T : cement business & investment india 2012 THE SHIFT FROM WEST TO EAST:

HARNESSING THE POTENTIAL CEMENT INVESTMENT IN INDIA AND BEYOND industry leaders will take a closer look at the evolution and direction of the market, balance views on the ever critical fuel sourcing situation, new policies and legislation, infrastructure plans, and technology maximization.

The conference will also take a closer look at Indian’s growing role in the international markets as companies expand globally through acquisitions, greenfield units and exports as well as technological updates and best-practices.

“So far the marketing of Indian cement has largely taken place inside the country to meet the great demand that arose from India’s infrastructure boom,” said Mr. Demsas Faloppa, CEO of Prescon. “But things are slowly changing and those companies that lead the Indian cement market are actively looking for investment and new ventures. This is the right time to discuss these dynamics and developments.”

round 200 CEOs and industry stakeholders will assemble in Mumbai, India, to attend the 1st Cement Business & Investment India (CBI India) 2012 Conference on the 10th and 11th of October 2012. This is an international event with a unique focus on India’s cement sector that will emphasize the crit- CBI India attendees will include not ical executive, investment, technology and fuel issues facing the only cement companies but also investors, bankers and advisors, fuel traders sector.

“A new forum is needed in India to critically look at the industry’s issues. Not just as the ‘conference engines’ do today, but as industry analysts and technologists to build a real and insightful dialog, from the CEO down. The CBI event is set to become a forum of choice to hone competitive insights, form new business relationships and shape the industry agenda,” said Mr. Robert Madeira, Managing Director and Head of Research at the CW Group, the parent of CemWeek and owner of the

India Cement & Construction Materials journal.

The two day interactive program, which is organized by London-based Prescon and the Global Management and Investment Forum, supported by CemWeek and India Cement & Construction Materials, will cover key aspects of India’s cement industry. Sessions will center on the principal issues facing the Indian cement sector today and in the future. In particular,

and suppliers, engineering organizations, among many other constituents. The conference will include over 25 presentations by industry experts and government officials, a CEO led panel discussion, various networking breaks, an exhibition, lunches, cocktail reception, and a gala dinner. BMWeek BMWeek BMWeek

Conference registrations are now open at a 25% early bird discount. Please e-mail bissirat@prescon-int.com or call 0044 207 1007940 for more information.

Organised by Prescon and the Global Management and Investment Forum.

Supported by CemWeek and the India Cement & Construction Materials journal

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focus

focus roadways are constantly congested, slowing traffic speeds to an average of 30 to 40 km/h for transport roads and 6 to 10 km/h in large cities.

These speeds keep India behind the curve and boost costs for ground shipping. As of 2010, a 1400 km journey in India between New Delhi and Mumbai was 35 hours, but a journey of similar length would take 17 hours in China and 12 hours in Europe.

Costs for surface freight transport average US$0.07/km, double the price of freight in other Asian economies. Competitive disadvantages like this prevent India from winning trade contracts or going to market with the best prices on their own goods.

It's a constant business frustration for all industries, lowering the national GDP by an estimated US$16 to $32 billion and costing the country about ten million new jobs annually.

It's a challenge officials are well aware of and actively working to address. For decades, the road network was neglected, with few funds allocated to upkeep or roadbuilding projects. At the turn of the century, there was a dramatic shift, and by 2013, the national government will have spent more than US$70 billion to modernize India's road network.

The Case for Better Roads In 2011, India awarded road-building contracts for 7,300 km of roadways worth more than US$12 billion. This record-setting award year will help the country meet its goal of constructing at least 20 km of roads per day by 2014, a key component in the national infrastructure upgrade currently underway.

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Targeted Action Plans To end the frustration and maximize the potential of the Indian economy, the government is making roadways a top priority, backed by hard cash. The National Highways Authority of India (NHAI) is mandated to create world-class roads with uninterrupted traffic flow for the counRoadmap courtesy of National Highway Authority try across 33 lakhs km. For fiscal year 2010/2011, NHAI reported building 1800 It's not just maintenance and make-work km of road, capping a period in which projects; road development in India has more than 14,500 km of recently built been linked to expanded economic devel- four-lane highways were brought online. opment potential, something central plan- In the next ten years, more than 12,000 km ners are keen to leverage as the global of new roads are planned. economy remains sluggish. No state wants to be left behind, especially when examples It's no coincidence that national expressof how roads help are clear. Within India, way and highway systems are getting prithe area that is thriving the most and grow- ority treatment. These roads are responing the fastest, Gujarat, is the area with the sible for 40 percent of all traffic despite best roads. accounting for just two percent of overall roads. Existing highways are being resurBest, in this case, means paved and multi- faced to replace bitumen with concrete, lane, capable of supporting high speeds for widened to allow more traffic, and restrucpassenger travel and goods transport. For tured to include passing lanes, dedicat40 percent of Indian villages, thinly paved ed on/off lanes, and clear shoulders. New roads and dirt tracks wash out every mon- highways are being built to international soon season, bringing goods transport and standards and put in place to cut transport local travel to a screeching halt until path- times on key transit routes. ways can be rebuilt. In other areas, narrow

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The government is not doing it alone.

Instead of relying on local and regional authorities to push through road works projects, there has been a marked shift in the last five years to a Build-OperateTransfer (BOT) system. Under this system, private developers build roads, operate them for a fixed period as toll roads to cover costs, and transfer the roads to the government when the term is up. According to J.N. Singh of the NHAI finance group, BOT has helped slash construction delays and provided an incentive for finishing projects on time. The privatization system has been so successful in some regions and cities, like New Dehli, that BOT is now used almost exclusively.

Roadblocks – Literal and Figurative The momentum for new roads is there, and the benefits of the infrastructure are clear, yet an estimated 20 to 25 percent of road projects were delayed by months or even years as of mid-2011, according to NHAI. Ask for a reason and everyone has a theory, all partially correct. Some blame corruption at local levels and at state borders, backed by Transparency International's estimation that Indian truckers pay US$5 billion annually in bribes. Others point to land acquisition and land use issues, noting that public right of ways are often planted fields or mini-slums, and debates rage over the environmental impact of ongoing construction. Money is another issue causing clashes between workers

and leaders, public and private firms, and even citizens and the state. On any given project, all the issues can come together, delaying or even stopping workflow and raising tension levels.

Overcoming these roadblocks is not impossible, though it will take concentrated effort by multiple parties. The stakes are high. Goldman Sachs estimates that the country would need to spend US$1.7 trillion to enhance economic development through roads, while the potential trickle down effects of ten million new jobs annually can't be measured in mere dollars and cents. As India makes its plans for the future, everyone must consider the value and potential of quickly laying down a smooth road ahead. BMWeek CemWeek CW Group

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t is not an exaggeration to state that the roadways of the country are vital arteries, not only connecting the people of this vast land, but also facilitating the growth of its economy. Over 60 percent of the country’s goods are trafficked over roads; therefore, reliability and maintenance of this key network remains a priority India’s road network includes over 3.5 million kilometers of paved and unpaved surfaces and is the world’s second largest after the United States. The majority of the existing paved surfaces were constructed with bitumen, a by-product of crude petroleum, and only two percent of concrete. British engineers originally popularized the use of bitumen in India largely because of their familiarity with the product and the availability of it. Cement at that time was in scarce supply, and given the significant cost difference between the two products, bitumen won out.

However, times and circumstances have changed. As the uproar over the deplorable condition of the roadways grows louder, government officials are once again turning their attention to the debate over whether using concrete for its roadways is a better option. Given the increased supply of cement in the country and the rising costs of bitumen, turning to concrete may now, more than ever, be a more viable long-term solution.

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JANUARY/FEBRUARY 2012

Why Bitumen?

Historically, bitumen was used because the road laying costs were considerably less than concrete. Additionally, it took less time to lay a road because bitumen dried faster. Bitumen, an imported material, was at one time preferred because of its abundant supply and cost (up to three-times less expensive than concrete). An added bonus was the maintenance required. Potholes were easy to repair, and laying new asphalt was a cinch as workers could pour new layers over existing layers multiple times. For a rapidly developing country with a limited budget, bitumen seemed to make economic sense.

Although economically advantageous, significant drawbacks associated with bitumen remained. Bitumen-made roads are not especially suited to India’s aggressive climate conditions and excessive usage. The heavy rains from the country’s monsoon season have wrecked havoc, weakening roadways throughout the coun-

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try. Additionally, heavy transportation vehicles, typically overloaded with goods, place tremendous wear and tear on the roads.

Bitumen-covered roadway surfaces, as well as road strength, tend to deteriorate rapidly under these conditions, leading to noticeable damage within a year. Repairs are needed, on average, every two years, and strengthening is required every five years.

Then there are the environmental and health concerns associated with bitumen. While bitumen is a recyclable material that can be repeatedly used after melting, it does produce highly polluting greenhouse gases. For laborers, studies have raised questions regarding the possible carcinogenic properties of bitumen fumes as well as the potential for respiratory and other irritation effects.

Other Options Now Available Alternatives to bitumen surfacing were at one time extremely limited and costly, but that was then and, not surprisingly, the picture is different today. Bitumen prices have continued an upward climb over the decades. In early 2011, the price of bitumen was expected to jump from 35,000 per ton to roughly 300,000 per ton over the next twenty years. If that holds true, bituminous construction will become too costly to continue. The availability of bitumen is likely driving the price up, as bitumen reserves are declining at a significant clip. Ironically, it is cement that is now found locally in abundance and is firmly on its way to becoming a more cost-effective alternative.

A shift to concrete roads does provide some operational and financial advantages over bitumen roads. Often cited advantages such as durability and strength are definitely bonuses for an often cashstrapped country. Several technical studies have confirmed that concrete roads are best suited for countries with extreme weather patterns and harsh usage conditions like those experienced in India. Concrete can withstand the repeated pounding from monsoon seasons and the sweltering high temperatures, as well as the all-too-common industrial pollutants and spillages associated with traffic accidents attributable to man. If grooved, the roadways can provide a durable, skid-resistant surface.

Added Benefits Historically, concrete roadway paving has cost a little higher compared to bitumen and generally has taken more time to lay, requiring deeper roadbeds and more engineering, but concrete roads have a long life, possessing an average life cycle of up to 40 years.

Under certain conditions, these roads have even remained maintenance-free for 50 years. It is true that repairs to concrete roadway when there are cracks and breaks require more than a quick mend with a shovel and loose gravel, as is the case with bitumen roads. In the case of a break in a concrete road, the whole slab would need to be replaced. Furthermore, concrete is not recommended for areas prone to seismic activity, as the potential

destruction may lead to heavy replacement costs. Still, considering repairs to concrete roads are generally not needed as routinely as to bitumen roads, the overall cost savings of concrete helps to balance the scales.

Furthermore, the cost argument needs to take into consideration that the substantial rise in oil prices and the reduction in asphaltic bitumen for the first time make the cost argument irrelevant.

Waste products used in making asphaltic bitumen are now refined to a higher value product, thanks to the use of cokers. These cokers have subsequently done much to reduce the amount of bitumen now available for use in asphalt paving. This, in turn, has driven up the price of bitumen greatly. Some industry experts argue that, for the first time in history, concrete and bitumen pavements are now either similar in costs or, surprisingly, concrete is found to be cheaper than bitumen.

Studies have indicated that concrete roads tend to produce smoother rides, and smoother rides lead to fuel consumption economy.

According to the Central Road Research Institute, transport vehicles carrying goods consumed 15 to 20 percent less fuel on concrete roads compared to bitumen. Throw in the associated lower wear and tear on vehicles and running costs connect with transportation vehicles decreased between ten and 15 percent.

In the past, concrete roads did not garner much attention, but that is changing as public pressure is increasingly brought to bear on the government, and specifically the Public Works Department (PWD), to find a viable solution to the country’s recurring road problems. The government’s recent acceptance of the Cement Manufacturer’s Association’s (CMA’s) offer to lay 25 km of concrete roads free of cost in any part of the country may have provided the reassurance needed to move forward with the switch, since the PWD has signaled its support for the use of concrete for road construction. It is a definite positive development for the cement industry, specifically, and the country in general. BMWeek

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Is Greater Consolidation of the Industry on the Horizon? ndia’s growing cement sector historically has been a highly fragmented market since de-licensing in 1991. However, two aggressive rounds of consolidation, one in the late 1990s and another earlier in this decade, have done much to change the face of the industry. With market conditions once again favoring M&A activity, is another frenzied round of consolidation on the horizon?

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Consolidations often occur in phases, typically toward the end of a downward cycle and at the start of an upswing in the market. It is during a downturn that smaller players find it difficult to continue operations, as prices often drop while expenses rise. In contrast, during an upturn in the market, the prospects of strong growth attract new players to the market. Capital is readily available and accessible, and smaller players are looking to exit the market, but at a premium. Larger players seek to enhance their earnings growth through acquisition, and generally valuations are attractive. In India, the same pattern has held true over the last few decades.

History of Consolidation The first consolidation in the Indian cement industry dates back to 1936 when ten local companies merged to form the Associated Cement Company (ACC). Given that the industry was heavily controlled by the government in regards to distribution and pricing until 1982, consolidation activity was not intense by any means. However, the de-licensing of the industry in 1991 opened the market, which was flooded with new entrants in a very short time.

In 1982, there were only 15 large cement companies (i.e., more than one mtpy), and by 1997 there were 62. This rapid expansion contributed to defining the industry as one that was both highly competitive and fragmented.

The intense competition spawned a drop in pricing, which in turn eroded profit margins. Smaller players became less competitive and found themselves struggling to continue. Larger companies with significant cash reserves saw smaller companies as a good way to quickly increase market share, particularly in regions where they wanted to develop a larger presence.

Acquisition was a cost-effective alternative to having to undertake a Greenfield project, which at that time not only cost more to build, but took years to come online. For example, in the late 1990s, it was estimated that to bring a one million ton capacity plant on line required a capital

investment of Rs 3.5 billion. Thus, between 1997 and 1999, the first major wave of consolidations occurred.

India Cements, which in 1990 was one of the first companies to start expanding through acquisitions with its purchase of Coromandel Cement, picked up Vishaka Cement, Cement Corporation of India’s Yerraguntla Cement, Raasi Cement and Shri Vishnu Cement between 1997 and 1999. Gujarat Ambuja acquired Modi in 1998, and Grasim purchased Shree Digvijay and Indian Rayon in 1998. Local

manufacturers weren’t the only companies using the power of M&As to harness the growing market. In 1998, global manufacturer Lafarge entered the market with its purchase of Tisco, a 75,000-ton facility.

Other multinational corporations including Heidelberg, Holcim, and Italcementi would follow soon after.

Round Two India saw a second significant wave of consolidation activity between 2005 and 2008 as the cement market once again entered an up cycle. During this three-year period, the Centre for Monitoring Indian Econ-

M&A Cement Activity (2005 - 2011 # of deals) 50

25

0

2005

2006

2007

2008

2009

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2011

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omy (CMIE) recorded 97 mergers and acquisitions, with 2007 showing 42 alone.

Acquisitions, not Greenfields, remained the preferred route for domestic as well as international manufacturers looking to gain market share. The many notable deals of this era included Holcim’s stakes in Ambuja and ACC, CRH’s agreement to purchase a 50 percent stake in My Home Industries, and the joint venture between French-based Vicat and Sagar.

Today After experiencing a downturn in 2009, the Indian cement market is expected to grow in 2012. Some are projecting growth as high as nine percent, though we expect the advance to be more muted. The market once again appears primed for consolidation, particularly in the southern region where over 40 players of various sizes compete for market share. Talk of consolida-

2011 M&A Activity in the Cement Industry

Merger/Acquired Co.

Deal Type

Feb 11, 2011

Deal Date

Birla Cement & Inds. Ltd.

Target/Seller Co.

Rain Commodities Ltd.

Takeover

Feb 3, 2011

National Lime Stone Co. Pvt. Ltd.

A C C Ltd.

Merger

Feb 3, 2011

Encore Cement & Additives Pvt. Ltd.

A C C Ltd.

Merger

Feb 3, 2011

Lucky Minmat Ltd.

A C C Ltd.

Merger

Jan 20, 2011

Binani Cement Ltd.

Binani Industries Ltd.

Takeover

Nov 22, 2011

Andhra Cements Ltd.

Jaypee Development Corp. Ltd.

Takeover

Nov 22, 2011

Small Tiles Pvt. Ltd.

Prism Cement Ltd.

Takeover

Nov 14, 2011

Rain Commodities Ltd.

H S B C Bank (mauritius) Ltd.

Takeover

Nov 14, 2011

Jaiprakash Associates Ltd.

Jaypee Cement Corp. Ltd.

Sale of Asset

Oct 25, 2011

Rain Commodities Ltd.

Buy Back

Takeover

Oct 21, 2011

O C L India Ltd.

Mridu Hari Dalmia Parivar Trust

Takeover

Sep 16, 2011

Shiva Cement Ltd.

Preferential Allotment

Takeover

Sep 14, 2011

Dirk India Pvt. Ltd.

Ambuja Cements Ltd.

Takeover

Sep 9, 2011

Gulbarga Cement Ltd.

Zuari Cement Ltd.

Takeover'

Jul 27, 2011

Orient Paper & Inds. Ltd.

Orient Cement Ltd.

Sale of Asset

Jun 6, 2011

Dang Cement Inds. Pvt. Ltd.

Ambuja Cements Ltd.

Takeover

Apr 23, 2011

Binani Cement Ltd.

Unknown

Sale of Asset

Source: CMIE tion has heated up over the last year, and M&A activity was brisk in 2011, with over 20 deals recorded by the CMIE. However, the industry has not come close to the record level of consolidation activity seen in 2007, begging the question: why not?

Several factors may be suppressing M&A activity. Expectations of future growth, limited need to sell and some transactions that closed at high valuations have frequently come in the way of more deals closing.

To illustrate, the average value of cement acquisitions between 2005 and 2007 was roughly US$168/ton. A decade prior, the average sat at US$121/ton. The last few M&As have occurred at a very high rate, between US$170 and $180/ton. No one appears to be in any hurry to invest this amount in an industry that is currently— albeit mostly expected in the near-term— overflowing with capacity, especially foreign companies that are strapped for cash.

Hence, no one appears to be in any hurry to jump on the consolidation bandwagon from the outside, and domestically it has proven easier to build capacity than to buy

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it. Many are waiting for valuation levels to adjust downward before moving forward.

The Impact Consolidation in the industry has changed the face of cement manufacturing in India.

Smaller and regional players continue to struggle because of limited capacity and capital to expand. They are becoming the exception instead of the norm. Large players with capital to expand their operations are increasingly grabbing more market share and significantly reorganizing existing capacity. In FY 2001, the top three cement manufacturers controlled 33 percent of total capacity. By FY 2010, and largely through consolidation activity, the top three manufacturers (AV Birla Group, Holcim Group, and BK Birla Group) controlled 43 percent of total capacity. In comparison, the world’s top 50 cement manufacturers control 60 percent of the global cement market.

Consolidation in the hands of a few dominant players has always been eyed wea-

Two aggressive rounds of consolidation have changed the face of the industry.

rily, as it lends to fears of collusion over price and quantity control. Concerns over cartelization emerge, as evidenced by the allegations that have appeared more frequently in news reports over the last year.

However, this isn’t to suggest that this is a natural event destined to occur. It is not, provided the right regulatory agencies and

policies are in place—and enforced—to prevent it from happening. Instead, consolidation in the industry may succeed in exerting downward pressure on cement prices and ultimately promote stronger and more consistent demand.

With the increased challenges of Greenfield projects, such as the hassles associated with mineral concessions, permitting approvals, financing, land acquisitions and increasing environmental concerns, consolidations offer an attractive alternative to companies looking to expand capacity quickly. Given the right set of market dynamics, including continued headwinds in utilization, rising input costs and continued foreign interest, and at the right valuation, India’s cement industry may well see a series of tactical / in-fill, if not transformational, M&A activity in 2012 and undergo yet another makeover, especially as the divide between the majors and independents grow. BMWeek CemWeek CW Group

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LEADERS COMMENT

CemWeek looks closer at India:

Through the eyes of an engineering consultant n this interview, CemWeek talks to Soumen Karkun, Deputy Managing Director and Board Member at Holtec Consulting. Mr. Karkun shares his experiences and viewpoints on the unique strengths of the Indian cement market, areas for possible improvement, the likelihood of vertical integration within the industry, and some of the more interesting technical developments coming out of India.

CemWeek: Tell us about Holtec’s work in the cement sector within India and beyond. What are a few of Holtec’s more notable projects in India?

Soumen Karkun: Holtec Consulting, incorporated in 1967, is an engineering and business consulting firm. In addition to its cement coverage, the company also services assignments in sectors such as Captive Power, Highways and Bridges, and Steel Detailing.

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Holtec Consulting is a part of the Holtec Group, which consists of two other, wholly owned subsidiaries: Holtec Global Solutions FZE operating from Sharjah, UAE, and Holtec Global Solutions, headquartered in India. The former is configured to operate and manage cement plants globally, while the latter provides overall solutions, encompassing services, spares, and consumables.

Since its inception, Holtec has executed more than 3,500 consulting assignments in over 80 countries. Our current workload consists of 195 active assignments spanning 20 countries and 85

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clients. Of these assignments, 110 are in the domain of cement engineering and project management, 30 in pre-investment and performance enhancement studies, 25 in captive power and waste heat recovery, 20 in highways and bridges, and ten in steel detailing.

Five hundred staff members with over 6,500 combined years of experience perform Holtec’s service delivery. Spanning all functional disciplines, our width of service coverage is, possibly, higher than any other cement advisory in the world.

Since every project has its unique challenges, it is difficult to single out a “flagship assignment.” Our credo has always been to give our best to all assignments, irrespective of nature, size, location or client. However, it is my personal assessment that the most significant assignments have been the 10,000 tons per day (tpd) plants, recently engineered by us in infrastructurally challenging environments.

CemWeek: A lot is written about looming overcapacity in India. While we know the arguments that per capita still has ways

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leaders comment lizations, possibly in the mid-seventies range. This could create a downward pressure on prices. With cost pressures, particularly those for process and transport fuel, likely to escalate, valuations of financially weak players, operating in surplus regions could see a decline. This could spur a sequence of M&A activities. This period could also witness several players creating their overseas manufacturing presence in limestone-rich, economically deprived countries. The principal objective would be to offset domestic risks such as those caused by cyclic over-capacity, political disturbance, depleting mineral resources, high borrowing rates, threat of a realty meltdown, difficulties in land acquisition, and impediments of acquiring environmental and other clearances, etc.

Soumen Karkun to go, what are your thoughts on the operating environment in the next one to two fiscal cycles?

Soumen Karkun: The threat of looming overcapacity, in our opinion, is possibly overemphasized. Players with the intention of sustaining a presence in capitalintensive industries are well aware of the significance of industry cycles, and have devised suitable buffering mechanisms to counter negative impacts in the short term.

A supportive feature has been the comparatively low breakeven points in India, affected principally by the very high percentage of blended cement consumption.

In the financial year 2010-11, ending on 31st March this year, consumption in India at 222 million tons per year (mtpy) was 82 percent of the effective installed capacity, almost 25 to 30 percent above the average breakeven! By 2018, India is expected to consume 390 mtpy against an effective capacity of about 400 mtpy.

Notwithstanding this, the next one to two fiscal cycles could see lower capacity uti-

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CemWeek: If you had to identify areas where you see the Indian cement industry leading globally, what would they be?

Soumen Karkun: I believe the Indian cement industry excels in several areas. For instance, the industry leads in the installation of the largest number of plants with single line capacities exceeding 10,000 tpd. It exhibits survival skills in intensely competitive and fragmented markets, has experience in retail and rural marketing, possesses strengths in manufacturing the highest volumes of blended cement, and in the ability to produce good quality cement utilizing average quality limestone and poor quality fuel.

CemWeek: What do you see as the most significant areas that India’s cement producers need to work on to improve in the near to midterm?

Soumen Karkun: India’s cement industry has miles to go before achieving the standards of environmental friendliness that more developed economies have achieved. While the canvas for this is indeed large, reduction of greenhouse gas emissions is, possibly, one of the more actionable areas in the short to medium term.

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The dwindling of natural resources is another serious cause for concern. Among these, limestone, fossil fuel and water, if not conserved, could definitely inhibit the long-term growth of the industry. The onus of conservation, until now, has generally been technology-based and, therefore, largely driven by equipment suppliers. Wasteful practices need much higher attention, and cement producers must pick up the baton on directly arresting these in the course of normal operations.

A primary reason for the gap between demand and consumption is the high market price of cement. Producing “affordable cement” without compromising the quantum (not %) of EBIDTA is possibly the one major initiative that would possibly dwarf all other initiatives. This would necessitate the harnessing of technology, amending operating practices and modifying customer mindsets. The net effect would be a huge increase in the customer base and consequentially an explosion in the size of the cement market pie!

The range of products available, progressive volumes and respective quality specifications could be targeted as a focus area of change because of market forces, cost imperatives and alignment of quality standards to those accepted globally. A large component of this change could be affected through technology intervention but would also need incessant customer education, as well as changes in standards and statutes.

Given the exponential growth in cement capacity, a shortage of skilled labor is encountered. Initiatives that need greater attention include lower human dependency through increasing automation, as well as creating and nurturing outsourcing options. Training and exposure to operations in more developed economies is another, as is modifications to operating practices targeted towards reducing the headcount.

An analysis of the components of the final delivered cost of cement shows that 40 percent is constituted by production costs, 25 percent by the transport costs of inputs and outputs, and 35 percent by direct and indirect taxes. Optimization of transportation logistics, spanning modes, and nodes and routes is thus an area deserving a higher degree of focused attention.

CemWeek: Will we see cement makers expand more through vertical integration by adding more ready-mix operations, gypsum and other construction related services?

Soumen Karkun: The extent of vertical integration may be viewed in the context of being either upstream, midstream or downstream.

Historically, upstream integration in the Indian cement industry has been largely restricted to limestone mines only. In recent years, the scope is increasingly enhanced to cover fuel as well as blending materials such as fly ash and slag. While coal mines, both in India and overseas are targeted for acquisition, long term agreements are sought with fly ash and slag producers. As a natural consequence of the high consumption of blended cement in the country, power producers and steel

India’s cement industry has miles to go before achieving the standards of environmental friendliness that more developed economies have achieved.

producers are increasing their presence in the cement industry with the natural advantage of owning a blending material source, which, otherwise, would have resulted in a negative disposal cost. This connotes a downstream integration phenomenon for the power and steel sector and upstream integration for the cement sector. Conversely, the construction sector is displaying a higher interest in upstream integration through the creation of cement manufacturing facilities.

In terms of midstream integration, an increasing number of cement players are trying to insulate their dependence for

power on erratic, state-owned utilities by setting up captive power plants using diverse fuels. In several cases, these captive plants have been designed for higher capacities with excess power being sold to the state-owned grid at attractive unit rates. Other forms of midstream integration include packing material and several other consumables.

If one were to discount the higher interest displayed by the construction sector through the creation of upstream cement manufacturing facilities, downstream integration by cement players is still in its nascent stage. Though the top cement players have forward integrated into Ready Mix Concrete (RMC) operations, the share of RMC is still less than ten percent of the total concrete consumed in the country.

The causes are many. It is, however, undeniable that the acceptance of RMC is gaining increasing popularity, albeit at a slow pace. Forward integration of an increasing number of cement players into RMC is, thus, inevitable. Either state-owned companies or independent private companies operate natural gypsum mining. In recent years, while a few cement players have commenced operations in value-added products such as gypsum boards, given the scarcity of gypsum sources, we do not foresee significant vertical integration in this area.

CemWeek: On the information technology (IT) front, how would you assess the Indian cement sector? What still needs to be done and can be done to increase organizational efficiency?

Soumen Karkun: IT in the Indian cement industry is gaining higher acceptance, albeit at a slower pace than that existent in developed economies. Applications in accounting, materials management and dispatch management abound. The industry also needs to be complimented for the level of control automation that has been attained with commensurate benefits in plant availability, higher process and quality control, and reduced headcount.

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leaders comment

The focus for IT development has to shift from information used for record keeping and statutory fulfilment to one that is exception-based and thus, more decision enabling. Management cockpits need to be created by encompassing the concepts outlined in the Balanced Scorecard (BSC).

Primarily only the larger players have implemented integrated Enterprise Resource Planning (ERP) systems. Given the high degree of industry fragmentation, small to mid-sized players have yet to convince themselves of the benefits of ERP systems vis-Ă -vis their costs. In addition, with many plants located in undeveloped areas, attracting IT talent for operations and IT maintenance infrastructure has been a serious inhibiter to more widespread application. The use of ERP in any activity post packaging, like dispatch plan-

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ning, trucks tracking, etc. is low, and the industry needs to consider using IT in areas such as inventory planning and dispatch/ logistic control.

CemWeek: European companies today provide much of the major cement plant equipment in India. What about India’s domestic turnkey cement plant manufacturers? Are the Chinese able to compete effectively in India?

Soumen Karkun: Nearly all major European cement plant equipment manufacturers have their design offices and manufacturing workshops in India. Promac, Walchandnagar Industries, and LV Technologies are the major domestic cement machinery manufacturers in India. However, all three cater to smaller capacity plants limited to a maximum capacity of 5,000 tpd.

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Chinese plant equipment manufacturers have yet to establish a significant presence in the Indian cement industry. At present, only three complete cement plants have, or are, being built using Chinese equipment. Equipment manufactured in China loses its competitive edge when pitched against equipment manufactured domestically. Duties, inadequate transport/ handling infrastructure and freight costs are, possibly, the principal deterrents. In addition, the Engineering, Procurement and Construction (EPC) mode of project execution, at which the Chinese are particularly proficient, is yet to establish itself in the Indian context.

CemWeek: What are some of the more interesting technical developments in India?

Soumen Karkun: There have been several notable developments in many areas such as unit operations, pyro-processing, and plant technology and operations. Specific examples are seen in: Mining: Increasing use of surface miners; utilization of marginal grade limestone by employing flotation processes as well as multi-screening to reduce silica and adding calcareous industrial waste for enriching lime; improved drilling and blasting operations through better drilling geometry and explosive technology; choice of larger and more fuel efficient mining and transport equipment, etc.

Crushing: Utilization of larger crushers capable of handling 1.5 m x 1.5 m boulder sizes; throughputs exceeding 1,800 tph for a product size of 75 mm, which is acceptable to technologically advanced, raw grinding systems downstream.

Raw Grinding: Adoption of larger (motor sizes ~ 6,300 KW) and more energy efficient VRMs, with capacities up to 550 tph, with longer roller/ table lives and improved material bed development; throughput augmentation through higher residues acceptable by technologically advanced pyro-processing equipment. In recent times, projects have been offered individually powered, 6-roller (motor sizes, 6 x 2,000 KW), VRMs which could achieve grinding capacities up to 1,000 tph.

Preheaters: 6-stage, twin string preheaters with clinkering capacities up to 10,000 tpd; increased cyclone efficiency from 92 to 94 percent; reduction in l/d ratio in cyclones resulting in a pressure drop reduction from 700 to 400 mm WG and a tower height reduction of 10 to 15 m; reduction in the total air requirement from 1.6 to 1.45 Nm3/ kg clinker; improvement in fan efficiencies from 72 to 76 percent.

Precalciners: Degree of calcination pegged at 94 percent to prevent the onset of liquid phase; calciner to kiln fuel ratio

The threat of looming overcapacity, in our opinion, is possibly overemphasized. of 70:30; increased residence time from two to five seconds to improve combustion efficiency of fuel mix would result in more acceptable NOx values.

Kilns: Redefinition of operating parameters—volumetric loadings up to 7.5 tpd/ m3, thermal loadings up to 5.5 Gcal/ m2/ kg clinker, filling percent of 14 to 16 and kiln speeds up to 5.5 rpm; 2 pier installations with a drop in l/d ratios to 10 to 11; residence time reduction from 30 to 20 minutes; low primary air, multi-channel burners using sophisticated weighing systems; better refractory life through use of improved refractory technology and greater raw material homogeneity and controlled burning conditions; raw mix compositions are also undergoing a change with induction furnace produced slag being used to the extent of eight per-

cent and high carbon fly ash at two to three percent.

Coolers: Increased adoption of new generation (e.g. “walking-floor”) coolers resulting in increased cooler efficiency from 68 to 76 percent, a drop in air requirement from 2.2 to 1.6 Nm3/ kg clinker, a temperature increase of secondary/ tertiary air to 1,000 ºC, increase in cooler loading to 55 t/ m2 and significantly reduced installation time by about 20 percent.

Finish Grinding: In view of overall cost (capital and operating) effectiveness, large VRMs, with grinding capacities up to 325 to 350 tph for Pozzalanic cements ground at 3,500 Blaine, seem to be the flavor of the new decade. Against current restricted use in blended cements, usage in the times ahead could span all cements as well as slag; technology developments, including metallurgical interventions for reducing wear rates, formation of stabilized clinker beds, etc., seem to have helped their cause.

The use of roll presses has also received a boost, particularly after the improvements effected in the material quality of liners giving a life of 30,000 hours.

Packing & Dispatch: To meet increased demands, increased adoption of 240 tph, twin discharge, 16 spout packers; to address variable market demands and dispatch modes, flexibility in the dispatch

AP Cement Project at Tadipatri, Andhra Pradesh, India

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bio

Captive Thermal + DG Power Plant for 0.9 mio tons per annum Cement Plant at Ariyalur, India

section are being significantly enhanced through appropriate automation.

Automation, Instrumentation & Plant Control Systems: Aimed at reducing human intervention, automated maintenance (e.g. lubrication) and better process measurement and control. This includes new technologies such as intelligent MCCs, serial bus architecture, satellite communications, etc.

Material Handling Systems: Targeted towards achieving higher capacity, smaller area requirements, and lower wear rates.

Integrated Quality Assurance Systems: To ensure alignment to International Standards such as EN-197; market demands for higher one-day strengths (by interventions in C3S and product fineness), quicker initial setting (through C3A and gypsum interventions), darker product color (intervention in C4AF and minor constituents), etc. are assuming increased importance.

Operations Research and Statistical Tools: Are being increasingly used in optimizing logistical applications such as the management of vehicle queues (seen mainly in limestone transport and cement dispatch), transportation/ transshipment operations, etc.

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Significant interventions are being made in equipment choice, maintenance practices, materials’ management, and other associated systems, targeted at enhancing plant/ equipment availability; larger plant/ equipment sizes and the consequent high opportunity cost of downtime are drivers that are enhancing the relevance of such interventions.

With environmental norms getting more stringent, technology development and acquisition are being harnesses to keep pace; e.g. possible lowering of dust emission norms, from 50 mg/ Nm3 to 10 mg/ Nm3 are resulting in the increased adoption of hybrid filters; the pressure to reduce CO2 emissions are unleashing a variety of clean technologies and practices such as cogeneration of power using waste heat, incineration in cement kilns of waste materials to meet the dual objectives of waste disposal and cost reduction, separation of CO2 from kiln exhaust gas and its utilization in value products, etc.

Energy Efficiencies: A variety of technological initiatives, targeted towards effecting significant improvements in energy consumption is underway. As against current “best” values of 680 kcal/ kg clinker and 65 to 70 kwh/t of blended cement, these initiatives are expected to result in thermal energy consumption dropping to 665 kcal/ kg clinker and electric energy consumption to about 60 kwh/ t of blended cement.

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An engineer-MBA by qualification, Mr. Soumen Karkun is currently the Deputy Managing Director and Board Member at Holtec Consulting, one of the top cement advisories in the world. Other than executing his corporate responsibilities, he looks after the Process Engineering, Raw Materials (Geology & Mining) and Business Consulting functions and is thus responsible for all consulting assignments relating to pre-investment and performance enhancement activities.

Associated with the cement industry since 1972, Mr. Karkun’s initiation to the industry was in the area of plant operations. Joining Holtec Consulting in 1978, Mr. Karkun has led over 500 multi-functional consulting assignments for over 100 clients in 45 countries.

Mr. Karkun’s primary expertise is in delivering holistic consulting solutions in which multi-functional inputs and implications are synergistically integrated.

An accomplished speaker, Mr. Karkun has also led a variety of training related initiatives, including institution building, courseware development and teaching, and has over 20 international publications to his name.

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CCI

A Return to Profits

he Cement Corporation of India Limited (CCI) was founded on January 18, 1965 by the government of India. Its goal was to help India become a self-sufficient producer of various types of cement—a goal that CCI has met with limited degrees of success over the years.

However, following a severe liquidity squeeze in the early 2000s that led to a government mandated shuttering for sale of seven of its production sites, the company seems to be back on track Since 2007, CCI has been one of 15 central public sector enterprises designated as “sick” by the government with regard to reporting year-over-year profits on a continuous basis. Now in its third straight year of sustained profitability, the company is on the move. Its completion of the restructuring plan developed by the Board for Reconstruction of Public Sector Enterprises (BRPSE) also has it on a short list of potential candidates for a public offering in 2012, though the government would still hold a five to ten percent stake in the firm.

as little as ten years ago. In 2001, employees brought the firm before the National Human Rights Commission after salaries went unpaid for more than six months. In contrast, 2011 saw the firm be an aggressive recruiter of mid-level and senior-level project management, engineering, and technical advising talent throughout the country, with applicants clamoring for positions in trainee programs on major public job boards. CCI now employs nearly 1,100 people, primarily in factory locations considered to be underdeveloped areas.

tioned scheme for rehabilitating the firm.

For fiscal year 2010 – 2011, the firm generated Rs 27.13 crore in net profits. This was down from the previous year’s net profits of Rs 52.75 crore, a drop in line with contractions in the Indian construction industry demand for cement over the same term and large increases in input costs caused by commodity spikes and excise duty increases. The ability of the firm to earn such profits while still in a reconstruction scheme earned CCI the “Turnaround BRPSE Award,” granted in March of 2011.

This turnaround is all the more remarkable in light of the ongoing global economic challenges in the construction industry and the depths to which CCI had fallen

CCI currently owns ten units across eight states, with three plants in active operation.

The others remain closed in preparation for final sale through the government’s sanc-

The total annual installed capacity of the firm is 38.48 lakh million tons. For the 2010 – 2011 operating year, CCI’s utilization capacity was 62.27 percent, down

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each state where it does business, coordinated with New Delhi.

slightly from 2009 – 2010’s 66.96 utilization capacity. Total production fell from 968,225 million tons in 2009 – 2010 to 900,440 in 2010 – 2011 after a damaged kiln shell at the Tandur site caused frequent work stoppages. The kiln shell is scheduled for replacement in 2012, allowing Tandur to return to full capacity and contribute more consistently to the company’s annual production goals.

Headquartered out of New Delhi, CCI’s operating sites are primarily remote, prompting the firm to implement a stateof-the-art Enterprise Resource Planning (ERP) solution in 2011. This helps maintain connection and continuity toward annual goals among operating sites and facilitates the company’s on-site development efforts in the areas around its operating plants. CCI underwrites schools, public utilities, and conservation projects in

This development emphasis is in keeping with the current growth trends for the company. Its current project load exceeds its personnel and capacity limits, putting it in firm expansion mode. CCI manufactures in-demand Portland cement products, including Pozzolona Portland cement, Portland Slag, and ordinary Portland cement in multiple grades. One more unique grade is 53S, customized for use by Indian Railways, a product that keeps CCI well-positioned for involvement in regional and national infrastructure projects.

Moving into 2012, CCI seeks to continue its positive momentum. The company has invested to expand its plants at Tandur and Nayagoan to one million tons of capacity each. Expansion through new site development, something CCI would not have been capable of earlier in the decade, is also once more on the table. In December 2011, the company announced to the Indian Parliament a formal proposal to open a grinding facility at Baikunthapur (Cachar district, Assam). The new facility would have an installed capacity of 82,500 tons, based on a single shift with a cost of Rs 39.68 crore.

Land has already been assigned so that the project may get underway and keep CCI moving forward. BMWeek CemWeek CW Group BMWeek BMWeek

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CCI Plants & Processes, 2012*

FISCAL YEAR NET PROFITS (INR)

Location

State

Rajban

Himachal Pradesh

Dry

Haryana

Semi-Dry

Delhi

Grinding Unit

Neemuch

Madhya Pradesh

Dry

Bokajan

Assam

Dry

Akaltara

Chhattisgarh

Dry

Mandhar

Chhattisgarh

Wet

Kurkunta

Karnataka

Dry

Adilabad

Andhra Pradesh

Dry

Tandur

Andhra Pradesh

Dry

Charkhi- Dadri Delhi

60

30

0

2007-08

2008-09

2009-10

Process Used

2010-11

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ANALYSIS

Moving Upward ndia remains on an upward trajectory of rapid development and strong economic growth, and no industry better illustrates this than its cement sector. According to the bottoms-up mapping of cement facilities in the India Cements Facilities Review (2011), prepared by CW Group Research, the total annual production capacity of cement manufacturing facilities in India had exceeded 310 million tons of cement per year by mid-2011. Of the capacity, 94 percent is dedicated to gray cement, with the balance made up by slag and white cement units.

India’s cement sector boasts over 190 (and growing) functioning medium and large scale production units, which are operated by over 60 cement companies. The majority of those facilities are classified as integrated, large-scale units, producing one million tons or more of cement each year.

The average plant capacity is a relatively large 1.62 million tons per year. larger players dominate While a crowded field with regard to players, larger groups maintain a dominant position. For example, global cement maker Holcim, through its ACC and Ambuja units, holds the top position in terms of production capacity, representing 18 per-

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cent of total capacity. Graism’s UltraTech, also a market leader, holds the distinction of being the single largest operating company, controlling 16 percent. Other large group operators with significant capacity include Shree Cement, Madras Cements, Dalmia Cement, Chettinad Cement, and J.K. Cements. regional breakdown Regionally, the northern and southern regions are in the lead, with over 85 percent of combined market production capacity. In the North, the state of Rajasthan has the most capacity, followed by Madhya Pradesh and Maharashtra. Andhra Pradesh dominates in the south when it

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comes to production capacity, with Tamil Nadu and Karnataka rounding off the top three state spots.

With regard to facility and type, integrated cement plants account for over three-quarters of total cement capacity. The majority of the integrated production units use the dry processing production method, which accounts for 97 percent of all integrated production capacity. Older wet and semidry production units make up the balance.

With ample limestone reserves and rapid economic development, the South has the largest number of integrated facilities, accounting for 38 percent of the country’s total production capacity. The North, with

CAPACITY AND PLANT TYPE BY REGION (MTPY) 150 BLENDING INTEGRATED GRINDING

75

0

NORTH INDIA

SOUTH INDIA

WEST INDIA

EAST INDIA

NORTH EAST INDIA

REGIONAL DISTRIBUTION OF CAPACITY NORTH EAST INDIA EAST INDIA WEST INDIA SOUTH INDIA

a strong demand profile but less access to quality raw materials, relies more on grinding capacity, and 29 percent of capacity in the region is from grinding-only units (compared to a national average of 22%). Only the East relies more on grinding plants in producing cement. There, 69 percent of capacity is from grinding.

NORTH INDIA

NAMEPLATE CAPACITY SHARES BY GROUP OTHERS DALMIA CEMENT BK BIRLA

The CW Group’s recently released report builds a comprehensive picture of a still relatively fragmented industry as it discusses all the larger integrated gray and white facilities, grinding stations and slag cement plants in India, providing details on principal cement type produced, plant CEMENT OUTPUT CAPACITY SHARE capacity, ownership structure, and affiliation with global groups. A copy of the full report is available directly from the CW Group. BMWeek CemWeek CW Group Coal Week BMWeek BMWeek

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JAYPEE GRASIM HOLCIM

SLAG GREY WHITE

Contact the CW Group Research to obtain a copy of the large scale poster as well as detailed supply-side report at inquiries@cwgrp.com.

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update Exclusive Agreement Maximizes Waste Heat Recovery FLSmidth expands energy efficiency portfolio

in these gases can be recovered and converted into electrical energy. This means new and existing plants are less reliant on traditional power sources, drastically cutting power costs and reducing CO2 emissions.

To curb rising energy costs and reduce water consumption and CO2 emissions, cement and minerals plant manufacturers are constantly looking for ways to make the plants more efficient.

Waste Heat Recovery (WHR) is just one of the technologies helping energy-intensive industries meet these challenges—and FLSmidth now has exclusive rights to the latest technology for waste-heat-to-power generation.

FLSmidth is renowned for bringing innovative technologies to the global cement and minerals industries. This reputation was strengthened in June 2011 when the company signed a licensing agreement with Wasabi Energy for its Kalina Cycle waste heat recovery technology, one of the most efficient waste-heat-to-power systems available. The licensing agreement grants FLSmidth exclusive rights to offer Kalina Cycle technology to the cement and lime industry globally, with the exception of the few countries covered by existing licensees.

Good news for the environment Particularly in the cement manufacturing process, the preheater and clinker cooler release large amounts of hot flue gases.

With the Kalina Cycle technology, the heat

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Based on a patented ammonia water process, the highly efficient heat transfer rate of the Kalina Cycle can improve thermal efficiency by ten to 40 percent over conventional steam and organic Rankine Cycle (ORC) waste heat power systems—without harming the environment or interfering with the cement production process.

Greater power generating capacity Essentially a ‘modified’ Rankine Cycle, the Kalina Cycle uses a mixture of ammonia and water instead of a pure component working fluid, such as water. Not only does ammonia boil at a lower temperature than water, the ammonia and water mixture boils and condenses across a wider temperature range than water and closely parallels the heat source temperature. In short, the Kalina Cycle allows a higher power generating capacity for a given heat source than other available systems.

In addition, the ammonia-water concentration can be altered at various points within the power cycle in order to improve the effectiveness of heat acquisition, regenerative heat transfer and heat rejection.

Why use Kalina Cycle technology?

In addition to emission-free power generation and lower water consumption, the Kalina Cycle has a range of other benefits. The Heat Recovery Vapor Generators (HRVG) for the preheater and the clinker cooler exhaust gases are simple heat exchanger/boiler designs, without the

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need for steam drums. As a result, startup and shutdown is fast, and tube fouling caused by sticky dust deposits is minimal.

To ensure high performance, tube cleaning and dust removal systems are integral to HRVG design. As a result, start-up and shutdown is fast, and tube fouling caused by sticky dust deposits is minimal.

The optimum ammonia-water mix depends on the heat source and cooling temperature. If one or both of these temperatures change, the mix can be easily adjusted to optimize cycle efficiency and power production. In a production plant, seasonal optimization of power production can be accounted for simply by changing the concentration of working fluid. The HRVG’s once-through design means that boiler blowdown is not required to maintain the quality of working fluid. While a steam cycle power plant requires a water treatment system to provide a continuous supply of working fluid, the Kalina cycle system does not.

Used extensively in refrigeration plants and industrial processes, ammonia has a proven safety record backed with wellknown safety controls. In the HRVGs, the ammonia-water working fluid is heated directly by the cement plant exhaust gases. There is no need for an intermediate heat transfer loop as required by ORC systems, which improves the WHR plant performance and keeps costs down. Furthermore, ammonia is environmentally benign and does not contribute to ozone depletion or global warming like organic fluids. BMWeek Source: Reprinted from the FLSmidth website.

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We know the cement industry well. Let us guide you. For more information please contact us at inquiries@cwgrp.com or on +1-702-430-17 48 848 N. Rainbow Blvd., Box #1658, Las Vegas NV, 89107, USA

FOCUS

2011 Cement Person of the Year he India Cement & Construction Material’s global sister publication, the executive-oriented analytical journal CemWeek Magazine recently took a global look-back on the year and some of the leaders that helped shape the industry in its “2011 Person of the Year.” The selection process, based on input from industry professionals and colleagues, resulted in a list of leaders with diverse backgrounds but similar industry-changing achievements.

The magazine’s choice for the industry’s Person of the Year was Aliko Dangote, the Nigerian boss and creator of Dangote Cement, a company which he consolidated in 2011 into Africa’s largest cement maker. Aliko Dangote is a self-made entrepreneur who started in 1977 at the age of 20 with a commodities trading company.

The man called “the golden child of Nigerian business” is now worth about US$13.8 billion—wealth built on businesses that span across many sectors of the Nigerian economy.

The year was rewarding for Aliko Dangote and the many Indian senior executives and managers at the company. Dangote inte-

grated his cement investments across Africa and established his company as the largest entity on the Nigerian stock exchange, with a market value of US$10 billion. The cement maker plans to raise funds in a London share sale before the end of 2012, a US$3.9 billion investment, as it moves to more than double output to 50 million metric tons by 2013 from an estimated 20 million tons this year. Dangote is building eight new plants across Africa and constructing cement import terminals in five countries. With his strategic goal to build substantial new capacity in Africa’s growth economies, Aliko Dangote is voicing ambitions to become one of the leading cement producers in the world.

Runner-ups for the Person of the Year included India’s own Narayanaswami Srinivasan, managing director of India Cement, Markus Akermann, the retiring leader of Holcim, and Filaret Galchev, Russia-based Eurocement’s ambitious billionaire leader.

NARAYANASWAMI SRINIVASAN An industrialist from Chennai, Narayanaswami Srinivasan has been responsible for leading one of India’s Top 10 cement makers, India Cements, into the 21st century.

The company, founded in 1946 by Srinivasan’s father and grandfather, T. S. Narayanaswami and S. N. N. Sankaralinga Iyer, employs about 7,500 workers. Srinivasan

Person of the Year photos featured (left to right): Aliko Dangote, Filret Galchev, Narayanaswami Srinivasan, and Markus Akermann

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took over as Vice Chairman and Managing Director of India Cements in 1989. Under his supervision, the company had a successful 2011 despite the difficulties on the Indian cement market.

A chemical engineer by training, Srinivasan is a post graduate from the Illinois Institute of Technology in the United States. Srinivasan served as the President of the Madras Chamber of Commerce and Industry from 1996 to 1998 and is a member of the Executive Committee of Federation of Indian Chambers of Commerce and Industry (FICCI).

Besides cement, cricket is one of his passions. Srinivasan is the newly-appointed President of the Board of Control for Cricket in India and owns, through India Cements, the Chennai Super Kings cricket franchise. “When cricket doesn’t do well, cement does,” he has said, referring to India Cements’ 400 percent profit growth in the first quarter this fiscal year. stepping up during difficult times Srinivasan, along with family members, owns 25.32 percent of India Cements. During the summer of 2011, Srinivasan specifically has increased his stake to 0.14 percent from 0.05 percent, by paying Rs. 1.89 crore (US$365,000). The stake increase comes as India Cements’ stock has been under pressure, along with other South India cement makers, on deteriorating fundamentals and sluggish demand in South.

Srinivasan says cement companies have built capacities, generated employment, and helped the nation grow. According to Srinivasan, the cement sector receives a disproportionate share of blame for increases in overall construction costs. “I was selling cement at Rs 280 per kg two years ago and at Rs 290 now. Cement makes up only 12 percent of overall construction costs,” he said in a recent interview. He does not think cement demand will pick up in the short term. “I’ll be surprised to see if cement demand picks up in

the near term, but I’m not going to drop my prices,” he said. turnaround performance Srinivasan is leading the company through an increasingly difficult market. Despite the uncertain marketplace, India Cements began this fiscal year with a four-fold rise in net profit at Rs 102.03 crore in the first quarter, ending June 30, 2011. Moreover, the company further improved its performance in the second quarter, announcing in November 2011 that it had generated a net profit of Rs 69.71 crore in Q2 2011 against a loss of Rs 33.63 crore in the same quarter last year. Net sales for the period increased by 29.53 percent at Rs 1092 crore.

“It is a good performance considering the capacity overhang in the south (with 100 million tons), sluggish demand and cost increases,” Srinivasan said. “We expect the bottom line to be much better this year due to higher realization, though demand will be sluggish in the current quarter due to monsoon and recovery prospects in the last quarter.”

In a November press conference, Srinivasan stated that the company would focus on profitability rather than volume. During his more than two decades of leadership at India Cements, Srinivasan has proven his ability to adapt to a changing marketplace.

MARKUS AKERMANN Markus Akermann earned a degree in business economics at the University of St. Gallen in Switzerland in 1973 and studied economic and social sciences at the University of Sheffield in the United Kingdom. He began his professional career in 1975 with the former Swiss Banking Corporation. Then, in 1978, he joined Holcim, where he was active in a number of roles, including Area Manager for Latin America and Holcim Trading. Akermann has been a member of the Holcim Executive Committee since 1993 and CEO since 2002. Akermann has spent the last decade at the helm

of the cement giant, steering the company through turbulent times since the global crisis sparked in 2008. He intends to retire in early 2012.

FILARET GALCHEV Russian Filaret Galchev has led the charge to turn Eurocement into a regional power and one of the world’s Top 10 cement makers. Recently, he bought out partner Georgy Kransyansky to become sole owner of this international, vertically integrated manufacturer of cement and other construction materials.

In the 1990’s, Galchev created Russia’s largest coal-trading company. He went on to invest in cement and acquired the Stern Cement plants and cement facilities from Inteko. Today, Eurocement is the largest cement producer in Russia with 39 percent of the market. Galchev also owns a six percent stake in Swiss-rival Holcim.

A billionaire worth an estimated US $3.5 billion, Galchev holds a Bachelor of Science in Engineering from the Moscow Institute of Mining and holds dual GreekRussian citizenship. BMWeek CemWeek CW Group BMWeek BMWeek

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For a more in-depth look at each of the leaders profiled for Person of the Year, check out CemWeek Magazine, Issue 6 available on the CemWeek website.

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ement sector sales are estimated to have grown by 12 percent in December. However, Fitch Ratings remains negative on 2012 cement dispatch volume growth because of muted demand from real estate and infrastructure projects. India Cements is taking its expansion plans national, and ACC plans to boost its export sales.

Outlook: Negative for 2012 Fitch Ratings announced that they see Indian cement dispatch volume growth in 2012 to range between two to five percent on muted demand from real estate and infrastructure projects.

The industry’s downturn is due to a cyclical moderation in demand and structural overcapacity. The agency reports volumes had been relatively stable last year, with a slowdown in construction activity offset by government spending in infrastructure. However, rising interest rates have moderated the construction growth, while a weakening of government finances may adversely impact infrastructure spending this year.

Fitch estimates that most cement companies will experience pressure on margins in the medium term due to rising operating costs, which have not been passed on to customers because of the expected drop in demand. Fitch expects overcapacity in the sector to continue this year due to lower off take by the construction and real estate industries. The widening demand supply gap is expected to affect utilization levels of the cement companies.

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Finishing the Year The cement sector was estimated to have grown by 12 percent in December as strong sales from the country’s major cement players put the industry back on a growth trajectory. UltraTech’s sales increased by 10.5 percent and Holcim’s ACC increased dispatches by nine percent during the month.

The highest increase in sales was recorded

by Jaiprakash Associates whose sales grew by 29 percent, while Shree Cement posted

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growth of 17 percent. Demand is strongest in the southern, northern and central markets, and demand slightly lags behind in the eastern and western markets.

Demand was driven by the traditional year-end discounts given by the companies in an effort to produce better figures.

In December, prices went down to Rs 265 per bag from Rs 280. Cement makers say they are set to raise prices again as the tra-

Export Efforts Stepped Up ACC says it plans to step up exports to cash in on the record depreciation in the rupee and beat slowing demand in the local market. The company is looking to sell in the South Asian market until the domestic situation improves. Bharathi Cement has also started eyeing markets such as Sri Lanka, where it has exported close to 1,300 tons in the last two months, with plans to increase it closer to 10,000 tons.

Expansion Plans Confirmed India Cements announced plans to become a national level player by 2013. The company is a regional cement player concentrating in the country’s southern region with a 28 percent market share. India Cements has set up operations in Maharashtra with a one million ton grinding unit and is building a 1.5 million ton composite cement plant in Rajasthan. The company has also received limestone mining leases that will help it in its expansion plans.

The company hopes to increase its production this year to 10.9 million tons from 9.9 million tons in 2011.

Plant Closures Demanded Meghalaya’s opposition Nationalist Congress Party (NCP) demanded the state government issue immediate closure notices to all cement plants operating in the Jaintia Hills district in violation of the Forest Conservation Act of 1980. The demand came after a high-level committee unearthed a “massive mining scam” in the area where the state government gave a single window clearance to cement companies to operate in thick-forested areas. The opposition also demanded immediate action against officials allegedly involved in the scam.

Excess Allowance India Cements has been accused of getting preferential treatment for its cement plant in Jagati.

The charge states that the cement maker secured excess water concessions in exchange for the investment. The order envisaged that no more than six million cubic feet of water from the catchment of river Kagna, which passes between AP and Karnataka, shall be used by the industry; however, the company got up to 13 million cubic feet.

Public prosecutor of CBI Balla Ravindranath told the court that Vijay Sai Reddy was behind the deal with India Cements for an investment of Rs 140 crore into Jagati endeavors. The argument was advanced by the Central Bureau of Investigation (CBI) while seeking a 13-day custody hold of Jagan’s financial advisor, V. Vijay Sai Reddy who was arrested in January.

New Cement Hub Balodabazar is reportedly set to become India’s cement hub as more companies set up shop in Chhattisgarh. Seven cement plants, of which four include the major groups like Lafarge, Ambuja, Grasim and Ultra-Tech, are currently located in Balodabazar.

CEMENT: MARKET AND COMPETITION

ditional peak period for building activity approaches in the summer.

The total production capacity of cement in the state is 13.8 million tons. Companies are planning expansion of the capacity, while many other prominent groups are also investing in the area’s cement sector. Cement makers plan to add over 100 million tons per annum of capacity, which would account for 51 percent of India’s current cement manufacturing capacity. BMWeek BMWeek BMWeek

focus Limestone Extraction Birla secured a court ruling to extract 70,000 tons of limestone from its Chanderia unit in Rajahstan. The ruling allows the company to remove 70,000 tons of already excavated limestone but also directed the Indian Bureau of Mines to conduct inspection and various tests with regard to mining activities and their effect on the Chittorgarh Fort and to submit a report. Birla Corporation had suspended limestone mining at Chittorgarh following the court’s order on August 27, 2011. The Rajasthan High Court had ordered that mining stop within 10 km of the Chittorgarh Fort.

OCL India to reduce limestone use OCL India has informed BSE that the company has received a letter from the office of the Deputy Director of Mines, Rourkela Circle, Rourkela (Odisha) requiring OCL to limit its production of limestone at its Lanjiberna Limestone and Dolomite Mines to 1.7 mtpy—that is, until the extension of TWP or approval under the Forest Act of 1980 is obtained—instead of the enhanced production limit of 4.2

mtpy for which the government has already accorded environmental clearance.

In view of the fact that the company has already exhausted the 1.7 mtpy limit of limestone production at that mine, the two kilns at Rajgangpur have been stopped temporarily until receipt of further clearance.

India’s ACC seeking coal blocks to secure coal supplies ACC is now developing coal blocks through joint ventures with state governments in India as it tries to secure supplies to power its plants. According to the company’s CEO, coal will remain the dominant fuel to run its plants, but the company is also focused on developing alternative sources of energy, such as biological and industrial waste to supplement energy from its coal-based power plants.

A recent supply crunch with India’s largest coal producer, Coal India, had affected production of steel and cement factories along with power plants.

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cement volume and pricing

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olume and pricing

ement production and dispatches were 20.96 million tons and 20.95 million tons respectively for calendar year 2011, compared to the previous year’s 20.12 million tons and 20.12 million tons. The Cement Planning Commission Working Group is projecting even stronger growth for the next five years, as capacity is projected to hit 479 million tons by 2017. This may not be welcome news, however, as overcapacity and sluggish demand have currently led to higher inventories for cement makers.

Capacity to Grow Despite the current cement oversupply, Indian cement production is expected to continue its growth. The sector’s Planning Commission Working Group projects the country’s capacity will hit 479 million tons by 2017 and that demand, production and the installed capacity of cement will grow ten to 11.75 percent during the five-year period.

The country’s capacity expansion calls for significant investments not only to build the cement plants but also to support its infrastructure, like power plants and coal supply centers. The country’s cement manufacturing capacity reached 323 million tons last year, surpassing the government’s target of 298 million tons.

Thus far, the growth in demand has not matched the growth in capacity, which grew 4.9 percent last year and is expected to drop to three percent this year. This has raised fears of a glut in the market leading to dropping margins and under-utilization among cement companies.

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Demand is set to grow despite the continued cost and regulatory pressures experienced by the real estate and infrastructure sectors. The growth in demand is expected to be dampened next year, with the utilization rate pegged at 73 percent. The lackluster cement industry performance is seen to continue until 2013, as the industry deals with a slowdown in the Indian economy.

The industry has largely been unaffected by the slowdown this year, with companies reporting generally positive results.

Increases in December ACC’s sales rose nine percent to 2.09 million tons in December 2011. This is compared with 1.92 million tons in the earlier year’s period. Production in the month rose to 2.03 million tons from 1.91 million in December 2010. On a cumulative basis, total sales rose to 23.68 million tons in 2011 from 21.17 million a year earlier, while production in the year increased from 21.21 to 23.66 million tons in 2010.

Ambuja Cements reports both its production and sales increased in December.

December production rose 7.3 percent to 1.91 million tons from 1.78 million tons for December 2010. Meanwhile, sales were at 1.93 million tons (compared with 1.82 million tons the previous December), registering an increase of 6.04 percent. For January to December 2011, cement production and dispatches were 20.96 million tons and 20.95 million tons respectively, compared with 20.12 million tons and 20.12 million tons respectively in the corresponding period last year.

Discounts Offered Several Indian cement makers began offering discounts in December in an attempt to reach their respective sales targets. Cement prices previously reached an all-time high of Rs 280 for a 50-kg bag in November.

CEMENT: volume & pricing

Demand to Rise Indian cement demand is expected to grow by 4.5 percent next year, which is slightly higher than the 4.4 percent growth rate this year.

focus Himachal Cement Price Drop

Three major cement manufacturers reduced their prices in the state of Himachal.

Prices in the state were reduced by Rs 25 per bag by Ambuja, ACC and Jaypee. The state government has praised the move, suggesting it would relieve pressure from the end consumers. The state government had earlier called for a meeting with the companies in an effort to rationalize the cement prices. Local lawmakers complained that cement prices in the area were higher than nearby states.

The Indian cement sector has been deregulated by the government, which has caused increased volatility in cement prices. The average cost of a bag of cement in the state was Rs 158. Four cement companies operate in the state: Barmana (ACC), Darlaghat (Ambuja), Rajban (CCI) and Bagha (Jaypee).

Century Cement Blocked

Members of the ruling Bharatiya Janata Party (BJP), as well as the opposition Congress and 500 locals stopped staff from going to work at the cement plant in the Tilda area of Raipur. The protesters also did not allow company officials to transport cement bags out of the factory.

Since then, prices have dropped to Rs 270 a bag. Analysts say the drop in prices can be attributed to the strategy of offering discounts towards the end of the year.

ACC, Ambuja and Lafarge were selling cement in the wholesale market at Rs 295, while UltraTech was selling at about Rs 10 less than other players. The northern and eastern markets took a price cut of around Rs 20.

Prices were expected to rebound by midJanuary as cement manufacturers resumed regular pricing. Another factor that helped lower cement prices was the cold weather, which forced construction activity to slow.

Stockpiles on the Rise Overcapacity and sluggish demand has led

Calling the situation “alarming,” Raipur District Superintendent of Police Dipanshu Kabra said the police presence has been beefed up at the protest site.

BJP legislator Devjibhai Patel, who is organizing the blockade along with Congress leader Vidhan Mishra, told IANS that they would organize the economic blockade one by one at the plants of all the seven leading cement manufactures, including Lafarge India, Ambuja Cement, Grasim and UltraTech Cement.

“All the cement manufacturers in India’s leading cement producing state of Chhattisgarh will have to face a strong economic blockade because they have formed a cartel and have been consistently raising prices, though there is no rise in raw materials and labor cost,” Patel said.

He said a cement bag, which cost Rs 190 in September, was now priced at Rs 280. Patel said the blockade would be lifted only after the companies agree in writing to dissolve the cartel and reduce their cement prices.

to higher inventories for cement makers.

The installed cement capacity in the country crossed the 300 million tons, and the industry added another 19.6 million tons of capacity in 2011 on top of the 35.6 million tons in 2010.

According to one report, although the year started off with strong demand, it moderated with fresh capacity going on stream, especially in the southern region which saw the maximum addition.

Cement sales in the June and September quarters took a hit due to the extended monsoon period. The sharp rise in raw material prices and logistic costs hit the profit margins of cement companies. BMWeek

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cement people

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olcim gets a new Area Manager, and the board of Shree Digvijay Cement appoints a new Managing Director. New CMA leaders take the helm.

New CMA Leadership Chettinad Cement’s current Managing Director, M A M R Muthiah has become the president of the Cement Manufacturers’ Association (CMA) and O P Puranmalka, a full-time Director of Ultratech Cement, is the CMA’s new vice-president.

The CMA acts as a bridge between the country’s cement industry and the government. Its primary function is to promote cement sector growth in India through a variety of methods.

Holcim Area Manager Onne van der Weijde, CEO of Indiabased Ambuja Cements, was appointed Area Manager and a member of the senior management of Holcim effective January 1, 2012. He remains CEO of Ambuja Cements and reports directly to Executive Committee member Paul Hugentobler, who is responsible for South Asia /ASEAN excluding the Philippines.

Onne van der Weijde is a Dutch citizen.

He holds a Bachelor’s Degree in Economics and Accounting from the University of Rotterdam and an MBA from the University of Bradford. In 1990, he started his career in the Dutch subsidiary Holderfin as an international tax consultant.

34 JANUARY/FEBRUARY 2012

focus FLSmidth appoints new Group Chief Financial Officer Poul Erik Tofte, Group Chief Financial Officer (CFO) of FLSmidth since 2003, has decided to seek new challenges outside FLSmidth and will resign at the end of March 2012. Ben Guren will be appointed new Group Chief Financial Officer (CFO) of FLSmidth and a member of the Group’s Executive Management. He is expected to take up his new position no later than 1 July 2012.

He was responsible for business development and acquisitions in Australia and was CFO at Holcim Indonesia from 2001 to 2005. In 2005, he was appointed General Manager of Holcim India, and in 2006 he also assumed the CFO function at ACC until October 2008. Since November 2009, Onne van der Weijde has been CEO of Ambuja Cements.

Ben Guren, age 51, is a Norwegian citizen and since 2007 has been Group Vice President of Finance, IT and Legal at the Jotun Group, Norway. From 2006 to 2007, Ben Guren was acting Chief Financial Officer (CFO) for Helly Hansen Group, Norway, and from 1989 to 2006 he was a partner in KPMG, Norway. Ben Guren is a state-authorized public accountant and a graduate from the Norwegian School of Economics and Business Administration in Bergen.

Mukherjee Named, MD The board of Shree Digvijay Cement on 19 December 2011 appointed Suman Mukherjee as Managing Director of the Indian cement company effective 20 December 2011 for a period of three years. BMWeek CemWeek

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UPDATE CemWeek discusses the global cement sector in Jordan

Outlook for Arab World’s Cement Market Positive

Cemweek’s Anthony Fitzgerald talks with engineer Ahmad Al-Rousan, Secretary General of AUCBM

he Arab Union Cement and Building Materials (AUCBM) conference was held in Amman, Jordan in November 2011. At the event, the Secretary General of AUCBM Ahmad Al-Rousan shared his insights with the CW Group on the political upheaval in the region and its effect on the Arab world’s cement industry. Despite the unrest witnessed throughout the region, Al-Rousan’s overall outlook for the sector was optimistic.

According to Al-Rousan, in Morocco and Algeria the growth of cement consumption is excellent, with several new projects under either construction or discussion.

Algeria’s decision to open its cement industry has led to over a third of plants having private sector and foreign involvement, thus contributing to healthy and transparent competition. Morocco, following a similar path, is enjoying comparable benefits.

a return to growth in the future. For Jordan, with consumption sitting around five million tons annually but with an 11 million ton capacity, exportation to Iraq when reconstruction efforts get underway will provide a great opportunity for growth.

In Tunisia, at least two major projects are under way, and a large boost to the country’s cement export market is expected when Libya begins reconstruction. Once the Libyan government is fully established, significant growth is anticipated.

Mr. Al-Rousan acknowledges that the unrest throughout the region has undoubtedly affected cement consumption, but the basic housing and infrastructure needs of a large and fast growing population remain.

Therefore, the Arab world’s cement industry will likely continue to thrive and grow under whatever governments emerge. BMWeek

While growth in Egypt was flat, plans for 12 new cement plants offers optimism for

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almia reportedly secures a stake in Calcom Cement. Aditya Birla mulls over a purchase of Lafarge’s South African Lichtenburg Cement Works, and JP Associates is looking for a partner for its cement business. Many Indian cement manufacturers may see a rise in profits as a result of stabilizing cement prices and a drop in cost pressures.

New Owner Dalmia Cement reportedly secured a 50 percent stake in Calcom Cement for Rs 238 crore. Calcom Cement is a privatelyheld company, which is expanding its consolidated cement manufacturing capacity to 2.1 mtpy. Assam Industrial Development Corporation (AIDC) is believed to be holding a little over a ten percent stake in the company. Apart from this, Calcom also has some foreign investors. The investment is expected to be made through a combination of new issuances and acquisitions and subject to various defined terms and conditions.

South Africa expansion?

Lafarge, the world’s biggest cement maker, is seeking a buyer for its cement operations in South Africa in order to reduce its debt.

Lichtenburg Cement Works is the largest, and one of the most technically advanced, cement production facilities in the country.

Aditya Birla may be one of the potential suitors for Lafarge’s South Africa unit, in a deal that could be worth between US$800 and $900 million. Birla confirmed it was conducting an initial assessment for a possible bid of the unit. Birla is currently

36 JANUARY/FEBRUARY 2012

looking at making several overseas acquisitions as it looks to expand.

Unsure Valuation GP Goenka is unsure about the future of his stake in cement maker Andhra Cements after selling a stake to Jaypee Cements.

Jaypee Group had acquired a controlling stake in GP Goenka Group’s Andhra Cements in November. It was the second transaction between the two groups in the last 18 months.

The deal involved Jaypee Development Corporation, a privately held arm of the group, acquiring 66.7 percent in Andhra Cements for Rs 234.7 crore. The Rs 177 crore will be used for fresh equity infusion, and the remaining will be used to buy a part of the stake currently held by the GP Goenka Group.

Strategic Partner Sought JP Associates is looking for a strategic partner for its cement business. This comes after the company board’s decision to hive-off the Andhra Pradesh and Gujarat plants in an attempt to reduce the debt on the books of the parent company. The company is reportedly in talks with private

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equities and foreign cement companies for investment. The company defines the strategic sales as anywhere from a 25 to 50 percent stake.

Better Performance India Cements expects to post a better than expected performance in the December quarter. Stable cement prices and volumes should boost revenues for the December quarter by around eight to ten percent. The anticipated drop in cost pressures could improve margins. This is good news for the company, as it had registered a decline in profitability in the recent past.

Cement prices, which normally take a beating, particularly in the south, during this period due to rains and low construction activity, have been stable since April.

Production discipline by southern manufacturers has helped sustain pricing amid volatility in most other regions on sluggish demand and an aggressive sales push by manufacturers.

ACC also reported a robust third quarter profit, driven by increased margins as the price situation improved. The company reported an 84.6 percent year-over year

CEMENT: m&A and finance

(y-o-y) growth in its consolidated net profit for the third quarter of CY11, and also offset high input costs like coal.

ACC’s consolidated operating profit margin improved 130 basis points y-o-y to 13.3 percent in the September 2011 quarter, while net sales grew 31.5 percent to Rs 2,382.8 crore. Its cement realizations improved nearly 11 percent y-o-y on a per ton basis, and helped to offset higher input costs. This resulted in ACC’s consolidated net profit improvement of 84.6 percent y-o-y, boosted partly by the previous year’s low-base effect.

Double Turnover The Vicat Group’s India unit plans to double its turnover to Rs 2,000 crore by 2013.

That year, its plant at Gulbarga in Karnataka will go on line. The capacity will double by 2016 to 10.5 million tons and will allow it to boost sales.

The upcoming two units at Gulbarga will have a combined capacity of 5.5 million tons, with the 2.75 million ton line operational by the second half of 2012. Bharathi, which at present enjoys three percent market share, aims to raise it to four percent next year and to six percent the year after.

Burned by Higher Prices Higher coal prices have been hitting small and mid-cap Indian cement mak-

ers such as Saurashtra Cement, Barak Valley Cements and Sanghi Industries, driving their stock prices lower. Cement firms are facing imported coal prices at elevated levels despite a recent easing in their global prices, as well as a weakened rupee.

focus

Improving Margins The profits of India based cement makers may be on the rise, as prices have continued to climb. Across regions, prices have risen by Rs 30 to 40 per bag sequentially. Thanks to the rising demand, utiliza-

Ambuja Cement Founders Exit

The founders of Ambuja Cements have exited the company. According to a report, Narottam Sekhsaria and Suresh Kumar Neotia left the company by selling their stake of 0.79 percent to Holderind Investment, a unit of Holcim. Currently, Holcim is the majority owner of the company. After the transaction, Holderind’s ownership of the company will increase to 40.53 percent.

Collectively, Holcim owns a 50.35 percent stake. Other investors of the company also include the Life Insurance Corporation (9.23%), Genesis India Investment Company (4.44%), and Aberdeen Asset Managers (3.07%).

Prism Cement Acquires Stake in Small Tiles Prism Cement has secured a 50 percent

tion levels of most companies jumped in November as cement consumption touched 17.5 million tons.

According to a recent report, consumption is estimated at 54 million tons in the third quarter, eight percent higher. Volumes are expected to rise four percent to 10.3 million tons, while domestic profits are expected to grow 19 percent annually (Rs 640 per ton) to Rs 3,987. BMWeek CemWeek BMWeek BMWeek

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stake in a joint venture that will supply floor tiles to its parent company, H&R Johnson.

Tile manufacturing would primarily be focused in the northern, central, and eastern regions of India and the overseas market.

“We are very happy and look forward to this new association. Joint ventures have played an instrumental role in our growth, and we already have four tile joint ventures running successfully over the past few years. This would be the fifth tile joint venture, and Small Tiles will now be supplying glazed floor tiles to us. Floor tiles have been growing at a healthy rate in India, and this joint venture would enable us to cater to the growing demand,” Managing Director Vijay Aggarwal said.

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cement projects and expansions 5

p

1 rojects and expansions

K Cement undertakes an ambitious plan to double output to 17 million tons by 2017 from the current 7.5 million. Dalmia Cement will start expansion activities in Karnataka and Meghalaya soon, setting up two plants in Belgaum and Gulbarga, and JK Cement expands abroad to the UAE. Expanding Sector A recently released report of the Indian cement sector by the CW Group indicates that total cement capacity reached, and likely exceeded, 310 million tons by mid-2011. Across the country, there were over 190 functioning production units, about three quarters of which were integrated cement production units. Global cement major Holcim, through its ACC and Ambuja units, was the market leader in terms of combined production capacity, representing 18 percent of the supplyside. The single largest operating company is Grasim’s UltraTech, which controls 16 percent of India’s cement manufacturing capacity.

Most of the cement groups in India tend to have a regional footprint, witth only Holcim and Grasim operating in four regions out of five. With over 60 cement companies operating in the country, the market remains fairly fragmented, though shaped mostly by the larger groups.

The northern and southern regions in India remain dominant in terms of production capacity, representing in excess of 85 percent of the market together. The oth-

38 JANUARY/FEBRUARY 2012

er regions trail in terms of capacity, with the western region coming in third place.

At the state-level, Andhra Pradesh is the largest home to cement production capacity, followed by Rajasthan at about twothirds the capacity.

JK Gears Up JK Cement rolled out its ambitious expansion plans, but potentially faces numerous challenges. The company seeks to double output to 17 million tons by 2017 from

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the current 7.5 million tons. To do this, it plans to invest 5,000 crore, mostly financed through loans.

Chief among the company’s problems are the current glut in the market and costlier inputs such as coal. The company is also expected to encounter difficulties in financing its expansion. It faces a looming debt problem, with its debt currently at 1,300 crore.

COMPANY/LOCATION Ultratech Cement/ West Bengal

Reliance Cement/ Bengal

COMMENTS Ultratech plans to expand capacity by building a new unit in West Bengal capable of producing 2 mm tons per year. The unit has received the clearance from the West Bengal Pollution Control Board. The plant would have capacities of 6,000 tpd of Portland Pozzolona cement. The plant will not be manufacturing clinker at the site, as clinker will be brought from other manufacturing facilities.

Reliance Cement is looking to build a 3 mm ton plant in Bengal. The company plans to invest Rs 500 crore in the project. The Bengal unit would be the third plant for Reliance Cement as it embarks on a capacity expansion plan to take production to 50 mm tons per annum.

Table available in the India Cement & Construction Materials journal Print Edition

Dalmia Cement/ Karnataka and Meghalaya

Dalmia Cement will start expansion activities in Karnataka and Meghalaya soon. It will set up two plants in Belgaum and Gulbarga. This will have an initial capacity of about 2.5 mtpy for cement plants.

JK Cement/ Karnataka

The company seeks to double output to 17 million tons by 2017 from the current 7.5 million tons. To do this, JK Cement plans to invest 5,000 crore, mostly financed through loans. The company is hoping to build a 300 crore 3 mm ton cement plant in Karnataka.

JK Lakshmi/Haryana

Shree Cement/ Rajasthan

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Lakshmi Cement announced plans to increase its cement production to ten million tons next year. To achieve its target, the company is working on several projects to boost capacity. Among these is a soon to be operational grinding unit in Haryana which has a capacity of 500,000 tons. The company also has a greenfield project in Durg which will allow it to meet its target by the end of the year.

Shree Cement has placed equipment orders of nearly Rs 700 crore for its kiln unit in Rajasthan. The company has placed the order with Cologne-based KHD Humboldt for a 4500 tpd or 1.5 mtpy plant kiln unit.

Dalmia Expands Dalmia Cement will start expansion activities in Karnataka and Meghalaya soon.

According to a recent report, it will set up two plants in Belgaum and Gulbarga. This will have an initial capacity of about 2.5 mtpy for the cement plants.

Dalmia Cement operates a cement production capacity of about nine million tons a year, with two plants in Tamil Nadu—four million tons in Dalmiapuram and 2.5 million tons in Ariyalur—and 2.5 million tons in Kadapa, Andhra Pradesh.

The management, however, has expressed confidence in being able to meet its goals, suggesting that while the market is currently down, it expects it to pick up by 2013 or 2014. The company hopes to build a 300 crore, three million ton cement plant in Karnataka. The plant is expected to help the company cope with the increased demand it sees in a couple of years.

According to a company spokesperson, UltraTech was planning to make investments to enhance its cement manufacturing capacity, and it was exploring both organic and inorganic growth to further strengthen their leadership position.

J.K. Cement Expands in the UAE J.K. Cement is building a new cement factory in Fujairah. The plant will have a 600,000 ton capacity to produce white

CEMENT: projects and expansions

Cement Projects/Expansion Table

focus Ministry Rescinds Nirma Cement Environmental Permit

The Ministry of Environment and Forests cancelled its permit for a Nirma cement plant which was to have been built in Mahuva in the Bhavnagar district. The decision came after the Experts Appraisal Committee concluded that the proposed site for the factory consists of a body of water and a wetland. It had further said that construction of a cement plant there could affect the region’s economy.

JK Lakshmi Eyes Expansion

JK Lakshmi Cement has announced plans to invest more money to expand capacity and install new plants. The company plans to invest 20 billion rupees this year, beginning April 1, and to expand its annual production capacity to between eight and nine million metric tons by the end of the next fiscal year. The company’s current capacity is 4.8 million tons, which is likely to rise to 5.3 million tons by March 31.

The company is setting up a new cement plant in central India, which would likely start operations by October or November 2013. The company also plans to set up facilities to make ready-mix concrete.

cement but will have the option to change its operation to produce up to one million tons of grey cement annually. The factory, to be commissioned in 2013, represents an investment of Dh 550 million on the part of J.K. Cement in the ongoing growth of the Gulf Cooperation Council (GCC) region.

Saudi Arabia, Qatar and Abu Dhabi are projected to undertake massive infrastructure spending plans starting in 2012. In Qatar, more than US$106 billion worth of major projects are expected to be awarded between now and 2022, stimulating strong demand in the construction sector.

In Saudi Arabia, an estimated US$108.15 billion worth of construction will be undertaken. BMWeek CemWeek CW Group Coal Week

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cement equipment

C

ement equipment

hyssenKrupp Polysius contracted to build a 10,000 tpd clinker production line, including two raw grinding systems, for Reliance Cementation. Dust Control Technology introduces new dust suppression device specifically for use at conveyor discharge points.

Dust Suppression Ring for Conveyor Discharge Points An innovative new dust suppression device has been introduced specifically for use at conveyor discharge points, designed to create a virtual curtain around the material flow for outstanding particle containment.

The DustBoss DB-RTM Ring from Dust Control Technology (DCT) is engineered for industrial strength and longevity, built with a high-quality stainless steel ring outfitted with a network of atomizing nozzles that deliver millions of 50 to 200 micron droplets per minute. By surrounding the discharge flow on all sides, the DustBoss Ring provides simple, focused dust management that’s well suited to continuous duty, such as radial stackers.

“This design was first developed for a coal application,” explained DCT CEO Edwin Peterson. “The momentum created while discharging dry coal was propelling large amounts of dust into the air, and the customer was looking for a way to specifically address the material as it came off the conveyor. The solution was simple but effective, and we’re finding that it’s well suited to conveyor discharge of sand, aggregates, biomass or other traditionally dusty materials,” he said.

40 JANUARY/FEBRUARY 2012

The DustBoss DB-R is available in five standard sizes, from 17” (43.2 cm) to 100” (254 cm) in diameter. All five can be customized with DCT’s Variable Particle Sizing technology, allowing customers to specify different droplet size ranges to match specific materials.

“The greatest chance of a collision between a dust particle and a droplet is present when the droplet and dust are roughly the same size, avoiding the slipstream effect,” Peterson reminded. “If we can increase the chances of collision with a given parti-

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cle size, we improve the effectiveness of the suppression.”

Designed without any moving parts, the intrinsically safe DB-R is intended for elevated mounting. It requires no electrical power or compressed air. The water supply hose is connected directly to male pipe threads on the ring: ¾" NPT for the 17" model, and 1" NPT for the three intermediate sizes: 22.5" (57.2 cm), 25.5" (64.8 cm) and 42" (106.7 cm). For large applications, the company also offers the 100" diameter model, which is supplied by a 1.5" NPT hose.

CEMENT: cement equipment

10,000 tpd Clinker Production Line Reliance Cementation has contracted ThyssenKrupp Polysius to engineer and supply a 10,000 tpd clinker production line. The new plant is to be constructed in Maihar in the province of Satna, which is part of the northern Indian state of Madhya Pradesh.

The scope of supply includes two raw grinding systems, each equipped with a Polycom high-pressure grinding roll with 2 x 1,250 kw drives and a Sepol-PC separator. The grinding systems will have a rated output of 375 tph and 400 tph of raw meal.

This plant section also includes a 25,000ton tangential blending silo.

The kiln system will consist of a 6-stage, 2-string Dopol preheater with PrepolMSC calcining system, the rotary kiln and a Polytrack clinker cooler.

Courtesy of Polysius

Siwertell Shiploader Keeps Cement Handling Clean Cargotec has won an order to supply Adelaide Brighton Cement with a Siwertell SSL 700 screw-type shiploader. A leading supplier of cement, lime and pre-packaged dry blended products into the South Australian market, and an exporter of cement to Victoria and clinker to Queenland, Adelaide Brighton Cement specifically requested the Siwertell unit for its environmental credentials.

“Our enclosed Siwertell system ensures minimal environmental impact for the owner,” says Bertil Andersson, Sales Manager, Bulk Termi-

nals. “And it has the advantage of being able to handle both cement and clinker. Also, we are able to minimize the company’s disruption and modernization costs by integrating our loading arm system into the customer’s existing loader structure, as well as integrating our control and power systems with the existing ones. The old arm system will be removed.”

The new Siwertell unit will be located at Adelaide Brighton Cement Birkenhead Plant in the Port of Adelaide, South Australia. It will have a rated capacity of 900 tph for cement and 600 tph for clinker.

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regional news

akistani cement manufacturers are expecting healthy margins this year, but have to contend with lower exports by sea and allegations of cartelisation. HeidelbergCement inaugurates a new cement mill in Bangladesh, and Pakistan’s Thatta Cement receives approval to build a cement unit on an industrial zone next to Hambantota port in Sri Lanka. Nepal is set to commission two new cement units in Dudhrash and Gogli of Dang, while Bhutan’s Dugnsam Cement extends the deadline on construction of its new factory due to a labor shortage.

Pakistan Pakistani cement manufacturers are bullish on the industry’s prospects this year. The country’s cement manufacturers expect to enjoy healthy margins. In the first half of the 2012 fiscal year, the country sold 15.4 million tons of cement up four percent.

Meanwhile, exports by sea fell by 22.73 percent, according to the All Pakistan Cement Manufacturers Association (APCMA). Exports fell mainly because of an increase in freight charges, following a 16 percent increase in domestic diesel prices during this period.

The country’s cement prices have been relatively stable despite an oversupply in the market of 12.8 million tons. A key factor in supporting cement prices is the declining cost of coal, which has brought down cement manufacturers’ energy prices.

Exports to India and Afghanistan, the two major markets for Pakistani cement, rose 62.64 percent and 10.35 percent, respectively. An official for the cement industry noted an over 4 percent decline in overall cement exports in the first half of the fiscal year due to a sharp increase in the local freight cost.

In southern Pakistan, cement manufacturers announced that they would be increasing their prices between Rs 50 and 100.

Thatta Cement and Al-Abbas Cement announced an Rs 100 per ton increase in cement prices to Rs 7,100 per ton. Additionally, Lucky Cement and Attock Cement increased their cement prices by Rs 50 per ton to Rs 7,550 and Rs 7,650, respectively.

42 JANUARY/FEBRUARY 2012

The decline of cement exports by sea was seen because northern cement manufacturers failed to cope with the rising freight charges. Increases in freight charges after a diesel price hike of Rs 13 per liter made them uncompetitive in Middle East markets, which are now being captured by Saudi Arabian and Iranian manufacturers.

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Southern cement manufacturers are still managing to compete with Saudi Arabian and Iranian manufacturers, while northern-based units are depending only on Indian and Afghan markets to sustain their exports. The total exports to Afghanistan during the first six months rose to 2,501,165 metric tons from 2,266,496 tons.

Exports to India surged to 350,059 tons from 215,235 tons.

Declining cement exports have also brought Pakistan’s cement capacity utilization rates to their lowest levels in a decade. The industry’s utilization rates were at 69.67 percent in the first two quarters of 2011-12 ending December 31, 2011.

In early January, a team from the Competition Commission of Pakistan conducted a raid on the offices of the All Pakistan Cement Manufacturers Association (APCMA) and Kohat Cement, looking for evidence of price fixing. Unfortunately, the

team found that the APCMA secretary was not present in the office and the records locked away.

The raid comes after the CCP was tipped off that the association`s secretary was allegedly involved in making correspondence with the cement manufacturers to control and monitor the supply of cement in the open market to avoid competition.

The contents of the emails provided by the informant to the CCP revealed that the cement manufacturers had prima facie collectively devised a vigilance plan by which the cement dispatches at one cement production unit were used to be monitored by a team of another unit and vice versa.

Bangladesh HeidelbergCement officially inaugurated a new cement mill at its plant in the seaport city of Chittagong in early January. The ball mill has a grinding capacity of roughly 800,000 tons and cost approximately US $16 million.

HeidelbergCement has been active in Bangladesh since 1998 and is one of the largest German investors in the country. The group operates cement-grinding plants in the two most important markets of the country, one in the capital city of Dhaka and the other in the second largest city Chittagong with 4 million inhabitants.

Sri Lanka Sri Lanka has approved the construction of a US $15.6 million cement plant by Pakistan’s Thatta Cement on an industrial zone next to Hambantota port. The factory is expected to be operational in the next 6 to 18 months.

Sri Lankan cement producer Tokyo Cement, the larger of only two local cement manufacturers, will continue its revenue growth over the short to medium term, according to ratings agency RAM. This is the result of a positive outlook for the construction industry, which is the cement industry’s biggest customer, and follows economic growth, as well as the company’s continued on page

Loesche to Deliver Cement Mill in Indonesia In conjunction with placing an order for an LM46.2+2 C/S vertical mill from Loesche by PT, the company is to deliver virtually all equipment, from the automotive engineering to the software engineering and visualisation.

The medium voltage switching system and main drives will also be supplied, as will the MCCs and low voltage main distribution. The order covers the necessary I/O cabinets and the instrumentation and process control circuits based on Loesche Automation Basic and Detail Engineering.

The software engineering is specially tailored to the requirements of the plant using Loesche solutions.

In order to ensure all the processes run smoothly, Loesche Automation will also be responsible for project management, commissioning and monitoring. At the same time, Loesche Automation also will carry out training services.

The components are due to be delivered by the end of May 2012, and commissioning is scheduled for March 2013.

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CONSTRUCTION materials

I

nfrastructure & projects

ndia’s roadways undergo a major face-lift with the assistance of foreign investors, while the government clears the way for the construction of industrial parks in several major states. Housing is also at the forefront as Mumbai-based Hiranandani Upscale and New Delhi-based Arbatec each expand into other major city markets.

NEW PROJECTS Water Transmission Pipeline The Hindustan Construction Company (HCC) won a water transmission project worth 289 crores in Gujarat. The company recently received approval from the government’s Gujarat Water Infrastructure.

The project will involve construction of a 57 km long water transmission pipeline between the Dhanki and Maliya villages.

The project is part of the ‘Swarnim Gujarat Saurashtra-Kutch Water Grid Programme (NC-31)’ and is expected to be completed in 12 months.

Supreme Infra Wins Three Projects Gurgaon-based Supreme Infra has won three construction projects worth 1,248 crore. The Jaipur Development Authority and the Punjab Infrastructure Development Board awarded the infrastructure firm two BOT projects worth 1,138 crores and construction of a hospital in Mumbai worth 110 crores.

New Water, Railway Projects KEC International, a flagship company of the RPG Group, won new orders worth 147 crores in water and railways. The com-

44 JANUARY/FEBRUARY 2012

pany secured three new orders for the construction of canals for irrigation projects worth 98 crores in Madhya Pradesh and Gujarat. In its railway business, the global infrastructure engineering, procurement and construction (EPC) major secured an order for the supply of railway tools, track materials and signaling equipment worth 49 crores.

Ramky Bags Two New NHDP Projects Hyderabad-based Ramky Infrastructure bagged two major orders worth 2,240 crores under the National Highways Development Project (NHDP), which involves six-laning of the Agra-Etawah bypass section of NH-2 under NHDP Phase V in Uttar Pradesh. The second

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order is the four-laning of the Hospet-Chitradurga section of NH-13 in Karnataka under NHDP phase III. The estimated cost of the second project is 1,033.65 crores.

Both projects will be executed by Ramky Infrastructure as a Design, Build, Finance, Operate, and Transfer (DBFOT) under the Build Operate Transfer (BOT) scheme.

MBL Infra to Construct Highway Kolkata-based MBL Infra has bagged a highways project for the Developing and Operation of the Bikaner – Suratgarh Section of NH0-15 in Rajasthan. The project, worth 500 crores, was awarded to the firm by the Rajasthan government and involves two-laning with a paved shoulder of Bikaner-Suratgarh Section of NH-15. The

Gov’t Plans to Build 11 Tunnels The central government is planning to build 11 tunnels on the Pakistan and China borders. The cost for constructing these tunnels is not yet disclosed. The government is planning to build two more tunnels in Uttarakhand to enhance the connectivity in the hilly state. The Border Road Organization (BRO) is going to construct these all-weather tunnels in the strategically important road stretches close to the Pakistan and China borders. Once completed, the tunnels will help rapid mobilization of troops and equipment and will provide better connectivity to local residents.

MoUs Signed at AP Summit The three-day CII Partnership Summit 2012 in Andhra Pradesh saw many MoUs signed in the construction sector. One important MoU worth noting was that of the GMR Group, which showed the company’s interest in setting up a 15 million ton refinery-cum-petrochemicals complex and a Special Economic Zone (SEZ) worth 33,000 crores in the Vizag-Kakinada region. Apart from this, the BR Shetty Group has expressed its interest in constructing a refinery project in Visakhapatnam worth 30,000 crores, whereas Yash Birla Group signed a MoU that involves the construction of a sports city, a poly silicon plant and an Ayurveda Complex worth 13,000 crores in the next 18 months.

25 Mega Projects Bengaluru-based Brigade Enterprises is going to launch 25 new projects by the end of this year. The company has decided to construct 70 percent residential and 30 percent mixed commercial buildings such as office space, hospitality and retail. The

Construction materials: infrastructure & projects

project was awarded to SREI Infrastructure, a consortium led by MBL Infra. The project will be executed on Design, Build, Finance, Operate, and Transfer (DBFOT) basis, with a concession period of 16 years that includes the construction period of two years.

NEW PROJECTS

NAME OF PROJECT

DATE/TYPE

COST IN INR

LOCATION

Water Transmission Pipeline

January 2012/ new project

289 crores

Gujarat

Two BOTs and Hospital

December 2011/new project

1,248 crores

Mumbai

Water and Railway Projects

December 2011/new project

147 crores

Madhya Pradesh and Gujarat

Six-laning of AgraEtawah bypass section; four laning of HospetChitradurga section

December 2011/new project

2,240 crores

Uttar Pradesh and Karnataka

Bikaner - Suratgarh Section of NH0-15

January 2012/new project

500 crores

Rajasthan

Eleven Tunnels

January 2012/New project

n/a

Uttarakhand, Pakistan and China borders

Special Economic Zone, Refinery, sports city, poly silicon plant, etc.

January 2012/new project

33,000 crores

Visakhapatnam

Residential and mixeduse projects

January 2012/New project

5,000 crores

Hyderabad, Chennai and Cochin

Three new luxury residential projects

January 2012/new project

820 crores

Bengaluru

Two New Residential Projects

January 2012/new project

400 crores

Chennai

Luxury Housing Project

January 2012/new project

2,250 crores

Noida

Monorail

January 2012/new project

1,655 crores

Delhi

overall cost of the project is estimated to be more than 5,000 crores. Out of the 25 projects, 20 are going to occur in Bengaluru and Mysore, whereas the remaining five projects will be launched in Hyderabad, Chennai and Cochin. The company plans to complete the projects over a period of five years.

RMZ Corp Enters Residential Market Bengaluru-based RMZ Corp, one of India’s leading commercial real estate developers, has decided to enter the residential segment. The company announced the construction of three new luxury residential projects: the RMZ Latitude, the RMZ Galleria and the RMZ Saawan in Bengaluru.

The estimated investment of this project is expected to reach 820 crores, which the company plans to fund through the SPV level and through customer advances. The project is slated for completion by the end of 2014. The residential project is spread

over 3.88 acres and consists of four 18-story towers with 322 luxury apartments.

Chennai Projects Bengaluru-based Sobha Developers announced two new residential projects in Chennai worth more than 400 crores.

The two residential projects, named Sobha Merrita and Sobha Serene, are going to be built at Kelambakkam and Porur on the outskirts of Chennai. Out of the two, Sobha Meritta has a project size of around 300 crores, whereas Serene at Porur has a project size of 120 crores and spreads over 3.15 acres.

Noida Luxury Housing Project Noida-based real estate company Supertech is going to develop a luxury housing project in Noida worth 2,250 crores. The project involves the construction of three circular towers and will have 650 flats in the ‘ORB’ project. The company

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CONSTRUCTION materials

is going to construct the towers in such a way that they have the maximum interior space and a circular shape to provide uninterrupted air supply and a 180-degree view.

The project is part of the 50-acre integrated township Capetown.

MonoRail in New Delhi In an attempt to decongest crowded east Delhi, the government of Delhi has approved the construction of a 10.8 km elevated monorail link. The project is said to be developed at a cost of around 1,655 crores and is expected to be functional by 2017. Chief Minister of Delhi, Sheila Dikshit, has asked the Delhi State Infrastructure and Industrial Development Corporation to draft a proposal to be tabled for formal approval by the Cabinet. The project, which involves a route of 12 stations, will cater a daily ridership of around 1.5 lakh. update on PROJECTS Global Bids Likely A high-powered panel committee of civil aviation and the Maharashtra government is likely to pave the way for inviting global bids for building a new international airport in Navi Mumbai. The project is

46 JANUARY/FEBRUARY 2012

expected to cost around 9,000 crores and be operational in 2014, but it has to receive environmental clearances from the Bombay High Court. The City and Industrial Development Corporation (CIDCO), the nodal agency of the project, will float tenders for the project once the concerned authorities approve the Request for Qualification (RFQ).

Cost Increase The Navi Mumbai Airport Project will see its project cost go up by 5,000 crores from the original 9,000 crores because the farmers affected by the project are demanding more compensation for their land. Considering this, the City and Industrial Development Corporation (CIDCO) is mulling several options, such as including a soft loan and viability gap funding to the developers to make the proposed project viable.

Ten More Acres The state government of Kerala acquired an additional ten acres of land for the development of the Azhikkal Port where developmental work will be carried out at an estimated cost of 418 crores. The state government of Kerala had already earmarked 26 lakh for the development of the road to the port.

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30 New Resorts Disha Direct, a real estate marketing company in Maharashtra, has announced that it will invest around 300 crores in the construction of 30 resorts in Maharashtra in the coming five years. The company seeks to capitalize on the country’s burgeoning hospitality industry, which is expected to grow by nine percent over the next six years. The company plans to open the resorts through Greenarth Leisure, the hospitality division of the Disha Direct Group. completed projects GQ Highways Project The Government announced the completion of the Golden Quadrilateral (GQ) Highways project. The GQ highway project, which is part of the first phase of the government’s National Highways Development Programme (NHDP), connects the major cities of the country such as Delhi, Mumbai, Chennai and Kolkata. The project, which covers 5,846 km between the four major cities, faced many legal and engineering hurdles after its start in 2000 but was successfully completed on January 6, 2012. BMWeek CemWeek CW Group Coal Week BMWeek BMWeek

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www.cwgrp.com T: +1-702-430-1748 F: +1-928-832-4762 848 N. Rainbow Blvd. Box #1658 Las Vegas NV 89107 USA We know the cement industry well. Let us guide you. For more information please contact us at inquiries@cwgrp.com or on +1-702-430-17 48

construction materials

E

quipment updates

he Tesab Group announced a JV agreement with Proman at EXCON 2011. Caterpillar launched a new 40-ton off-highway truck, along with two new fuel efficient motorgraders, and Hyundai offered up a new generation of excavators. The JV between John Deere and Ashok Leyland expanded its product offering to Andhra Pradesh while JCB India displayed a wider selection of machines at EXCON.

Tesab Launches JV at Excon 2011 The Tesab Group of companies, comprised of a network of manufacturing facilities in Northern Ireland and Sweden, announced the launch of a joint venture (JV) at Excon. The well-attended construction exhibition is one of the largest in India.

Tesab Engineering—the crushing division is based in Omagh, Northern Ireland and Mockeln, the screening division is based in Almhult, Sweden—is now providing a range of mobile units for the aggregate and mining markets in India through its collaboration with Proman. Proman, with its state-of-the art facility in Bangalore, manufactures crushing, screening and sand washing equipment for the supply of aggregates and sand to quarry and mineral sectors.

Tesab has had a long-standing and successful relationship with Proman, and the agreement at Excon cements this through a JV for the manufacture and sale of the Tesab brand range. The new company will be called Proman-Tesab, and its focus will be on providing mobile crushing and screening equipment.

48 JANUARY/FEBRUARY 2012

New Caterpillar Equipment Global infrastructure developer Caterpillar launched a new 40-ton off-highway truck: Cat 770G. The new off-highway truck is built to meet the demands of construction, quarry, and mining applications.

The 770G sports an efficient Cat engine and a drive train configured exclusively to deliver high production at reduced costs per ton of material hauled. The new offhighway truck has also been designed in such a way that it enhances performance

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and safety and lowers the lifecycle costs. It also features two cab options and has the Cat C15ACERT engine.

Caterpillar also launched two new fuelefficient motorgraders: the Cat 120M2 and 12M2 with all-wheel-drive (AVD).

The new motorgraders feature fuel-efficient and low-emitting engines that meet the Tier IV Interim emission standards.

construction materials: EQUIPMENT UPDATES

New Holland Launches New Telehandler New Holland launched the new compact 6-meter LM625. The company is set to unveil the new all-access telehandler at the Intermat 2012, which is going to take place from April 16 to 21 in Paris. The new compact telehandler delivers top performance in tough conditions and condensed spaces. The narrow radius allows the handler to work effectively in confined spaces and jobsites. According to New Holland, the LM625 features a robust chassis designed to deal with the toughest jobs.

JCB launches new Compact Tailswing JCB launched a new 2.7-ton compact tailswing: 8026 CTS. The machine is an addition to the company’s range of zero tailswing 8025 ZTS. The new compact design offers customers an increased digging capacity. The machine features a dedicated boom for dipper arm and offers greater digging and lifting performance.

The hydraulic system in the machine has full control isolation and uses the same engine family as the previous zero tailswing 8025 ZTS. JCB Expands its Loadall Range Construction equipment company JCB has added a high capacity Loadall, called the 550-80, to its top end line of telescopic handlers. At 8.1m tall and 4.99 tons capacity, the 550-80 is the company’s highest capacity Loadall. The new Loadall is designed keeping loading operations in mind. It is powered by a 97 KW engine and features high dump and rollback angles of 46” and 34.” Each helps speed up the loading operations and improves material retention and stockpiling for hopper loading or efficient lorry. The new machine is designed exclusively for bulk handling operations in heavier duty applications, such as working in loading duties with a bucket, metals recycling and waste handling.

JCB India Launches New Products JCB India, a leading construction equipment company, launched a wide array of

machines at EXCON 2011. Some of the machines launched by JCB included a range of backhoe loaders powered by the fuel-efficient JCB engine ecoMAX with 3DX Super, 3DX Xtra, and 4DX with a cabin that provides easy access and a new contemporary style bonnet. It also launched the 430ZX wheeled loaders, a 12.6-ton excavator—JS120 powered by 80hp JCB engine and Liftall 1553/1554 with a 15-ton lift capacity. The company dominated the recently concluded EXCON 2011 by displaying a range of machines and technology suitable for the Indian environment.

Hyundai to Launch New Generation Excavators Hyundai Construction Equipment India, a subsidiary of the Korean-based Hyundai Heavy Industries, is aiming to launch new generation excavators in the Indian market. The company announced the launch of the heavy-duty excavator RC 340L in India and displayed a R340 LC-7, an indigenously developed and internationally adopted rugged excavator. The R340 LC-7 is one of the excavators by Hyundai manufactured in India for heavy construction, granite, marble and quarry application.

The machine is 34 tons and has an engine power of 260 HP (191 KW) at 1750 rpm.

Scania Launches a Heavy Duty Tipper Scania recently launched a P380, an 8 x 4 heavy-duty tipper, in India. The tipper has numerous features designed exclusively to maximize the uptime. It has a 12-liter 380hp engine which delivers 1,900 Nm of torque from low revs to enhance drivability. The Scania Opticruise’s automated gearhanging facilitates the driver’s work with its new off-road mode, which is designed to help drivers deal with the toughest conditions without compromising the transmission components. The tipper’s clutch has an electronic overload protection system, and all of its transmission components and chassis are optimized for heavy-duty operation, such as its 18.8 cu m3 rock body.

Leyland Deere Launches Backhoe Loader Leyland Deere, a joint venture between Ashok Leyland and US-based John Deere, launched their first product in India, the 435-Backhoe Loader. The company first launched the product in the southern state of Tamil Nadu in November 2011 and recently launched the product in Andhra Pradesh. The company is planning to launch the loader pan-India in the next financial year. The new loader has more cabin space for the operator and comes with enhanced safety features. BMWeek CemWeek BMWeek BMWeek

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analyst recommendations ACC ACC received a ‘Neutral’ rating from Nomura with a price target of Rs 1155 against a current market price of Rs 1214.

The basis for the rating is ACC’s dominance in the southern states where there is a supply glut, and its near full capacity utilization in other regions. While potentially indicators of low volume growth, the company is expected to post mid-term profits. ambuja cement With unit operating efficiency positively influencing bottom line figures and the proximity of its units to high demand regions that favor an increase in output, Nomura Financial Advisory & Securities has given the green light to Ambuja Cement. Higher capacity additions and its ability to handle cost pressures are factors that led to a ‘Buy’ rating. The price target has been set as Rs 186 against a CMP of Rs 161. india cements India Cements’ strong dependence in the oversaturated southern states and price escalations in the region led to a ‘Neutral’ rating by Nomura. Additionally, a price target of Rs 80 against a CMP of Rs 76 was assessed.

tion in the cement market. With regard to long-term prospects, the company is also planning a major investment to reign in freight and power costs that could increase EBITDA/ton figures by 40 percent in the next three years. While these factors seem favorable, shares of the company are currently being traded at its fair value. Thus Nomura has given a ‘Neutral’ rating, keeping the price target as Rs 1259 against a CMP of Rs 1177.

With the third quarter posting of an EBITDA/ton of Rs 940 that stayed in line with expectations, and a Rs 1.05 billion subsidy on a new plant that boosted profit after tax to Rs 6.2 billion, Motilal Oswal has recommended ‘Buy’ for UltraTech at Rs 1424 against a CMP of Rs 1211. mangalam cement Predicting an increase in EBITDA/ton and EBITDA margin figures by FY 2013 due to capacity expansion and cost efficiency strategies, SKP Securities has recommended a ‘Buy’ for Mangalam Cements.

The price target has been kept at Rs 118.8 against a CMP of Rs 95.

continued from page

43: REGIONAL NEWS

“revenue and the output of the country’s construction sector [recording] a positive correlation of 0.85 for the past 6 years.”

Bhutan Dugnsam Cement announced in December that it was extending the deadline for the construction of its new factory due to a labor shortage.

The company has been having trouble recruiting and retaining a skilled labor force to facilitate plant construction. To help attract more workers the company enacted a “special incentive package” that allowed workers to bring poultry from India and eased restrictions on tobacco use. This has helped the workforce to triple. Even with the increase in workers, the company doesn’t expect to complete the project until March.

The company’s Nu7B cement plant will be the country’s largest cement plant with a capacity of 4,130 metric tons of cement and 3,000 metric tons of clinker a day. The project is located in Nanglam town and is 80 percent complete.

shree cement

Nepal Nomura has recommended a ‘Buy’ for Nepal is set to commission two new Shree Cement given that the company’s cement units in Dudhrash and Gogli of presence in non-southern states insulates Dang. Basu Pandey, the Director of Sonit from the oversupply situation in the apur Cement Factory, reported construcultra tech cement south. Furthermore, the company’s trim tion was almost completed. The Sonapur Ultra Tech Cement’s merger with Samrud- cost structure and additional revenues Cement Factory will target to produce dhi Cement is a positive point in its favor from its captive power plants have contrib- around 700 tons of cement on a daily basis, given that the company will now have bet- uted to a strong balance sheet. The price and will likely decrease dependency on ter exposure to the eastern and north- target has been raised to Rs 2933 against cement imports from India by 10 percent.

Week factory, which will brand its ern states, where there is no over satura- the CMP of Rs 2132. BMWeek CemWeek CW GroupThe Coal other CemWeek CW Group Coal Week BMWeek products as Ghorahi Cement, is also preCemWeek BMWeek CW Group Coal Week paring to bring its products to the market ratings changes starting in March.

Date Broker Company Rating Target Price Current Market Price 8-Dec-11

Nomura

ACC

Neutral

1155

1214

8-Dec-11

Nomura

Ambuja Cement

Buy

186

161

8-Dec-11

Nomura

India Cements

Neutral

80

76

18-Jan-12

SKP Securities

Mangalam Cements

Buy

118.8

95

8-Dec-11

Nomura

Shree Cement

Buy

2933

2132

8-Dec-11

Nomura

UltraTech

Neutral

1259

1177

21-Jan-12

Motilal Oswal

UltraTech

Buy

1424

1211

50 JANUARY/FEBRUARY 2012

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Finally, production at the Hetaunda Cement factory briefly halted in January due to a problem with the factory’s kiln.

The factory brought in technicians from India to make the repairs. Supply was suspended for a few days due to the halt in production. BMWeek CemWeek CW Group Coal Week BMWeek BMWeek

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stock performance Stock performance of leading cement companies 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.

Performance in the past 90 days Company

Start Date

Start Price

End Date

End Price

Difference

% Change

Top advancers CCL INTER

Nov 3, 2011

18.05

31-Jan-12

28.45

10.40

57.62

PANYAM CEMEN

Nov 3, 2011

47.75

31-Jan-12

60.15

12.40

25.97

SHREE CEMENT

Nov 3, 2011

1901.35

31-Jan-12

2255.40

354.05

18.62

CHETTINAD CEM

Nov 2, 2011

473.65

30-Jan-12

542.05

68.40

14.44

RAIN COMMODI

Nov 3, 2011

29.50

31-Jan-12

33.45

3.95

13.39

N C L IND

Nov 3, 2011

37.05

31-Jan-12

41.85

4.80

12.96

KEERTHI

Nov 3, 2011

32.35

31-Jan-12

35.50

3.15

9.74

MADRAS CEM

Nov 3, 2011

106.85

31-Jan-12

117.00

10.15

9.50

KAKATIYA CEM

Nov 3, 2011

68.40

31-Jan-12

73.50

5.10

7.46

ULTRATECH CM

Nov 3, 2011

1148.65

31-Jan-12

1211.25

62.60

5.45

SAGAR CEM.

Nov 3, 2011

140.40

31-Jan-12

145.85

5.45

3.88

JK CEMENT

Nov 3, 2011

109.65

31-Jan-12

112.95

3.30

3.01

AMBUJA CEME

Nov 3, 2011

157.15

31-Jan-12

160.70

3.55

2.26

JK LAKSHMI

Nov 3, 2011

46.25

31-Jan-12

47.25

1.00

2.16

KCP LTD

Nov 3, 2011

26.35

31-Jan-12

26.90

0.55

2.09

KALYANPUR CE

Sep 28, 2011

24.35

27-Jan-12

24.70

0.35

1.44

OCL INDIA L

Nov 3, 2011

91.00

31-Jan-12

91.85

0.85

0.93

INDIA CEMENT

Nov 3, 2011

80.25

31-Jan-12

80.65

0.40

0.50

MANGALAM CEM

Nov 3, 2011

101.70

31-Jan-12

101.80

0.10

0.10

Top Laggards

52

BIRLA CORPOR

Nov 3, 2011

323.45

31-Jan-12

269.00

-54.45

-16.83

PRISM CEMENT

Nov 3, 2011

43.90

31-Jan-12

42.65

-1.25

-2.85

ACC LTD

Nov 3, 2011

1210.25

31-Jan-12

1189.90

-20.35

-1.68

HEIDEL CEM

Nov 3, 2011

33.95

31-Jan-12

33.80

-0.15

-0.44

DECAN CEMENT

Nov 3, 2011

149.50

31-Jan-12

149.25

-0.25

-0.17

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Most popular on CemWeek.com The most-read stories on CemWeek over the past two months reflect the industry's mixed outlook. The India column shows the 20 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.

India

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

global

India capacity passes 310mm ton threshold Ambuja Cement founders exit the company Report: Aditya Birla may be in line for Lafarge SA assets Indian cement demand to grow in 2012 JP Associates looking for strategic partner for cement unit Cement prices to remain flat in India this December Cement prices in India holding at annual high JK Cement gears up for expansion Cement prices fall in some parts of India Indian cement companies offer discounts India's ACC seeking coal blocks to secure coal supplies India cement demand slowing, stockpiles on the rise HeidelbergCement India has positive 2012 outlook Holcim appoints Ambuja CEO to Area Manager JK Lakshmi eyes expansion in 2012 India manufacturing capacity to continue growing Indian cement demand drops in November IIFL expects cement sales to increase in India India cement makers increase export efforts Shree Digvijay Cement appoints Mukherjee as MD India: Bharathi aims to double sales CCI eyes Assam facility GP Goenka unsure of future in cement business Dalmia Cement to embark on expansion Nepal to commission two cement units in soon

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Oficemen sees cement consumption falling further in 2012 Huaxin Cement installs new conveyor system Sinoma signs contract for Angola plant Italcementi sells unit to Sika Brazil's Paraiba set to become leading cement hub US appeals court blocks new EPA rules on clinker Three new cement plants to rise in Mozambique Algeria to export white cement to the EU Saudi's Al Jouf to build new production line Cement production increase in Ukraine Report: Lafarge looking to sell off South African unit Lafarge France has new CEO Sinoma achieves milestone Carthage Cement to proceed with new cement plant Egypt cement prices increase Cemex shuffles Latvian management Hoclim investing $400mm in Ecuador expansion Fives visit Krasnoyarsk Cement for kiln upgrade New cement plants to be built in Nigeria UAE cement firms hike prices Cemengal wins Port Kembla project China's AVIC signs order for Venezuela line FLSmidth announces two new Brazil orders Argos shareholders approve asset spinoff Lafarge Karbala cement plant production threatened

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