India Cement & Construction Materials (vol 1 / issue 12)

india CemWeek A CemWeek Publication

Cement issue 12

may / june 2013

& construction Materials

Antitrust Laws: Analysis

Exploring Antitrust Regimes

Industry Industry hits hits headwinds headwinds in in Q1 Q1

VICAT PROFILE

CW Research & Analytics

Planting Planting the the flag flag firmly in India firmly in India

Brief Brief on on cement cement and and energy energy markets markets News

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Analysis

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Market Coverage

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Interviews

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People

CBI CONFERENCE

CEMENT BUSINESS & INDUSTRY INDIA & SOUTH ASIA October 9-10, 2013 Hilton Mumbai International Airport Hotel Mumbai, India cBI India & south asia 2013 conference will focus on the various aspects of India’s cement industry from a business growth & investment perspective. notably, the programme will take a dual-track business and technical approach to the issues around:

GMI

♦

market perspective, forecast and competitive outlook

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alternative fuels, new business models

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environmental performance management

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finance and capital markets

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coal as mainstay fuel option and outlook

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efficiency, innovation, new developments

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technology, operations and best practices

GLOBAL

organized by gmI global and again with the great support from the India cement & construction materials (Iccm) journal the event is expected to bring together more than 200 cement and lime professionals. gmI is excited to build on the success of cBI India 2012 to expand the scope to include participants from the entire south asia region this time around.

Register on-line at www.gmiforum.com or email sales@gmiforum.com.

You may also call us in the US at +1-203-516-7424 supported by

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CEMENT & CONSTRUCTION MATERIALS

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FEATURES 4

DEPARTMENTS

Antitrust laws in a global environment The challenge of establishing antitrust regimes

8 18

Starlinger AD* STAR

2

Shining the spotlight

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Changing the face of cement packaging

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Event

Profile of Vicat in India and History

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Analyst Recommendations

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CW Group Meeting Agenda

analysis Quarterly financial results for Indian companies Industry hits headwinds in Q1

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28

Equipment update

Highlights from CBI Africa 2013 Latest broker recommendations CW Group’s upcoming events

cement MARKET AND COMPETITION Cement makers slash capital spending

Global Indexes revealed

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VOLUME AND PRICING Cement price increases are looming

research

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22

India and South Asia focus

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Coal market update

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Numbers in Brief All-time high for Indian cement industry

Increased stake in India

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EDITOR’S LETTER

Volumes and prices

PEOPLE Shree Cement bags award

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PROJECTS AND EXPANSIONS New cement plant construction projects

Coal trading markets show little signs of improvement

Energy price update Coal prices continue to slip

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M&A FINANCE

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UPDATE

UltraTech eyes Jaypee’s Gujarat plants Equipment Highlights

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construction & building materials

40

REGIONAL NEWS Pakistan’s cement sales affected by logistics limitations

CemWeek rOBERT MADEIRA CemWeek Anthony Fitzgerald CemWeek judy foust BMWeek BMWeek BMWeek

cemweek publisher head of cw group reasearch

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INFRASTRUCTURE & PROJECTS Green light received for new projects

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letter from the editor

Shining the spotlight.

And a mixed bag. s the CW Group’s Research & Analytics team maintains its focus on the global cement markets, we continue bringing decision-support in a disciplined and systematic manner that is still much needed in the cement sector – not only in India, but of course also beyond its shores. The Research & Analytics section highlights some of our on-going research in the cement and ever-important energy markets. The team is of course happy to share our views on these with you beyond the magazine if you would like to discuss further.

The first quarter was a mixed bag for India’s cement groups. Out of a set of twelve analyzed cement companies, only three performed well enough as to post increasing net profits. Margins were affected by booming freight costs, but also by a reluctance to invest in infrastructure and housing.

While cement companies pledge their last efforts into imposing price increases on their local markets before the monsoon sets in, sentiment within the market is poorer than ever.

We are again excited to be a part of the Cement Business & Industry (CBI) India 2013 conference in Mumbai on October 9-10. We were part of the CBI conference last year and look forward to being part of this executive, fresh format cement sector conference – we hope to meet you there!

Robert Madeira publisher and head of research

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numbers IN BRIEF India’s cement production reaches 67 million tons in Q1 2013 Indian cement companies closed the first quarter of 2013 with a new all-time high for cement output in terms of both monthly and quarterly volumes. After producing 23.89 million tons of cement in March 2013, the cement makers can brag about a 9.4 percent QOQ increase for the first three months of 2013. The 67 million tons produced in Q1 represent an all-time high for the pan-Indian cement industry. In 2009, the first quarter’s cement output was reported at 50 million tons, followed by 55 million tons in Q1 2010, 57.8 million tons in Q1 2011, and 63.3 million tons in Q1 2012. The cement market registered a strong evolution between December 2012 and March 2013 with a monthly averaged cement production of 22.1 million tons. However, preliminary analysis shows that both April and May 2013 were not at the level forecasted initially by cement companies.

PAN-INDIA CEMENT VOLUME (TONS) 2009

2010

2011

2012

2013

25,000,000

17,500,000

100,00,000 Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sept

Oct

Nov

Dec Source: CW Group Analysis

Cement companies initiated a concerted price increase action in February 2013 that led all-India cement prices 5.5 percent higher when compared to January 2013. Except in the southern area, where prices stabilized, all regions registered hikes, with the sharpest one noted in the east (12 percent). At that time, the eastern region was also suffering from an acute lack of wagons. Dealers feared that the elevated February 2013 prices would not stick, as comfort levels have been exceeded for most of the regions. Their concern was correct: In the following two months, prices plummeted in all regions with the all-India April 2013 cement price declining to RS 279 per 50 kg bag from RS 298 in February 2013.

CEMENT PRICES (RS PER 50 KG BAG) South

350

West

East

Central

North

300

250

Mar-12

Apr-12

May-12

Jun-12

Jul-12

Aug-12

Sep-12

Oct-12

Nov-12

Dec-12

Jan-13

Feb-13

Mar-13

Apr-13 Source: CW Group Analysis

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feature

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Antitrust Laws Proliferate with Global Economic Integration

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FEATURE is considered one of the most active business sectors. Considering the level of capital investment involved, numerouscement companies are tempted to breach antitrust regulations to optimize profits.

Global Trends in Antitrust Laws The economic crisis that plagued most advanced economies in the past years has triggered globalization like never before.

North America and the United Kingdom are no longer invincible. The traditional economic links became tenuous and looking to other markets for fresh opportunities was the viable option. With emerging economies now on the rise worldwide, antitrust enforcement has proliferated as many countries realize its necessity in drawing foreign capital inflows.

As various companies from different parts of the world pit their products against each other, competition law has become a critical component of antitrust. Companies now spend millions on R&D and worldclass design. Innovation revolves around not only function, durability and aesthetics, but also environmental impact. Thus, most companies require stringent antitrust regulations to protect their products and their market position.

Moreover, the rules of the game for mergers and acquisitions, market abuse and cartel have evolved for most emerging economies. Cooperation in the enforcement of

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antitrust regulations across borders has now become standard. A proposed merger between two companies must secure approval across multiple jurisdictions, each one having an established competition threshold that should be observed.

Cartel enforcement likewise became a practice in most economies, with more aggressive policies as well as leniency programs. Leniency programs are implemented to offer incentives to companies who betray their co-conspirators. Along with increased cooperation and coordination among authorities, detection and destabilization of cartels has become easier.

Under this scenario, penalties could be substantial. Fines or derailment of the launch of a new product could be imposed on companies found to have violated antitrust laws. In some jurisdictions, executives may even face criminal prosecution.

Cement Companies in Emerging Economies Subject to Scrutiny With urbanization and infrastructure development considered critical components of economic development, the cement industry in emerging economies

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In Brazil, seven of its largest cement companies were investigated for price-fixing within the period of 2002-2006. Cement companies Votorantim Cement, Lafarge, Cimpor, Camargo Correa (InterCement), Cement Company Itambe, Itabira Agro Industrial and Holcim were found to have manipulated prices and divided clients as a cartel. Brazil’s antitrust regulator Cade completed its investigation in October 2012 and a verdict is expected in 2013.

Penalties could range between 20-30 percent of the companies’ 2005 revenues in Brazil if they are found guilty. Of the seven companies, Lafarge SA (LG) will not be fined as it paid about US$21.1 million in 2007 to settle the case.

Similarly, the Competition Commission of India (CCI) imposed a fine of RS 6,307 crore on 11 cement companies in June 2012 for creating artificial shortage and price-fixing. The penalty was calculated at 50% of profits for the periods 2009-10 and 2010-11. The cement firms were found to have conspired to lower utilization despite a growth in installed capacity. In addition to lowering production, the companies colluded to increase cement prices even with lower market demand. Among the companies found guilty were Jaiprakash Associates, Ultratech Cements, Ambuja Cements and ACC. The companies have recently filed petitions with the Competition Appellate Tribunal (COMPAT), contesting the penalties imposed.

Under almost the same scenario, the South African Competition Commission found Lafarge, Pretoria Portland Cement (PPC), Afrisam and Natal Portland Cement Cimpor (NPC) to be guilty of market sharing to manipulate the price of cement. However, PPC applied to the commission for leniency, admitting that it colluded with the three other companies to divide the market among themselves and control prices.

For cement companies planning to operate in emerging economies, most antitrust regulators are always on the lookout for cartel offenses. As such, it is imperative to prepare for such risks, as it will involve years of investigation, documentation, litigations and penalties that average between 10-30 percent of annual turnover.

The Challenge in Establishing an Antitrust Regime While new antitrust regimes are more likely patterned after U.S. and European anti-

2000

1000

trust regulations, the challenge for emerging markets and economies is to support such laws with data. Most emerging markets have no historical data to streamline the process and most implementations are supported by practice rather than legislation.

And with competition law now set up in over 115 jurisdictions, management of antitrust risk is critical for transactions

SPAIN Cement

SOUTH AFRICA Food

CHILE Pharmaceutical

CHINA Electronics

ARGENTINA Cement

USA Elecronics

USA Cars Manuf

0

INDIA Cement

Cartel investigations usually take years to be completed and even longer when a company files an appeal against penalties meted upon it. In the case of Heidelberg Cement in Germany, it was only recently that the Federal Court affirmed the Higher Appeal Court’s 2009 verdict on the cartel fine. Heidelberg Cement was found guilty of cartel infringements from 1990 to 2002 and the fine was imposed way back in 2003. After years of appeal proceedings, the court reduced the penalty by 5 percent to 161.4 million euros.

FINES ON RECENT ANTITRUST CASES (MM US$)

EUROPE Electronics

Consequently, Afrisam followed suit by providing the commission the same information and agreed to a penalty of 3 percent of its 2010 cement turnover. Lafarge likewise admitted to market sharing and agreed to a fine of 6 percent of its 2010 annual cement turnover.

that will involve crossing jurisdictions. It is now essential for a company to analyze the risks in meeting the demands of one enforcement regime and its impact on the company’s ability to defend itself in other enforcement jurisdictions. For companies whose products are sold in other markets abroad, the key to mitigating antitrust risk is to always keep a global perspective in implementing major capital investments in other parts of the world.

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

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feature Changing the face of cement packaging:

Polypropylene laminated block bottom valve sacks Characteristics of AD*STAR woven polypropylene block bottom valve sacks and the advantages of this type of packaging for the Indian cement and construction materials industry

In 2012, the total cement production in India amounted to around 234 million tons , requiring approx. 4,000 million 50 kg sacks for bagging. The vast majority of the produced cement is filled into flat, nonlaminated sewn woven valve sacks which are still produced manually. A growing share of approx. 6 %, however, is already being packaged in locally produced polypropylene laminated (PPL) block bottom valve sacks such as AD*STAR sacks. While before AD*STAR sacks were produced abroad and had to be imported to India, in 2011 the first packaging and cement producer has started to manufacture them in India. By today AD*STAR sacks are becoming increasingly popular within the Indian cement and dry bulk industry; for high-quality powder products such as white cement this type of packaging has already become the preferred option.

History and concept of AD*STAR block bottom valve sacks The AD*STAR block bottom valve sack was developed and patented by Starlinger

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& Co. GmbH of Austria in the mid-1990’s.

The idea behind it was to combine the advantages of a paper sack – its brick shape and suitability for automatic handling – with the tightness and flexibility of a PE film sack and the strength and resistance of a woven PP sack. The result: A laminated one-layer block bottom valve sack made of stretched and woven polypropylene tapes.

Safe packaging for dry bulk goods By now, StarlingerAD*STAR sacks are used all over the world for packaging a wide range of free-flowing goods, such as cement, building materials, fertilizer, chemicals, or resin, but also for flour, sugar, or animal feed. When used in dry bulk packaging, AD*STAR sacks have many advantages: ■■ Suitable for automated bag filling and palletizing ■■ Strong and brick-shaped for perfect stacking ■■ High sack strength, even when exposed to moisture (e.g. during

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monsoon season) ■■ No spillage or leaking because of the polypropylene coating ■■ Overfilling of sacks is not necessary ■■ Adjustable air-permeability due to optional micro-perforation – reduces “dusting” to a minimum and prevents moisture from entering the sack (longer shelf life, no lump formation) ■■ No counterfeiting of sacks possible ■■ Sack production is fully automatically ■■ Attractive sack design for improved brand promotion Perfect for high-speed automatic filling processes Like paper sacks, AD*STAR sacks are suitable for automatic filling on high-speed roto-packers. Manually sewn valve sacks, in turn, require much slower filling speeds, therefore more filling machines are needed to achieve the same filling tonnage. Sewn sacks also have greater size variations, which may lead to problems on the automatic filling lines.

AD*STAR block bottom valve sacks on an automatic filling machine

The highly automated production process of AD*STAR sacks is very accurate, guaranteeing minimum size variations and consequently trouble-free filling processes. The automatic production also reduces manpower requirements both in sack production and during bag filling. This means not only less labour costs, but due to the almost dust-free filling process the working environment in cement filling plants is healthier and safer.

No overfilling required Overfilling is a common method to compensate product loss occurring during transport. The so-called sewn “pillow bags” are leaking because mostly non-laminated fabric is used and powdery content such as cement escapes through the weaving gaps. Also, the holes caused by the stitched seams increase during transport and handling so that a significant amount of cement is spilled.

Countries worldwide in which AD*STAR sacks are produced and used

Sewn cement bags: Cement escapes through the gaps in the fabric and settles in a dust layer on the sacks

Outdoor storage of AD*STAR cement sacks on pallets

AD*STAR sacks are tight and ensure that the entire content of the sack stays inside.

Also with optional micro-perforation (600,000 holes/m²), which is necessary for aeration during the filling process of certain materials, the AD*STAR sacks are leak-proof and virtually dust-free.

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FEATURE Example: Ecological and economic implications of overfilling Sewn valve sacks require an overfilling of 600 g cement per 50 kg bag due to the loss of product during transport. As stated in the beginning, only about 6 % of the 4,000 million cement sacks required per year are AD*STAR sacks. This means that 3,760 million sewn bags need to be overfilled by 600 g, which in total amounts to 2.25 million tons of cement which are wasted and spilled into the environment every year.

The spilled cement is harmful for humans, causing skin irritations and serious lung problems, and also has negative effects on the environment.

Another big issue are CO2 emissions: The cement industry produces about 4 % of global man-made CO2 emissions . In this specific case 1.8 million tons of CO2 could be saved per year if overfilling were not necessary.

Seen from the economic point of view, the amount of cement used for overfilling could be turned into additional profit: If all the cement were filled into AD*STAR sacks, the extra 2.25 million tons could also be sold, generating a total of INR 12,150 million or USD 222 million of extra money per year.

Brand promotion and long shelf life The coated surface of an AD*STAR sack allows brilliant printing and appealing sack designs. Contrary to sewn bags the print on the square bottom of an AD*STAR sack is well visible and can be read easily when the sacks are stacked. And it is a fact that cement packaged in AD*STAR sacks is selling at a higher price – the high-quality packaging reflects on the content and makes the product more appealing to the consumers.

The laminated sack also provides a good protection of the content and prevents moisture migration into the sack (e. g. during Monsoon seasons). This reduces lump formation and increases the shelf life of the product.

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Successful reference projects in India Bharathi Polymers India Pvt. Ltd. In 2011, Bharathi Polymers India Pvt. Ltd. has opened a manufacturing plant for 60 million AD*STAR sacks/year at Ippatla Village, Lingala Mandal in YSR district, Andhra Pradesh.

The company was the first to take up the production of AD*STAR bags in India. 50 % of the bags manufactured are supplied to Bharathi Cement Corporation Pvt. Ltd., a joint venture with Vicat Group, France, while the rest is sold on the open market.

In a press release on the occasion of the inauguration of the plant in February 2011 M Ravinder Reddy, Director at Bharathi Cement, points out that AD*STAR bags help to ensure that customers receive the correct quantity of 50 kilograms in each bag from Bharathi Cement because the AD*STAR bag does not allow adulteration: The bags are manufactured with heat seal technology, contrary to other cement bags which are stitched and can be opened. Another unique selling point of polypropylene laminated bags is that they minimize spillage: The cement cannot escape through the weave gaps, and the bags are tamper proof.

Alliance Polysacks Pvt. Ltd. Alliance Polysacks Pvt. Ltd. is the flagship company of the Indian SPPL Group and has been established in 2010 with the primary focus on manufacturing AD*STAR block bottom valve sacks. Featuring the latest AD*STAR technology from Starlinger, the plant in Jaipur, Rajasthan, took up production with a capacity of 63 million sacks per year by early 2012.

A production increase to the full capacity of 153 million sacks per year is already in progress; the required machinery will be delivered and installed by the end of 2013/beginning of 2014.

SPPL Group is among the leading manufacturers, exporters and suppliers of small industrial packaging bags for fertilizer, minerals, grains and cement in India, and is renowned for high standard quality products. With a pro-

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duction output close to 360 million bags per year, SPPL Group is reported to have one of the largest capacities in India, achieving an annual turnover of more than INR 2000 million.

Platinium Tie-up Pvt. Ltd. Platinium Tie-Up Pvt. Ltd. is part of the Modern Group and has been present in the packaging industry for almost 40 years. Starting its journey as a manufacturer of jute sacks, the company is one of the largest and most respected names in the Indian woven plastic sack industry today.

In terms of production capacity, the company has four manufacturing plants with seven tape extrusion lines, around 300 looms, 4 coating lines and numerous printing and finishing machines for making every type of bag required by customers. The latest facility for making AD*STAR block bottom sacks under license from Starlinger & Co. GmbH, Austria, has been commissioned in 2012 Gujarat, India.

Today the group is said to have a polymer processing capacity of more than 40,000 million tons per annum, which makes it one of the biggest manufacturers in India.

J.K. Sons Engineers Pvt. Ltd. JK Sons Engineers Pvt. Ltd. is one of the pioneer manufactures of PP/HDPE bags in India.

Situated at Seepat Road, opposite New RTO Park, P.O. Mopka, Bilaspur (Chhattisgarh) since 2008, the production facilities are located 10 km from the Bilaspur railway station and have a production capacity of 11 million bags per month which are supplied to different industry sectors such as cement, fertilizer, chemicals, flour, rice, etc. The unit is also registered with DGS & D Delhi for the supply of 50 kg food grain PP bags.

In 2012, JK Sons Engineers Pvt Ltd expanded the plant and installed the latest technology and machinery from Starlinger & Co. GmbH, Austria, for the production of AD* STAR bags.

The resource for global cement prices The CW Group's Global Cement Trade Price Report includes current pricing for cement delivered through the retail channel as well as import and export pricing for major markets around the world.

Worldwide monthly cement prices

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Global import and export cement prices: ■■ Major market trade flows ■■ FOB export prices ■■ CIF import prices

Global market cement prices.

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ANALYSIS

Q1 2013 Challenging first quarter for Indian cement companies

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expanded by 4.8 percent YOY, notching a slightly higher growth rate when compared to the previous quarter ending December 2012 (4.5 percent). Expectations are that in 2013 the economy will recover partially with a 5.3 percent increase over 2012.

bag the highest increase in net sales for the quarter (29.4 percent and RS 369.3 crore), mostly driven by the significant 19.7 percent increase in the company’s cement sales expressed in tons. In February 2013, HeidelbergCement started commercial operations at Damoh plant, Madya Pradesh, and Jhansi cement plant, Uttar Pradesh. Following the commissioning of the units located in central India, the company now owns a total annual cement capacity of 6.2 million tons in India.

Only three out of the 12 companies included in the analysis set obtained higher net profits for the period, while for most of them the declines were in the range of double digits. HeidelbergCement India registered the largest decline in net profit (80.8 percent decrease and only RS 2.2 crore in Q1 2013). On a reverse scale, HeidelbergCement was also the company to

Dalmia Bharat registered the second largest increase in net revenues from the analyzed pool of companies, with around RS 796 crore reported for the quarter. However, the 19 percent increase was not sustained by a comparable net profit evolution. Dalmia Bharat witnessed an 11.1 percent decline in its profit in the first quarter of 2013 (RS 18 crore) when com-

Indian cement companies reported grim results in the first quarter of 2013. Elevated freight costs and lower than expected cement demand were noted as the main drivers behind the depressed results.

Starting last year, growth in cement demand slowed down and was unable to regain its strength. Usually, cement demand is expected to be more robust in the first quarter of the year. However, this year the cement industry witnessed a deviation from its normal course on the back of reduced construction activities. The government restrained large infrastructure development, while the high interest rates and uncertain economic environment generated decreases in sales of new buildings.

India’s economy grew by only 5 percent in FY 2012-2013, the slowest pace in a decade. The latest quarter ended March 2013 NET SALES Q1 2012 - Q1 2013 CHANGE (%)

Shree Cement

Madras Cements

Dalmia Bharat

JK Cement

Birla Corporation

HeidelbergCement India

Shree Cement

Madras Cements

Dalmia Bharat

JK Cement

Birla Corporation

HeidelbergCement India

Source: CW Group Analysis

India Cements India Cements

Mangalam Cement

Prism Cement Prism Cement

Ambuja Cements

-10%

ACC

0%

UltraTech Cement

30%

NET PROFIT Q1 2012 - Q1 2013 CHANGE (%)

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

Mangalam Cement

ACC

Ambuja Cements

-100%

UltraTech Cement

0%

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Source: CW Group Analysis

200%

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ANALYSIS

ESTIMATED Q1 2013 MARKET SHARES FOR REPORTING COMPANIES (%)

rate for Q1 2013 (6.7 percent). After gathering RS 1.191 crore between January and March 2013, the company was forced to succumb to a 59.5 percent decline in net profits (only RS 26.3 crore for Q1 2013 versus RS 64.9 crore in Q1 2012). The same two reasons were blamed for the sharp decline – poor demand and increasing freight costs.

Other Mangalam Cement Birla Corporation Dalmia Bharat

Ambuja Cements ACC UltraTech Cement

pared to the same quarter of the previous year (RS 21 crore). For the entire FY 20122013, Dalmia Bharat reported a 20 percent increase in operational income, noting as influencers the 11 percent increase in sold volumes and the 6 percent improvement in cement realization. The company managed to offset the increase in diesel prices and rail tariffs of over 20 percent with higher levels of efficiency and increased utilization of southern-based resources.

Thus, the variable cost per ton of cement

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Source: CW Group Analysis

Shree Cement

expanded only by 7 percent during the last fiscal year. After acquiring Adhunik Cement in Meghalaya (1.5 million tons in cement capacity) and increasing the stake owned in Calcom Cement, the company acknowledges its northeast market share to have settled at around 22 percent in March 2013, while operating under premium pricing conditions.

India Cements occupies the third place from the perspective of net revenue growth

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UltraTech Cement, ACC and Ambuja Cements continue to dominate the Indian cement market with an estimated 35 percent market share concentrated in the hands of the three majors. They sold a total of 23.35 million tons of cement between January and March 2013, 11.13 million tons dispatched by UltraTech (16.6 percent in market share), 6.42 million tons

by ACC (9.6 percent in market share) and 5.8 million tons by Ambuja Cements (8.7 percent in market share).

However, all three companies witnessed their cement volumes decline in the first quarter of 2013. UltraTech Cement sold 3.6 percent less cement in Q1 2013 versus the first quarter of the previous year, while ACC and Ambuja Cements declined by 4.5 percent and 4.1 percent, respectively.

Their overall decline also reflected a compression of their total market share from 38.4 percent in Q1 2012 to the 35 percent noted in the first three months of 2013.

UltraTech Cement reported a net profit of RS 726.2 crore for Q1 2013, declining 16.3 percent versus the corresponding quarter of 2012. Net sales increased 1 percent to RS 5,389 crore. The company witnessed decreased levels for both cement volume and cement realization during the quarter.

ACC reported a total consolidated turnover of around RS 2,911 crore in Q1 2013 as opposed to RS 2,998 crore in Q1 2012 (2.9 percent decline). EBITDA also declined by RS 156 crore during the quarter. In terms of net profit, ACC obtained the highest growth rate versus all analyzed companies (189.2 percent), but the company acknowledges an additional depreciation

charge of RS 335.38 crore in Q1 2012 and a write back of tax provision of RS 140.83 crore in Q1 2013.

Ambuja Cements, India’s third largest cement company, closed the first quarter of 2013 at 56.3 percent above Q1 2012 in terms of net profit. The company reported RS 488 crore net profit for the quarter with net sales set at RS 2,545 crore.

Other companies, such as Shree Cement, JK Cement and Mangalam Cement, reported declines on all counts. Shree Cement notched RS 1,183 crore in net sales (1 percent decline) and net profits

settled at RS 225 crore for the quarter (10 percent decline). JK Cement saw its corresponding indicators decline by 4.6 percent and 30.1 percent, respectively, while Mangalam Cement dipped by 9.9 percent and 51.1 percent, respectively.

Going forward, the situation is not about to change dramatically for the Indian cement companies. The monsoon will generate the specific seasonal slump in the coming months with the expectation that the market will pick up by October 2013, if interest rates are kept at a level that favors investments.

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Coa Coa Coa

ANALYSIS

CW GROUP

during the period, since cement customers remain indecisive about expansions and new greenfield plants under the current environment.

CEMENT EQUIPMENT INDICES CEMENT EQUIPMENT ORDER INTAKE INDEX (CEOI)

Q1 2013

Q4 2012

Q3 2012

Q2 2012

Q1 2012

Q4 2011

Q3 2011

Q2 2011

Q1 2011

Q4 2010

Q3 2010

Q2 2010

Q1 2010

0

Q4 2009

100

Source: CW Group Research

200

CEMENT EQUIPMENT ORDER BACKLOG INDEX (CEOB)

Indices plummet in first quarter of 2013 Equipment companies experienced a steep decline in order intake during the first quarter of 2013, as orders were still affected by the weak situation in some markets and uncertainty about the future performance of the industry. Even though cement consumption is steadily rising in developing countries, utilization rates worldwide have not recovered yet. CW Group cement

16

MAY / JUNE 2013

Q1 2013

Q4 2012

Q3 2012

Q2 2012

Q1 2012

Q4 2011

Q3 2011

Q2 2011

Q1 2011

Q4 2010

Q3 2010

Q2 2010

Q1 2010

80

Q4 2009

100

Source: CW Group Research

120

equipment indices plummeted once again in Q1 2013, especially the Cement Equipment Order Intake Index (CEOI), reaching a 14-quarter low.

CEMENT EQUIPMENT ORDER INTAKE INDEX The CEOI dropped 70 percent and 82 percent in the first quarter of 2013, compared to the last quarter of 2012 and the first quarter of 2012, respectively. The drop is mostly attributed to a lack of large orders

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The most active countries in terms of new capacity are still located in South America, sub-Saharan Africa and Asia, where infrastructure projects continue to boost cement demand. North America is recovering slowly and the new U.S. Environmental Protection Agency (EPA) NESHAP environmental regulations will play a key role in the short- to medium-term U.S. orders. In China, the economic slowdown is causing some projects to be pushed back. Russia, on the other hand, has had a sustained and stable economic growth rate, and the cement market is expected to remain strong.

In India, cement manufacturers reported mixed financial results for the first quarter of 2013, and the majority saw their profits decline. In an effort to improve margins, companies have started to cut costs and slash capital expenditures in the next months. Despite the poor performance, sentiment in the industry is positive.

Cement makers anticipate an increase in demand in 2013 and will move on with ongoing and new capacity expansion projects. The most recent announcement was made by Lafarge. The company will raise 200 million euros in fresh funds to accelerate development plans in the country.

CEMENT EQUIPMENT ORDER BACKLOG INDEX The Cement Equipment Order Backlog Index (CEOB) moved to the 93 level in the first quarter of 2013, down 16 percent from the second quarter of 2012. The index continues to follow a downward trend that started in the second quarter of 2012; however, equipment supplier expectations remain positive. Companies are counting on cement demand growth from developing regions to support a strong order intake and an increase in order backlog in 2013, but tough competition and hard market conditions will remain in the short term.

the best

talent an

engineer can have

is the will to learn something new every day

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

feature

Vicat Group Further Increases Stake in India

Company Background Considered a pioneer in the industry, the Vicat Group traces its roots from one of the very few men who contributed to the evolution of the most widely used material in building and construction. It was in 1817 that Louis Vicat discovered that a combination of powdered lime and clay submerged in water for several days would produce a material sturdy enough to withstand the rough waters of the Dordogne River in France. In 1822, Louis Vicat successfully completed the Souillac Bridge, which has been recognized as the first bridge built using artificial cement.

While Louis Vicat considered his discovery a gift to world progress and relinquished his right to file a patent, it was his son Joseph Vicat who established the Vicat Cement Company in 1853 in Isere, France.

After more than a century and a half, the Vicat Group now operates in 11 countries

18

MAY / JUNE 2013

with 15 cement manufacturing plants, five grinding centers, 250 concrete batch plants and 70 aggregate quarries. As of 2012, 52.3% of its consolidated sales come from cement while 32.5% and 15.2% are from concrete/aggregates and other products/ services, respectively.

For the past five years, sales from its companies in France and Europe have been slumping as a result of the financial crisis that has slowed down construction. In 2012, cement demand in France dipped approximately 6.7% and is expected to drop another 7% this year. The building slump is aggravated by a 5.2% increase in cement imports from other countries such as Turkey. The group’s consolidated sales in France declined by 6.8% in 2012 to €879 million from €939 million in 2011. Consequently, the percentage contribution of sales in France dropped to 38% in 2012

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from 42% in 2011. In contrast, the group’s cement plants in the region of Turkey, India and Kazakhstan increased their contribution to 19% from 15% of total sales in 2011.

Despite declining profitability in France, Vicat plans to cut maintenance and operating costs in the region in order to keep the plants open. In contrast, competitors Holcim and Lafarge SA already announced plant closures in France in view of the cement glut in the market and to reduce losses.

Vicat Group Joins Sagar Cements in India In 2008, the Vicat Group entered into a joint venture with Sagar Cements in India to operate and expand a greenfield cement plant in the Gulbarga district of Karnataka. Its first line, with a capacity of 2.75 mil-

VICAT SALES BY REGION

16% 38% 19%

9%

18%

18% 42% 15% 7% 18%

USA

France

Europe

Africa, Middle East

Vicat Group Solidifies Position in Indian Cement Market Considering India’s potential for growth in the coming years, the Vicat Group confirmed its intention to gain a solid foothold in the cement industry with the acquisition of a 51% stake in Bharati Cement in Kadapa, Andhra Pradesh, in 2010. The remaining 49% is held by the Sakshi group (promoted by Jagan Mohan Reddy), India Cements, Dalmia Cement and N. Prasad.

The group believes in the growth prospects of South India, which holds over 30% of the country’s total cement market.

lion tons per year, became operational in December 2012. A second line of another 2.75 million tons per year is expected within two to three years. The Vicat Sagar Cement plant is ultimately targeted to have a total capacity of 8.25 million ton per year.

Although there were concerns about possible conflicts of interest against the group’s Vicat Sagar plant in Gulbarga, a spokesperson for the company denied that the new acquisition poses any threat to its joint venture with Sagar. As a matter of fact, it was a Sagar company (RV Consulting) that facilitated the acquisition of Bharati Cement by Vicat. When Vicat expressed its intention to further expand its operation in India, it was RV Consulting that suggested Bharati Cement since they were involved in the building of the plant in Kadapa.

The Vicat Sagar plant currently has two ThyssenKrupp raw mills with a capacity of 250 tons/hour each and four ThyssenKrupp cement grinders – two grinders at 200T/hour and another two grinders at 270T/hour. The plant likewise operates an FLSmidth kiln with 6 cyclone pre-heater tower and a clinker capacity of 6,000 T/day. Its FLSmidth coal mill has a total capacity of 75 tons/hour.

The Bharati Cement facility has a total capacity of 5 million tons per year but currently operates at only 50% capacity due to problems with the power supply in Andhra Pradesh. As a remedy, Vicat is planning to set up a 30MW captive power facility for the plant, which is expected to improve utilization by as much as 80%. The captive power plant for Bharati should take about 12-18 months to set up.

Turkey, India, Kazakhstan

Vicat’s new acquisition operates with two Loesche raw mills with a capacity of 375 tons/hour and another two Loesche coals mills with a capacity of 45 tons/hour. The plant’s operation is completed by two FLSmidth kilns (6 cyclone pre-heater tower) with a clinker capacity of 5,250 tons/day and three Loesche cement grinders (one at 360 tons/hour and two at 230 tons/hour).

Outlook for Vicat’s Operation in India As the Vicat Sagar plant in Gulbarga commenced operations, the group’s total cement capacity in India reached 7.75 million tons per year with another 5.5 million tons expected as it expands further in the next four years.

Looking forward, the group intends to strengthen its market position in India in anticipation of increased infrastructure and construction from 2013 onwards. As it pursues the expansion of the Gulbarga plant and prepares to increase the utilization of its Bharati plant, Vicat envisions becoming a major player in India’s cement industry.

While the market in France and the rest of Europe is not expected to recover until 2014 or 2015, the group believes that it will be able to achieve its aim of geographical diversification and at the same time establish a good foundation for long-term growth and profitability by eyeing markets in high-growth emerging economies.

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event Cement Business & Industry (CBI) Africa 2013 Conference GMI Global brought their custom-tailored CBI Africa 2013 Conference to Johannesburg, South Africa on March 27-28, 2013 – the first of its kind in this region. There were over 100 delegates registered, an exceptional selection of speakers who are leaders in their fields, and top corporate sponsors from the most influential cement business and manufacturing companies.

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“CBI Africa 2013 brought together a lot of exciting groups. We are really excited – this conference highlighted that Africa is a continent of incredible opportunity, despite the challenges that exist here. We are looking forward to expanding CBI Africa next year and welcoming an even larger and more diverse group.”

The first CBI Africa 2013 Conference was opened by Mr. Robert Madeira from the CW Group who provided an introduction on “The Big Picture – Shifting Economic Strength and Macro Challenges” in Africa. Below are some of the other highlights from CBI Africa 2013.

GMI Global LLC sales@gmiforum.com +1-203-516-7424

Technical & Engineering Highlights: •

Eduardo Reis from the Global Technical Assistance Area, Cement & Lime at Magnesita discussed “Technological Globalization.”

•

Dr. York Reichardt, General Manager of Products and Sales at Gebr Pfeiffer presented on “Vertical Roller Mills for the African Cement Industry.”

•

Gideon Potgieter an Independent Business Advisor shared his thoughts on“Reducing Carbon Footprint by Using Energy Generated From Waste.”

•

Jan Reynhardt, Co- Founder & Chief Operating Officer of GRNQ Environmental Solution (Pty) Ltd reviewed “Energy and the Environment: The World in Flux.”

•

Andreas Renetzeder, Senior Sales Manager at Scheuch presented on “Innovative Filter Technology- EMC, SCR, DeCONOx.”

•

Jens Garbe, Territory Sales Manager at Claudius Peters shared “Innovative Packing Plant Technology for African Building Material Market.”

•

Vishal Agrawal from Loesche discussed “Clinker Grinding without Hot gas & with Zero/Minimum water sprinkling in Loesche VRMs at Holcimplants in India.”

Business & Finance Highlights: •

Michel Folliet, Principal Industry Specialist at the International Finance Corporation (IFC) discussed the “Context of the African Cement Industry – What Lies Beyond the Horizon?”

•

Maciek Szymanski, Senior Manager at Ernst & Young presented on “Sub-Sahara – The Last Exciting Frontier In Global Cement.”

•

Jeannot Boussougouth, Senior Manager at Standard Bank reviewed “Financing Cement Projects in Africa”.

•

Benjamin Tymann, Shareholder of Greenberg Traurig LLP and CoChair of the Global Construction Materials Industry Practice Group shared his thoughts on “Today’s Rising International Legal Risks and Designing a Compliance Program to Prevent Them”.

•

Tshepiso Dumasi, Commercial Director at Lafarge Zambia discussed the “Opportunities and Challenges Central Sub-Saharan Africa.”

•

Dr. Daniel Camarasa, Strategic & Business Development Manager at Dangote Cement presented on “Growing Africa’s Cement Industry – Challenges & Opportunities.”

CBI Africa 2013 was sponsored by: Magnesita, Gebr. Pfeiffer, Claudius Peters, Loesche, Promac Engineering Industries Limited, Scantech, Scheuch, and Starlinger. CemWeek also provided key support to CBI Africa 2013.

GMI Global is looking ahead and is excited to begin planning for the next CBI Africa Conference. Stay tuned for news on what will surely be the most exciting annual cement business and industry events in Africa.

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CEMENT MARKETS

CW Research & Analytics CW Group CemWeek BMWeek CemWeek CW Group BMWeek CemWeek BMWeek CW Group South-East Asia Focus

C

Bleak trade landscape for South East-Asian countries

Cement imports covered 0.28 percent of India’s consumption in 2012.

The Indian cement market benefits from self-sufficiency, thus only limited imports crossing the country’s borders on a monthly level. Cement imports covered 0.28 percent of the country’s consumption in 2012, with the share decreasing further in the first two months of 2013 (0.16 percent). India consumed 234.59 million tons of cement in 2012, 0.66 million tons of which being supplied from external sources.

Cement imports reached their highest level between February and May 2012, mirroring the seasonal upswing with a frail recovery noted in October-November 2012. The general disappointment felt on the domestic market in the beginning of 2013 was also present at the level of India’s cement suppliers, as imports in Q1 2013 did not increase at the level that had been expected.

80,000

Others Pakistan Bangladesh

40,000

0

Jan-12

Feb-12

Mar-12

Apr-12

May-12

Jun-12

Jul-12

Aug-12

Sep-12

Oct-12

Nov-12

Dec-12

Jan-13

Feb-13

The largest external suppliers are Pakistan and Bangladesh, whose combined dispatches to India represent around 95 percent of India’s total cement imports. Pakistani cement companies have argued for some time now that non-tariff barriers imposed

by India are restraining shipments at levels far below the ones anticipated initially. In February 2013, Pakistani cement companies noted that only one truck loaded with cement was able to cross Wagah borders during one day, requiring at least four hours for clearing customs. The trade by rail is also hampered, as both Pakistani and Indian railways had assigned a limited number of wagons for cement transportation. The subdued volumes of cement imports triggered a decline in trade prices for both Pakistan and Bangladesh. In February 2013, a ton of cement was shipped from Pakistan at US$68, while Bangladesh was shipping its cement at around US$83 FOB per ton.

To learn more, please contact the CW Research & Analytics team at sales@cwgrp.com or +1-702-430-1748.

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MAY / JUNE 2013

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Source: CW Group Analysis

INDIA MONTHLY CEMENT IMPORTS STRUCTURE (TONS)

INDIA MONTHLY CEMENT EXPORTS STRUCTURE (TONS) 300,000

CEMENT MARKETS

CW Research & Analytics CemWeek BMWeek CemWeek BMWeek CemWeek BMWeek Others Nepal

150,000

0 Jan-12

Feb-12

Mar-12

Apr-12

May-12

Jun-12

Jul-12

Aug-12

Sep-12

Oct-12

Nov-12

Dec-12

Jan-13

Feb-13

Source: CW Group Analysis

Sri Lanka

FOB EXPORT PRICE TO INDIA (USD/TON)

70

40

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11

Sep-11

The Indian cement trade landscape is mostly sketched by exporting activities, with 0.84 percent of 2012 cement production being dispatched externally. Cement exports also witnessed a decline in their share in cement production in the first two months of 2013, when they registered a share of 0.6 percent. Given the limited trade volume registered at the level of both imports and exports, cement consumption and production follow each other closely in terms of volumes.

India exported around 2 million tons of cement in 2012, the majority of the exports being destined for Sri Lanka and Nepal. Sri Lanka received 1.4 million tons of cement from India in 2012, while Nepal consumed around 0.27 million tons of Indian cement.

After notching consistent volumes in August and September 2012, cement exports remained at rather low levels, well below the corresponding months of the previous year.

Jan-12

May-12

Sep-12

Jan-13

Source: CW Group Analysis

100

India exported around 2 million tons of cement in 2012, the majority of the exports being destined for Sri Lanka and Nepal.

Cement trade is expected to continue to suffer for the remaining part of the year, given the struggle of the Indian authorities to tackle the drop in demand growth rates and to achieve the objective of promoting domestic products over imported ones.

To learn more, please contact the CW Research & Analytics team at sales@cwgrp.com or +1-702-430-1748.

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CEMENERGY MARKETS

CW Research & Analytics CW Group CemWeek BMWeek CemWeek CW Group BMWeek CemWeek BMWeek CW Group CEMENT ENERGY MARKETS Global coal trade volumes show little recovery in the first four months of 2013

COAL MARKET UPDATE Coal volumes worldwide remained sluggish during April and the beginning of May as weak demand from main consumer countries persist. Coal oversupply continues to be the main driver in price setting.

Coal trading markets show little signs of improvement Global coal trade volumes showed little sign of recovery in the first four months of 2013 compared to the same period of 2012. Higher coal export volumes out of Russia, Australia and the United States were offset by a decline in deliveries from Colombia and Indonesia.

Coal output from South Africa’s Richards Bay Coal Terminal (RBCT) declined to 6.24 million tons in April, down 17% from the previous month, while coal shipments out of Australia’s Newcastle surged as China, one of the top markets for Australian coal, saw its imports increase 25 percent through April.

In the U.S., April’s coal production declined 3 percent versus March and the output from coal mines in the first four months of 2013 showed a 7 percent decline compared to 2012, as utilities’ stockpiles continue to be high and companies try to burn inventories.

Coal deliveries to countries in Europe surged at the beginning of the year, pushing up Russian exports more than 10 percent in the first four months of 2013. In 2012, Europe accounted for more than 50 percent of Russian total coal exports.

Indonesia’s coal industry, whose production output reached 100 million tons in the first quarter of 2013 and which is expecting a 6.5 percent increase in exports this year, could be hit by China’s recently announced plan to restrict the usage of low-grade coal in the country. China receives most of its low-grade imported product from Indonesia and the potential impact could represent anything from 50 to 70 million tons per year.

India and Japan offsetting China’s decrease in consumption While Chinese demand for coal is expected to weaken, Indian and Japanese appetite for coal is still strong. In Japan, imported volume during the first 4 months of 2013 grew by one million tons versus 2012 while coal consumption in power generation plants reached 18 million tons. After the Fukushima plant meltdown in Japan, the country is moving away from nuclear energy sources and the government is easing the process to approve new coal-fired power plants.

To learn more, please contact the CW Research & Analytics team at sales@cwgrp.com or +1-702-430-1748.

24 MAY / JUNE 2013

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CEMENERGY MARKETS

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According to the Ministry of Coal, India’s coal production in fiscal year 2012-2013 was 560 million tons, up 3.3% versus 2011-2012. Deliveries from the facilities rose 6.2% during the same period. Despite the increase in local supply, the Indian industry hasn’t been able to keep up with the country’s coal demand. Coal imports hit record last year and Indian coal consumers located in coastal areas have taken advantage of low trade prices to supply their operations with foreign product. The government recently announced it is addressing all the issues and it will expedite the process to clearance new coal mining projects.

COAL GLOBAL TRADING (MILLION TONS) Rest

120

US

South Africa

Colombia

Australia

Russia

Indonesia

60

0

Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11

Jul-11

Oct-11

Jan-12

Apr-12

Jul-12

Oct-12

Jan-13

Feb-13

Mar-13

Source: Customs Data

Global coal prices continue to fall

ENERGY PRICES UPDATE Coal Global coal trading prices continued to fall during April, a sign of China’s weakened demand for imported product and oversupply in the markets. Current average price is 22 percent higher than the price observed in April 2009, but 24 percent lower than the peak reached in February 2011.

After losing market to cheap imported coal, local mines in China continue to cut production to alleviate oversupply. The government recently announced that it will close 500 mines in the Sichuan province by 2015; around 300 of them will be shut down in 2013. A recent blast in the same region killed at least 25 workers and all operations in the region were halted for investigation.

In Australia, coal export prices declined for a second straight month in April, as demand slid from its customers in Asian markets. As a preventive measure and following the steep slide in prices, BHP Billiton, the global coal player headquartered in Australia, released plans to temporarily close high-cost coal mines and reduce coal investments, with no new major projects planned. May output from the Newcastle terminal seems to be unaffected while coal loader workers continue with strikes and work bans to defend contract conditions.

Lack of local product in India, along with low international prices, has been pushing up coal imports. Stocks at many power plants in the country are reportedly at critical lows and customers have to turn to imports to replenish coal inventories. In order

To learn more, please contact the CW Research & Analytics team at sales@cwgrp.com or +1-702-430-1748.

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CW Group CW Group CW Group

to compete with depressed trade prices, coal miner Coal India (CIL) announced price cuts of its premium quality coal that competes with imported product from Australia and South Africa. CIL is also planning a price increase of its low-grade coal.

US PETCOKE EXPORT PRICE (US$/TON)

120

60

0

Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Mar-13 Source: Customs Data

Petcoke The 12-month average price of U.S. uncalcined petcoke for export markets remained unchanged versus the previous month but slightly recovered from last year’s average.

Price is down 21 percent from a year ago versus a 24 percent drop in the previous month. First-quarter volumes are 3 percent below 2012 levels. While India’s demand for U.S. petcoke more than doubled in 2012 versus 2011, 2013 shipments are 8 percent behind a year ago. Strong petcoke demand from India has helped the U.S. offset the decline in exports to selected countries in Europe due to the economic recession.

Local cement producers reported an increased use of petcoke during the first quarter of 2013 and a decrease in manufacturing cost due to lower petcoke prices.

Year-to-date petcoke volumes delivered to Japan, the second largest market for U.S. petcoke after China, are up 42% compared to 2012, but the price is at the lowest level since mid-2010.

Natural Gas Natural gas price in North America closed at its highest since July 2011, reaching US$4.2/mmBtu in April, as the country approaches the summer season and demand should start to slow down. In Europe, natural gas prices jumped 9% in April from March. Both regions have been hit by unseasonably cold weather. This spring is the coldest since 1979 in the United Kingdom; in the U.S., record May snowstorms have spread through the north-central states.

To learn more, please contact the CW Research & Analytics team at sales@cwgrp.com or +1-702-430-1748.

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CEMENERGY MARKETS

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The price of Japanese imported liquefied natural gas (LNG) closed at US$14.5/mmBtu in April, back to the levels seen in mid-2011, following a recent drop in oil prices.

Japan’s liquefied natural gas contracts have been long linked to oil prices and the government is pulling out all the stops in an effort to delink gas prices from crude prices.

Local prices in Russia, the largest producer and exporter of dry natural gas, still remain among the lowest in the world. April’s price closed slightly over US$1/mmBtu, onetenth lower than the average price of its peers in Europe. It is estimated that Russia supplies about 25 percent of the natural gas consumed by the European Union countries.

Russian exports were hit by the shale gas revolution in the U.S. last year but recently the government has been in conversations with China and Japan to develop new projects and agreements aimed to improve future output.

NATURAL GAS PRICES (US$/MMBTU) 20

Japan LNG

US

Europe

Source: EIA, World Bank

0

Mar-97 Nov-97 Jul-98 Mar-99 Nov-99 Jul-00 Mar-01 Nov-01 Jul-02 Mar-03 Nov-03 Jul-04 Mar-05 Nov-05 Jul-06 Mar-07 Nov-07 Jul-08 Mar-09 Nov-09 Jul-10 Mar-11 Nov-11 Jul-12 Mar-13

10

STEAM COAL FOB AVERAGE PRICES (US$/TON) Indonesian HBA

US exported

150

Australia Newcastle

Colombia exported

Jan-13

Oct-12

Jul-12

Apr-12

Jan-12

Oct-11

Jul-11

Apr-11

Jan-11

Oct-10

Jul-10

Apr-10

Jan-10

Oct-09

Jul-09

Apr-09

60

Jan-09

105

Source: EIA, Colombia Ministry of Mines and Energy, IMF, Indonesia Ministry of Energy and Mineral Resouces

South Africa Richards Bay

To learn more, please contact the CW Research & Analytics team at sales@cwgrp.com or +1-702-430-1748.

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cement market & competition

M

arket and competition

Excess capacity and slower growth for demand determine cement companies to look beyond their usual markets, but also to cut spending budgets. Citing the same poor market conditions, Lanco canceled its mini cement plant project.

hati. Star Cement recently commissioned its state-of-the-art cement plants at Jaintia Hills Meghalaya and Guwahati that brought the total cement capacity of the company to 4 million tons.

North Bengal and Bihar draw attention Cement companies operating in northeast India are targeting the growing markets of North Bengal and Bihar. Northeastern cement companies enjoy favorable conditions under the North East Industrial Investment Promotion Policy (NEIIPP), which confers concessions and tax reliefs.

Market estimations reveal that Bihar is expected to grow at 13 percent, while

28 MAY / JUNE 2013

North Bengal is projected to expand by between 10 and 12 percent. The current size of these two markets is estimated at 20 million tons.

Cement Manufacturing (CMCL) intends to supply the area with one million tons of cement per year for a value of RS 400 crore. The company already has sent a full rake (2,650 tons) of Star-branded cement from its Sonapur greenfield plant in Guwa-

CW Group Coal Week CemWeek BMWeek INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE CemWeek CW Group Coal Week BMWeek CemWeek BMWeek CW Group Coal Week

Cement makers slash capital spending Excess capacity and a softer-than-expected revival in construction and homebuilding led Indian cement companies to announce slashes in their capital expenditure over the next 12 months. Capacity utilization was rated at 71 percent in FY 2012-2013, decreasing from 89 percent in FY 20092010. The indicator is projected to hike up to 75 percent by FY 2014-2015. Housing has been affected by the reluctance of residential developers to launch new projects due to high inflation and interest rates and uncertain economic outlook.

UltraTech is expected to cut its capital expenditure by half versus the RS 44.3 billion spent in the last fiscal year. Other companies will follow in spending reductions, including Century Textiles, Grasim Industries, Madras Cement and India Cements.

CEMENT: MARKET AND COMPETITION

Lanco cancels deal to build plant Citing poor market conditions, Lanco Industries announced that is shelving the plan to set up a mini cement plant in Andhra Pradesh. The 0.3 million ton cement plant was evaluated at RS 125 crore.

The investment was initially announced in November 2012.

ACC launches new products ACC launched a range of premium cements in early April 2013 in an attempt to meet changing customer needs. Three premium high-performance cements were introduced: ■■ ACC F2R Cement (F2R = Foundation to Roof) is a premium high-performance Portland Slag Cement, packed in laminated polypropylene bags.

■■ ACC Concrete Plus Cement is a premium high-performance Portland Pozzolana Cement, produced by inter-grinding higher strength Ordinary Portland Cement with high-quality processed fly ash. The new cement product will be available in Maharashtra, Karnataka and Andhra Pradesh.

■■ ACC Coastal Plus represents a product designed especially for the coastal climate. This cement will be marketed in southwestern coastal belts, such as coastal Karnataka, Goa and entire Kerala.

Cement makers argue for renewable energy status Indian cement companies consider that co-generation of power through wasteheat recovery processes should be given renewable energy status. N.A. Vishwanathan, Secretary-General of the Cement Manufacturers Association (CMA), notes that the Indian cement makers were trendsetters when it comes to energy conservation measures. On the other hand, according to G. Jayaraman, Executive President of Birla, the waste-heat recovery mechanism had the potential to generate around 600 MW of power. However, the current power generation is only at 100 MW.

Vasavadatta Cement turns to plastic waste After Vasavadatta Cement became the first company to receive green energy status from the Confederation of Indian Industry for eco-friendly measures for its plants in Sedam, the company has been cleared by the Goa State Pollution Control Board to burn plastic waste at its Karnataka unit.

Vasavadatta Cement would be procuring the alternative fuel from the collecting state agencies and village panchayats from Goa. Before being supplied to the cement company, the plastic waste will be baled by two baling machines, one in North Goa and the other in South Goa. In order to process all its plastic waste, the state would need six baling machines.

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olume and pricing

Cement companies announce price increases ahead of the monsoon season. In the first five months of the year, the Indian cement makers have been unable to transfer their inflated costs to the endcustomer. Are the recently bumped up prices set to stick or will they be reversed once again by the decline in consumption specific to the monsoon season?

Cement price increases are looming So far this year, Indian cement companies have been unable to pass their cost increases on to the customers. Railway freight charges boomed by 25 percent in 2012, while coal prices rose by another 10 percent on the back of lackluster demand.

Logistics costs continued to inflate in 2013 as the Indian railways announced on April 1 that freight rates would be linked to the inflation index, which led to freight rate increases of 6 percent for coal, 4 percent for clinker and cement and 5.5 percent for steel.

The first attempt to increase cement prices was noted in February, although the price increases failed to stick. Weak demand forced cement companies to adjust their prices downwards once again with panIndia average cement prices reported at around RS 294 per 50 kg bag in March 2013.

The festival of Holi affected both the central and the western regions, while Maharashtra’s cement prices were hampered by sand and water related issues. Northern India remained relatively stable, except

in Rajasthan and Punjab. Rajasthan witnessed higher demand on the back of improved supply given the recent commissioning of cement production units within the state, while Punjab suffered from sand supply shortage. Prices kept firm in eastern India, while the severely oversupplied southern region continued its subdued pattern. Hyderabad was the exception of the region, with prices found on an upwards trend given the weak base of 2012.

Cement prices were further reduced in April and the first half of May with the first signs of recovery registered in the beginning of June. Cement companies are expected to increase cement prices in June while they try to gain a price edge ahead

of the monsoon season. Industry sources revealed that the price hikes might be in the range of RS 10-15 per bag. The price increases might be even higher for some markets. An example is southern Andhra Pradesh, where cement companies had to overcome the sharp decline in prices from April 2013 and already increased prices in the range of RS 10-30 per bag.

HeidelbergCement announces moderate price hikes HeidelbergCement was among the first to announce cement price increases in June 2013, though the change in rates was lower than expected by the industry. The company raised cement prices by RS 2-5 per 50 kg bag in some of its markets. The early continued on page 44

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CEMENT: PEOPLE volume and pricing

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eople

Shree Cement wins the Golden Peacock Business Excellence Award for 2013. Indefinite transport strike staged around an ACC cement factory. Landslide at unfinished JK Lakshmi cement plant kills one worker and leaves two critically injured.

PROBLEMS FOR JK LAKSHMI On April 1, 2013, a landslide at the JK Lakshmi cement plant currently under construction in the Durg district of Chhattisgarh left one worker dead and two critically injured. The three employees were working in a 40-feet-deep pit at the plant in Malpuri Khurd, about 30 km from Bhilai.

They were laying the foundation for installing heavy machinery at the plant. Adding to the woes of JK Lakshmi, three days later a group of villagers set on fire 17 vehicles parked within the plant’s premises. Even though the villagers regarded their act as a protest against the death of the employee, the company declared that the two incidents were not related, the latter being seen as the consequence of an ongoing agitation generated by a request for permanent jobs.

PLEA FOR JOINT TRIAL YSR Congress leader, YS Jaganmohan Reddy, has filed a petition through his counsel requesting framing of charges and pleaded for a joint trial for all chargesheets in the case. Reddy was arrested on May 27, 2012, on corruption charges and has been jailed in Chanchalguda since then. Reddy and his financial advisor were also chal-

lenging the filing of a fifth chargesheet by CBI on the basis of the existence of a single issue concerning Dalmia Cement. The new chargesheet was filed by CBI on April 8, 2013, regarding alleged investments made

by Dalmia Cement, Eeswar Cement and Raghuram Cements. The central agency also told the court that it is investigating another six aspects related to the case.

TRANSPORT STRIKE AROUND ACC PLANT The Jharkand Colliery Shramik Union is staging an indefinite transport strike around an ACC cement factory. Jaleshwar Mahto, general secretary of the union, announced the strike at the end of March.

The Jharkand Colliery Shramik Union says that the announced strike follows the request of casual workers to have their regularization of services processed through PF deduction. The company refused to proceed with the regularization in the required format and began deducting PF through contractors.

SHREE CEMENT BAGS AWARD Shree Cement has won the Golden Peacock Business Excellence Award for 2013.

The company was recognized by the Institute of Directors Delhi for its Quality of Leadership and Governance for Business Excellence, Innovation and Sustainability.

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1 rojects and expansions

Ultratech, Malabar Cements and Jammu and Kashmir Cements plan to expand cement capacity.

Reliance Cement launched commercial operations in Amravati.

UltraTech sets spending budget for Rajasthan UltraTech plans to expand its capacity at Aditya Cement Works in Rajasthan by 2.90 million tons per year. The RS 2,000 crore project includes the construction of two additional grinding units with the commissioning date set for March 2015.

The company is actively increasing its clinker and cement capacity around the country. UltraTech’s recent commissioned projects include the clinkerization plant at Rawan, Chhattisgarh (3.3 million tons per year in cement capacity); the 1.55 million ton per year grinding unit at Hotgi, Maharashtra, and the 0.6 million ton increase of its cement grinding capacity at Gujarat.

UltraTech’s expansionary efforts were also set on the bulk terminal at Cochin, Kerala, and the Wallcare Putty plant at Katni, Madhya Pradesh.

The current clinker capacity of UltraTech is rated at 41.80 million tons per year, while the cement capacity almost reaches 54 million tons per year. Along with the commissioning of all projects that are currently underway, the company’s cement

32 MAY / JUNE 2013

capacity is expected to reach 64.45 million tons per year.

Chettinad Cement unveils expansion plan for Dindigul plant Chettinad Cement intends to increase cement production at its Karikkali cement plant in Dindigul, Tamil Nadu, by 2.5 million tons. As soon as the expansion is commissioned, the total nameplate cement

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capacity of the plant will reach 7 million tons. In order to support the additional electricity demand at its plant, Chettinad Cement will also enhance the capacity of its captive power plant from 48 MW to 78 MW. The total investment is estimated at RS 565 crore, while the total land requirement for the project is evaluated at 132.76 hectares.

project will use Bhilai Steel Plant’s slag and will include a captive limestone mine and two grinding units.

Chettinad Cement is also pledging RS 1,800 crore for a 5 million ton per year cement plant in Chincholi in Gulbarga district, Karnataka. Another two grinding units are under construction – one in Ahuj in Solapur, Maharashtra, and a second one in Vishakapatnam in Andhra Pradesh, the latter with a nameplate cement capacity of 2 million tons.

The company already invested RS 800 crore in the project and is expecting to commission its new integrated facility, along with the Odisha grinding unit, in early FY 2015.

The two projects will bring the company’s cement capacity to 8.5 million tons, while also offering the opportunity to penetrate the eastern market.

JK Lakshmi reveals details for Chhattisgarh project JK Lakshmi Cement, part of the HS Singhania Group, embarked on a RS 2,100 crore expansion project that will be largely funded by debt. The bulk of the investment (RS 1,550 crore) is dedicated to the 2.7 million ton integrated cement plant located at Durg in Chhattisgarh. The Durg

In a subsequent expansionary process, JK Lakshmi will build a grinding unit in Asansol-Durgapur region, West Bengal.

Rajasthan-registered JK Lakshmi is investing another RS 150 crore for the construction of its second unit in Gujarat, at Surat.

New clinker unit to rise in Kashmir Jammu and Kashmir Cements (JKCL) is investing RS 27 crore to build a new

clinker grinding and packing unit at Samba. The unit will own a grinding capacity of 300 tons per day and is expected to be commissioned by July 2013.

Malabar Cements to double cement capacity Malabar Cements proposed to set up another cement mill at Walayar with the intention to double its current cement capacity of 50,000 tons per month. The construction of a 4,000 tons silo is also included in the project. The company cautions that the limestone reserves owned near Walayar at Pandarathu mines are sufficient only for the next 16 years, so the company proposes a joint sourcing program, including domestic purchases and imports.

CEMENT: projects and expansions

The company already secured the Terms of Reference (ToR) from the environment ministry in March 2013.

Mangalam Cement stops operations at kiln I The company stopped operations at its first kiln effective May 6, 2013. Mangalam Cement intends to upgrade its clinker production capacity by 0.5 million tons per year, expecting the upgraded kiln to be restarted by the end of the second quarter of 2014. The company’s operations will not be affected during the upgrade as it has sufficient clinker stocks available.

Reliance Cement starts commercial operations in Amravati Reliance Cement launched commercial operations in Amravati, Maharashtra, on April 15, 2013. The company started operations in September 2012 from Nagpur.

Reliance Cement is planning to continue its Indian expansion, targeting areas such as Wardha, Chandrapur and Bhandara.

The Indian company is also building two integrated cement plants, located in Maharashtra and Madhya Pradesh, with a combined cement capacity of 10 million tons.

The cement plants will use fly ash produced at power plants owned by Reliance Cement’s sister company, Reliance Power.

However, Reliance Cement’s projects are facing criticism. The opposition party BJP accused state Congress’s ruling for planning a deal after allotment of 5 million tons cement plant to Reliance Cement.

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&a and finance

5

1

HeidelbergCement sells cement grinding unit in Raigad. Ultratech shows interest in Jaypee’s Gujarat plants. The Securities and Exchange Board of India asked to investigate takeover.

M&A UltraTech eyes Jaypee’s Gujarat plants UltraTech is in final discussions with Jaiprakash Associates to buy its 4.8 million tons cement plants in Gujarat and thus become the largest Indian cement company, with an estimated market share of 20 percent. The deal was evaluated at RS 4,100 crore and was expected to be closed by the end of May 2013. Jaiprakash Associates intends to reduce RS 8,000 crore in debt through the sale from a total debt of RS 45,000 crore reported at the end of 2012. Another RS 1,000 crore will be raised by selling the Greater Noida land parcel owned by Jaiprakash Infratech.

34 MAY / JUNE 2013

UltraTech will pay a premium value of US$155 per ton of cement, given that it will be able to hasten its entrance into the robust western India cement market. As a reference, the acquisition performed in September 2012 by KKR-backed Dalmia Cement of the 1.5 million tons Meghalaya cement plant owned by Adhunik Cement was rated at an enterprise value of RS 1,085 crore, the equivalent of US$130 per ton.

HeidelbergCement sells unit HeidelbergCement India announced on May 21, 2013, that it will sell to JSW Group the 0.6 million tons cement grinding unit located in Raigad. The size of the deal was

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not disclosed by the companies, as negotiations were still ongoing. JSW Ispat aims to use the additional grinding capacity for developing a stable outlet for slag evacuation. HeidelbergCement India previously explored different options for improving margins at the Raigad grinding facility, all of them rendering unfeasible due to infrastructural bottlenecks.

HeidelbergCement India’s CEO and MD, Ashish Guha, declared that the disposal is in line with the company’s philosophy of divesting less strategic assets, while focusing on key operations in central India where the company recently expanded its footprint.

Sebi asked to look into takeover The Securities and Exchange Board of India (Sebi) is probing investor complaints about alleged irregularities in the takeover of Shree Digvijay Cement by the Brazilian cement major Votorantim Cimentos.

Votorantim took control of the Jamnagar, Gujarat-based cement producer after a series of multi-level transactions spanning four continents that culminated in February 2013. Thus, complaints specify that the negotiated price is hidden in the complex restructuring process that took place between Cimpor (former owner of Shree Digvijay Cement) and Votorantim.

FINANCE Compat postpones penalty The Competition Appellate Tribunal (Compat) stayed a RS 6,300 crore penalty imposed on 11 cement producers that were fined in June 2012 by the Competition Commission of India (CCI) on account of cartel accusations. However, Compat asked the companies to deposit 10 percent of the amount while awaiting the resolution on their appeal. Failing to do so would lead to the appeal’s dismissal.

Approaching monsoon erodes shares Expectations of the approaching monsoon fueled profit-booking on the counters placing a lot of pressure on cement companies’ shares in the end of May. The

monsoon season has always been regarded as a dampener for cement shares, as heavy rains are expected to stall construction activities.

CEMENT: m&a and finance

HeidelbergCement may also divest a minority stake in its Indian arm. Bain Capital has been selected to perform due diligence and valued the dilution of 12 percent of the company’s shares at around RS 1,800 crore. The premium adds another RS 220 crore to the valuation.

India Cements hit hard by IPC spot fixing India Cements, led by N. Srinivasan, lost RS500 crore in market value as its share price plummeted by 21 percent in just one week, ending 26th of May 2013. The main cause for the slump was considered the arrest of Gurunath Meiyappan, Srinivasan’s son-in-law, for his alleged involvement in betting on IPL matches. The disappointing Q1 financial results also worsened the depreciation of the company’s stock.

The share price is expected to bottom out in the near future.

The shareholders of Shree Digvijay Cement say that the value of the assets that changed hands is much higher and demand the release of a new open offer that reflects the negotiated price of the shares. Initially, Votorantim made an open offer to the shareholders at a price of RS 10.94 per share.

Lafarge raises fresh funds Lafarge India signed an agreement to raise €200 million (RS 1,400 crore) through a capital increase subscribed by Baring Private Equity Asia. In case the transaction will be passed by local regulatory authorities, Baring Private Equity Asia will own a 14 percent minority in Lafarge India.

The funds will be used to double Lafarge India’s cement capacity at the Chhattisgarh cement plant.

Previously, at least six private equity companies showed interest into acquiring a minority stake in Lafarge India. The companies were the Singapore governmentowned Temasek Holdings, Carlyle, Standard Chartered, KKR, TPG Capital and Blackstone.

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quipment highlights

FLSmidth to supply cement plant to Orient Cement FLSmidth announced on June 5, 2013, the receiving of a new order from India.

The order worth in excess of DKK 200 million was placed by the Indian cement manufacturer Orient Cement for the supply of a greenfield cement plant to be located in the state of Karnataka in southern India. The plant will have a capacity of 6,000 tons per day.

The order covers engineering and supply of main equipment from limestone crusher to packing plant, including key components for raw material crushing equipment, limestone, coal and additive stores, raw material grinding system using roller press technology, vertical mill for coal grinding, ILC pyro processing system with Cross-Bar Cooler, and two vertical mills for cement grinding, as well as packing and loading systems for trucks and rail wagons.

This is the second contract closed between the two companies, after FLSmidth supplied Orient Cement with a 4,000 ton per day pyro processing system for a brownfield project in 2007. The order will

36 MAY / JUNE 2013

be booked by the cement division, and will contribute positively to the division’s earnings until the end of 2014.

Pair of road-mobile Siwertell unloaders ordered for Turkish operations Cargotec secured a contract for two Siwertell road-mobile unloaders from the Turkish company, Medcem Global Pazarlama. This is the second Turkish order in less than a month. The 10,000 S trailerbased, diesel-powered ship unloaders will be delivered in October and November 2013. Their assembling will take place at Siwertell’s plant in Bjuv, Sweden.

The unloaders will be used by the company to discharge cement at a capacity of 300 tons per hour. Each of the equipments will be fitted with a dust filter and double bellows system used to load trucks.

Sales Director for Siwertell Mobile Unloaders, Jörgen Ojeda, pointed out the reasons for which Medcem Global Pazarlama chosen his company: “With more than 100 road-mobile unloading systems delivered worldwide, they have earned a high profile reputation as state-

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of-the-art unloading equipment. Other advantages that influenced the client’s decision include the flexibility and high capacity that these systems offer, in combination with low operational and maintenance costs. As there is no need for any preparatory on-site engineering works, the mobile unloaders are available to start operations immediately upon delivery.”

REGIONAL NEWS

Axle load limits for truck transportation imposed by Pakistani authorities are severely cutting cement companies’ margins.

Multiple regional expansionary actions are announced by cement companies operating in the region.

Pakistan’s cement sales affected by logistics limitations Pakistani cement companies dispatched 2.888 million tons of cement in May 2013, more than 7.5 percent below April 2013.

Apart from the slower pace of construction activities, the decline was also perceived as the direct consequence of strict application of the axle load limits imposed by the national highway and motorway authorities. The axle load rule had been lax for years, allowing trucks to be loaded with extra quantities. The stricter application impacts not only the availability of transportation, but also the logistics costs incurred.

Northern cement units dispatched around 2.29 million tons of cement in May 2013, 24.3 percent of which were sent by sea to external markets, mostly to Afghanistan, while around 2.7 percent were dispatched to India. The southern units provided the

38 MAY / JUNE 2013

In the current fiscal year, the capacity utilization of the market is expected to climb back to its highest level reached in FY20062007 of 74.5 percent. Punjab-based units are estimated to lead the way and operate at full capacity, as the government is pushing forward with big-ticket items that boost demand.

domestic market with 0.39 million tons of cement, with their exports nearing 0.22 million tons.

During the first 11 months of the current fiscal year, Pakistani cement companies sold more than 30.5 million tons, around one million tons above the corresponding period of the last fiscal year. Cement exports notched 7.7 million tons this fiscal year versus more than 7.8 million tons in the last fiscal year for the first 11 months.

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Pakistani companies expand outside their borders Attock Cement Pakistan informed the Karachi Stock Exchange on May 27, 2013, that the company will pledge US$25 million for building a grinding unit in Basra, Iraq. Attock Cement operates a 1.8 million ton cement plant in Pakistan located in Hub, Balochistan.

Lucky Cement is at a more advanced stage on its DR of Congo project, and is expected to start construction on the US$240 million cement plant in July 2013. Lucky

Cement is founding the new Nyumba Ya Akiba (NYA) cement company together with the Rawji Group through a 50-50 joint venture. The 1.2 million ton cement plant, located 250 km away from Kinshasa, is due to be commissioned in late 2015.

In early April 2013, Thatta Cement also announced that is nearing financial closure for its US$15 million grinding plant project in Sri Lanka. The company signed a 25-year lease agreement with Hambantota port’s agency. The grinding capacity of the plant is set at 0.3 million tons per year with the possibility of increasing its output up to 1 million tons in future years. The grinding facility will not be limited to Pakistani clinker, but will be opened to other potential sources depending on international pricing evolution.

The Pakistani rush for alternative fuels Facing an ongoing energy crisis, Pakistani cement companies started to foray toward usage of alternative fuels, such as waste from poultry farms. The estimated share of alternative fuels among the industry’s energy mix crossed 20 percent. Lafarge Pakistan declared that it is planning to enhance alternative fuel utilization to 40

percent in one year. The decision follows the impact on coal transportation costs generated by stricter axle load limits. The drop in international coal prices was offset by transportation costs that shot up from US$35 per ton to US$50 per ton from Karachi to Potohar.

However, interest in the country’s cement industry does not seem to be completely lost as Semen Indonesia announced at the beginning of June 2013 that it is looking into acquiring a cement plant in Bangladesh, as part of the company’s expansion program.

Nigeria’s Dangote interested in Nepal Dangote Cement submitted an application to the Investment Board Nepal expressing interest to build a US$550 million cement plant in the western Nepali district of Surkhet. The Investment Board summoned a committee that will assess the application and decide.

New cement plant to be built in Sri Lanka Nepal’s first Forbes billionaire, Binod Chaudhary, submitted to the Sri Lanka government a US$75 million proposal for building a cement plant in Jaffna Peninsula. Chaudhary would not be making his first investment in Sri Lanka, as the businessman already invested around US$200 million in Sri Lankan projects.

Bangladesh running at low utilization Considering that half of the country’s cement capacity remains unutilized, Bangladeshi cement companies are on the lookout for exporting markets. In an attempt to move beyond dependency on the northeastern Indian states for exports, businessmen from Bangladesh have reportedly visited Sri Lanka, Myanmar and some African countries. The nameplate cement capacity of Bangladesh is estimated at around 480 million bags, while consumption falls behind at 320 million bags per year.

Singha Cement releases new packaging Sri Lanka’s cement producer released new packaging for its products in order to be in line with the corporate branding of its parent company, Italcementi. The spiral that symbolizes the idea of movement, acceptance of change and commitment to grow has been added to Singha Cement’s products.

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CONSTRUCTION materials

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nfrastructure & projects

Approval given for the expansion of the 31D National Highway in West Bengal and the city road project in Rajasthan. Roopnarayan bridge commissioned ahead of schedule.

NEW PROJECTS GREEN LIGHT FOR CITY ROAD PROJECT IN RAJASTHAN The Cabinet Committee on Economic Affairs approved the construction of a twolaning road network with paved shoulders on the Ladnu-Degana-Merta City section of National Highway-458 in Rajasthan.

The project developed under Phase-IV of the National Highways Development Project (NHDP) is estimated at RS 552.09 crore and will be executed through publicprivate partnership (PPP) on an engineering, procurement and construction (EPC) basis. Once complete, the project will ease the heavy traffic plying between LadnuDegana-Merta City.

involves the creation of a new mechanized facility at West Quay-1 (WQ-1) berth in the inner harbor. The facilities aimed towards iron ore handling will be developed in two phases on a design, build, finance, operate and transfer (DBFOT) basis. Phase-I of the project is expected to be completed

by June 2015 and Phase-II after two years from its commencement.

the company received orders worth RS 866 crore for the construction of Kochi Metro Rail Project.

The company’s Water & Renewable Energy Business has secured Engineering, Procurement and Construction (EPC) orders worth RS 148 crore from the Public Health Engineering Department of Rajasthan to construct a water supply system to 97 villages.

L&T CONSTRUCTION SECURES NEW ORDERS L&T Construction has secured orders worth RS 2,542 crore. The Building and Factory segment received orders worth RS 1,021 crore, which include the construction of residential towers, a cement plant and a factory. The Heavy Civil Infrastructure Business segment of

CABINET GIVES NOD TO NH EXPANSION IN WEST BENGAL The government has given its nod for the expansion of National Highway-31D in West Bengal. The expansion plan worth RS 3,119 crore involves four-laning of the Ghoshpukur-Falakata-Salsalbari section of National Highway. The project will be executed under the National Highways Development Project (NHDP) Phase II on a design, build, finance, operate and transfer (DBFOT) basis in build-operate-transfer (BOT) (Toll) mode of delivery and is expected to reduce the time and cost of travel for traffic on NH-31D.

CABINET GIVES NOD TO UPGRADE VISAKHAPATNAM PORT The Cabinet Committee on Economic Affairs also gave its approval for upgrading the existing facility and creation of a new facility at the Visakhapatnam Port Trust.

The project will be implemented through public private partnership (PPP) in two phases at an estimated cost of RS 845.41 crore. Phase-I comprises the upgrade of an existing mechanized iron ore handling facility at Outer Harbour, while Phase-II

40 MAY / JUNE 2013

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GREEN LIGHT FOR SEVEN ROAD PROJECTS IN NOIDA The Noida Authority approved several road infrastructure projects worth RS 2,000 crore to ease traffic flow in Noida.

The approved project includes construc-

Construction materials: infrastructure & projects

tion of two elevated roads, an overpass and makeover plans for four underpasses. One of the elevated roads will come up between Film City and the Uflex crossing, while the other is to be constructed near Dadri-Surajpur-Chalera (DSC) road. The four underpasses and the overpass are proposed to be located at City Center crossing and on NH 24-Model Town Crossing.

NEW LUXURY HOUSING PROJECT IN GURGAON Unitech’s realty segment has planned to shed an investment of RS 500 crore in the construction of a new luxury housing project at Sector 69 in Gurgaon. The project named ‘The One” involves the construction of six residential towers comprising 300 flats. The residential towers are being developed over an area of 16 acres. The company plans to complete the construction of the towers by 2017. Once complete, the project is expected to generate a sales revenue of RS 1,500 crore. update on PROJECTS RInfra THREATENS TO PULL OUT OF A NH-2 PROJECT Reliance Infrastructure has threatened to pull out of the multi-crore project that involves the widening of 180-km road between Delhi and Agra. The company has threatened to pull out of the project if security measures around the project are not beefed up. The company had even filed a complaint with Haryana Police over the vandalization of its toll plaza on NH-2.

The NHAI had awarded RInfra the project for construction and widening of the Delhi-Agra stretch in May 2010.

KMRL AND DMRC INK MoU Kochi Metro Rail (KMRL) and Delhi Metro Rail (DMRC) have signed a memorandum of understanding (MoU) as project owner and executing authority, respectively, for implementing the prestigious Kochi Metro Rail Project. The MoU clarifies the roles and demarcates responsibilities for both agencies. Under the MoU, the DMRC

will execute the Kochi Metro Rail Project under the financial and technical supervision of KMRL. The metro rail project is estimated to cost RS 5,182 crore of which 2,170 crore will be a loan from domestic financial institutions. The remuneration of DMRC is pegged at 6 percent of the cost of the total project. As per the agreement, the main civil work on the project is scheduled to start June 7.

COMPLETED PROJECTS ASHOKA BUILDCON COMMISSIONS ROOPNARAYAN BRIDGE The much-awaited bridge project across the River Roopnarayan, 72 km from Kolkata on NH6. is completed and commissioned by Ashoka Buildcon 18 months

ahead of schedule. The prominent highways and bridge development company was awarded the construction of the incomplete bridge in the year 2011, which it completed in a time frame of 10 months.

JAIPUR METRO PHASE-I TO BE OPERATIONAL BY AUGUST According to Managing Director Nihal Chand Goel of Jaipur Metro Rail, the first phase of the Jaipur Metro project is soon expected to start its function from August 2013. A train of four coaches will be ready for the public from Mansarovar to Chandpole section under the first phase, after the process of necessary checks and trial runs is completed by mid-July. The Jaipur Metro Rail Project is an ambitious dream project, which is expected to cost over RS 10,000 crore once fully complete. BMWeek BMWeek BMWeek

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Infrastructure and Construction Projects/Expansion Table

COST IN INR

LOCATION

Name of Project

NAME OF PROJECT

Cost (INR Crore)

Location

City Road Project

552

Rajasthan

Visakhapatnam Port upgrade

845

Visakhapatnam

L&T Construction new orders

2,542

Rajasthan

NH expansion Seven road projects Luxury housing project RInfra pulling out of NH-2 project

3,119 Table available in the 2,000 iccm Print Edition.

500

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KMRL and DMRC ink MoU

5,182

Ashoka Buildcon commissions Roopnarayan bridge Jaipur Metro phase to be operational by August

West Bengal Noida Gurgaon Delhi and Agra Kochi Kolkata

10,000 (overall project)

Jaipur

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analyst recommendations ratings changes Date

Broker

Company

Rating

Target Price (Rs)

Current Market Price (Rs)

6-May-13

Kotak Securities

ACC

BUY

1,377

1,230

3-May-13

Emkay Global Financial Services

ACC

REDUCE

1,160

1,227

21-May-13

Motilal Oswal

Birla Corporation

BUY

352

266

30-Apr-13

Kotak Securities

Shree Cements

BUY

4,820

4,414

30-Apr-13

Edelweiss Securities

Shree Cements

BUY

5,313

4,502

30-Apr-13

Motilal Oswal

Shree Cements

BUY

4,818

4,411

30-Apr-13

ICICI Securities

Shree Cements

HOLD

4,465

4,465

29-Apr-13

Emkay Global Financial Services

Shree Cements

ACCUMULATE

4,350

4,414

23-Apr-13

Kotak Securities

Ultratech Cement

ACCUMULATE

2,126

1,872

23-Apr-13

Motilal Oswal

Ultratech Cement

BUY

2,073

1,879

23-Apr-13

ICICI Securities

Ultratech Cement

HOLD

2,040

1,877

22-Apr-13

Emkay Global Financial Services

Ultratech Cement

HOLD

1,850

1,884

7-May-13

Motilal Oswal

Jaiprakash Associates

BUY

90

76

16-Apr-13

ICICI Securities

Jaiprakash Associates

HOLD

74

80

6-May-13

Emkay Global Financial Services

Jaiprakash Associates

HOLD

75

76

7-May-13

Kotak Securities

Jaiprakash Associates

BUY

75

88

BIRLA CORPORATION Motilal Oswal has maintained a ‘BUY’ rating for Birla with a target price of RS 352, upgrading it from the current market price (CMP) of RS 266. The rating has come based on higher than expected growth in cement volumes of the company. Cement volumes grew 4.6% YOY to 1.71m tons higher than the estimated 1.61m tons. The growth in volume was obtained despite a ban on limestone mining at its Rajasthan (Chanderia) plant.

ACC The poor performance of ACC continued as the company registered a decline of 25.7% YOY in its 1Q EBITDA. Based on this current downside, Emkay Global Financial Securities has recommended a ‘REDUCE’ rating for the company with a target price of RS 1,160, downgrading it from CMP of RS 1,227. The recommendation is a consequence of the company’s weak pricing and high cost struc-

42 MAY / JUNE 2013

ture, which the analyst predicts is going to affect the company’s profitability. On the contrary, Kotak Securities has recommended a ‘BUY’ rating with a target price of RS 1,377, upgrading it from CMP of RS 1,230. The recommendation is based on the expectation of growth in demand and recovery of cement prices post monsoon.

ULTRATECH CEMENT Motilal Oswal has recommended a ‘BUY’ rating for UltraTech with a target price of RS 2,073, up from its CMP of RS 1,879.

The recommendation comes as the company’s board approved a fresh brownfield capacity addition of INR 20 billion to be commissioned by March 2015. Meanwhile, ICICI Securities and Emkay Global Financial Services recommend ‘HOLD’ for UltraTech Cement with a target price of RS 2,040 and RS 1,850. Kotak Securities has maintained an ‘ACCUMULATE’ rating for UltraTech Cement with a target price of RS 2,126, up from its CMP of RS 1,872. The recommendation follows the expectation

CW Group Coal Week CemWeek BMWeek INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE CemWeek CW Group Coal Week BMWeek CemWeek BMWeek CW Group Coal Week

that the company will benefit from its volume growth along with the improvement in cement prices.

SHREE CEMENTS Shree Cements reported a growth of 6% (YOY) in revenues during Q3 FY13. Kotak Securities has recommended a ‘BUY’ rating for Shree Cements with a target price of RS 4,820, upgrading it from RS 4,414. The recommendation was received after the company performed slightly better than initially estimated. Edelweiss Securities and Motilal Oswal have also maintained a ‘BUY’ rating because of the company’s better than estimated performance. ICICI Securities has maintained a ‘HOLD’ rating owing to near-term challenges in terms of a slowdown in demand for cement. Meanwhile, Emkay Global Financial Securities has downgraded its rating to ‘HOLD’ from ‘ACCUMULATE’ based on weak earnings because of near-term cap constraints and weak prices.

JAIPRAKASH ASSOCIATES Kotak Securities has maintained a ‘BUY’ recommendation for JP Associates with a target price of RS 75, on a decline from CMP of RS 88. The recommendation was obtain due to the better than expected revenues channeled from the real estate division of the company. Motilal Oswal has maintained a ‘BUY’ rating for JP Associates as the company’s performance for 4Q FY13 was largely in line with estimates. However, the analyst reduced the target price to RS 90 as against RS 115 because of lower volumes, realizations and higher interest cost. Meanwhile, Emkay Global Financial Services has maintained ‘HOLD’ as it predicts the company’s stock performance to be governed by an asset monetization plan due to lower interest cover. ICICI Securities has also maintained its ‘HOLD’ rating for the company as it predicts that the deleveraging of the balance sheet through the asset stake sale in the cement business and land parcel sale in JIL would act as a key catalyst for the stock performance of Jaypee Associates. BMWeek CemWeek CW Group BMWeek BMWeek

CemWeek CemWeek

CW Group CW Group

Coal Wee Coal Wee Coal Wee

CW Group Meeting Agenda The CW Group will be hosting and participating in a number of webinars and conferences. We invite you to join us on-line or in person at the events to discuss our views of the industry.

CW Research & Analytics Webinars:

CW Group Hosted Executive Summits:

Energy Source Management: What’s in store for input costs?

June 25, 2013 at 2:00 PM GMT

Caribbean Rim Cement Finance, Strategy & Trade Summit 2013

Fall, 2013

Panama City, Panama

Alternative fuels and power as a new business model

August 6, 2013 at 2:00 PM GMT

Middle East Cement Finance, Strategy & Trade Summit 2013

December 10-11, 2013

Dubai, UAE

Conferences where the CW Group will be presenting: Solid Fuel Summit (SFS) India 2013

October 7-8, 2013

Cement Business & Industry (CBI) India 2013

October 9-10, 2013

CBI Brazil & LatAm 2014 Cement & Lime Conference

February 5-6, 2014

• • •

Hilton Mumbai International Airport Hotel Mumbai, India

•

Hilton Mumbai International Airport Hotel Mumbai, India

• •

Hilton Morumbi Sao Paulo, Brazil

continued from page 30

monsoon spread concern among cement makers, who feared that price increases could no longer be implemented. Ashish Guha, CEO and MD of HeidelbergCement India, declared that the company did not reduce retail prices in any of its markets, and if reductions were spotted at local level, they were the result of discount structure changes.

Himachal asks cement companies to lower prices In the beginning of April 2013, the Himachal Pradesh state government asked cement companies to reduce their prices in order to be more in line with the levels observed on neighboring markets. Mukesh Agnihotri, the State Industries Minister, noted that the population is suffering

44 MAY / JUNE 2013

from health hazards and depletion of natural resources, but is not able to reap the benefits of living in a cement-producing region. A 50 kg bag of cement was sold in Himachal Pradesh at a price of RS 340, while in neighboring Punjab the cement bag was rated at RS 275. The Himachal Pradesh state government acknowledged that an agreement had been closed with an unnamed cement company that will supply the government with cement at RS 155 per bag. Thus, the government is expected to save between RS 18 and RS 24 crore in a year.

Cement demand still expected to rise in 2013 The growth rate in Indian cement demand is estimated to increase from 5 percent this

CW Group Coal Week CemWeek BMWeek INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE CemWeek CW Group Coal Week BMWeek CemWeek BMWeek CW Group Coal Week

fiscal year to 7 percent in FY 2014, boosted by rural housing, roads and railways. Generally, ahead of the monsoon, the market declines after booming for the previous months. This year brought a disturbing evolution. The months of April and May 2013 both have been less buoyant than expected, with HeidelbergCement notching an increase of only 5 percent for its operations, while estimating previously that the market would expand by 10 percent. The coming elections have failed to reveal a positive influence on infrastructure spending so far, which might lead the overall 2013 growth rate to fall below the projected 5 percent.

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 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

global

1 UltraTech to buy Jaypee’s Gujarat plant

1 HeidelbergCement acquires German cement maker

2 China’s Sinoma expanding presence in India

2 Dangote sets sights on doubling cement output

3 India: Reliance Cement commences operations in Amravati

3 HeidelbergCement becomes sole owner of Russian cement company

4 JP set to unload some cement assets 4 Cemex to sell off assets in the UK 5 India: ACC launches new products 5 Cemento Andino to install new production line 6 ACC credits use of new technology for cost savings 6 New cement production line planned in Azerbaijan 7 Chettinad Cement unveils expansion plan for Diningul plant 7 Egypt: Sale of Alexandria Portland questioned 8 India: HeidelbergCement sells Raigad grinding unit 9 India cement makers seen cutting spending budget this year 10 India probes mining leases 11 Himachal okays new Reliance cement plant 12 Credit Suisse positive on India cement market 13 Tight competition hurting prices for India cement makers 14 JK Lakshmi blames locals for plant fire 15 Mangalam Cement to upgrade production unit 16 India: Opposition questions cement plant project 17 Tamil Nadu Cement Corporation to hike capacity 18 JK Lakshmi project to be delayed 19 Ultratech sets spending budget for Rajasthan 20 Analyst positive on HeidelbergCement India

8 HeidelbergCement looking to sell Voronezh Mine Group 9 Lafarge sells off Ukraine plant 10 LV Technology bags fresh deal in Bahrain 11 CRH continues with acquisition plans 12 Qatar National Cement to launch new cement plant 13 China’s Sinoma inks deal with Lafarge 14 Colombia’s Argos gives update on share sale 15 New plant inaugurated in Northern Cyprus 16 Test ignition for new clinker production unit in China 17 Sri Lanka to prop up cement industry 18 Qatar to source cement to meet demand 19 Secil to build new plant in Angola’s Lobito 20 Loma Negra plans fresh investments in Argentina

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

CemWeek BMWeek MAY / JUNE 2013 CemWeek BMWeek CemWeek BMWeek

45CW Group CW Group CW Group

Coa Coa Coa

M ct um ob Re e bai gis r 7 , In te -8, dia r To 20 da 13 y!

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OctOber 7-8, 2013 | MuMbai, india HiltOn MuMbai internatiOnal airpOrt HOtel

the Solid Fuels Summit india 2013 is a focused executive-oriented meeting and networking opportunity for coal and petcoke industry professionals who are involved in the indian coal and petcoke sectors. the Summit will bring a special dual focus on business and industrial issues and the program will include topics such as: » » » » » » »

assessing india’s solid fuel needs: coal & petcoke Solid fuel opportunities beyond today – trinity of sectors Mining technology & maximizing productivity for coal reducing costs through better technology petcoke – a threat to indian coal?

Fuel waste – trash or treasure? the international trade & bulk handling perspective

COal * PeTCOke * a lTeRnaTIve Fuels * Fly a sh

GMI

GLOBAL

Organized by gMi glObal witH tHe great SuppOrt FrOM cOalweek tHe event iS expected tO bring a FOcuSed grOup OF cOal and petcOke induStry prOFeSSiOnalS.

regiSter On-line at www.gMiFOruM.cOM Or eMail SaleS@gMiFOruM.cOM. yOu May alSO call uS in tHe uS at +1-203-516-7424