India Cement & Construction Materials (vol 1 / issue 19)

india CemWeek A CemWeek Publication

issue 19

JULY /AUGUST 2014

Cement & construction Materials

CW RESEARCH

India cement sector set to build momentum, accelerate into 2015 GCVFR - Global Cement Volume Forecast Report

SURVEY

INDIAN CEMENT SECTOR SENTIMENT SURVEY REVEALS EXPECTATIONS FOR A BETTER FUTURE

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India Consolidation Continues

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FEATURES 5 11

India cement sector set to build momentum, accelerate into 2015

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EDITORIAL LETTER

GCVFR - Global Cement Volume Forecast Report

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NUMBERS IN BRIEF

INDIAN CEMENT SECTOR SENTIMENT SURVEY Reveals expectations for a better future

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ANALYST RECOMMENDATIONS Latest Broker Recommendations

India Consolidation Continues

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A bright future for India Encouraging prospects for India’s economy and cement market

Cement

rOBERT MADEIRA cemweek publisher head of cw group research

Dr. S. N. Pati SNM Khan Pradeep Kumar EDITORS-AT-LARGE

research and analytics 21 24 25

cement volumes

29

MARKET AND COMPETITION

coal market update

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M&A and FINANCE

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PROJECTS AND EXPANSIONS

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VOLUME AND PRICING

energy price update

construction & building materials 40

cement

INFRASTRUCTURE & PROJECTS New residential project in Gurgaon

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PEOPLE

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REGIONAL UPDATE

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EQUIPMENT HIGHLIGHTS

LIVIU DINU project manager

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letter from the editor

A bright future for India ndia is a growing economy. It is predicted to be third largest economy by 2050 due to the GDP growth due to more emphasis on infrastructure growth from road-ways to airways, ports to airports, power production facilities etc.

Infrastructure growth is a stepping stone toward stable and productive opportunities for both private and public sectors in the field of construction. Infrastructure is one of the priority sectors for the current Indian government. According to conservative estimates, India will invest over one lakh crore rupees in various infrastructure projects by 2020. This estimate includes only those projects are included which are reasonably structured and can take off quickly. Construction sector is likely to boom in coming years which ultimately will be reflected the demand of cement.

The future of the Indian cement industry will likely be robust and its growth will continue for a few more decades, as India has one of the lowest rates per capita consumption of cement in the world. Unlike developed markets and large developing markets such as China, India has some distance to go to create sufficient infrastructure and overcome a large and huge housing deficit.

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Cement industry’s growth during the next decade looks very promising. Cement demand is projected to grow to up to 2.5 to 2.7 times the current volumes and may reach 550 to 600 MTPA by 2025.

Per capita cement consumption is likely to increase up to 385 to 415 kg in 2025.

This growth will likely be led by growth of infrastructure with increased cement usage in infrastructure projects; the industry can meet the full potential cement demand growth. The residential housing sector will remain one of the largest consumers, with 40 to 45% of total cement demand in 2025. It will likely see increased consolidation among real estate players.

These changes will lead to a significant shift in the overall cement customer mix.

The share of large and direct buyers is expected to increases from the current 30% to 70% in 2025. This shift will have a major impact on transportation of cement from bag to bulk. Long term growth in cement production will result in proportional increase in thermal and electrical energy requirements for the sector. Hence, the biggest challenges for the cement sector will be the supply of a uniform quality of fuel. The industry can be a role model by consuming most of the waste-derived ma-

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terials as alternate fuel and uninterrupted power. The industry is capable of consuming most of the waste materials either as alternative fuels or raw materials. Cement plants can supply up to 30% of their own electricity needs through the waste-heat recovery (WHR) process. At present Indian cement industry is generating around 200MW electricity through its 26 WHR installations. It can play a pivotal role as a sustainable avenue of not only consuming all hazardous waste materials but also generating power through WHR (up to 500 MW) with little push from state and central regulators.

Robert Madeira

Publisher and Head of Research

Dr S N Pati Former Joint Director, National Council for Cement and Building Materials

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NUMBERS India’s GDP levels increase

India’s Ministry of Statistics & Program Implementation has released its quarterly report for the first quarter of financial year 2014-2015. The data released show encouraging prospects for India’s economy and cement market.

s opposed to the same quarter last year, GDP at current market prices increased by 11.6% during the quarter ending in June.

Significant growth was experienced this quarter for economic activities like ‘electricity, gas, water supply’, ‘financing, real estate, insurance, business services’ and ‘community, social, personal services’. The construction sector grew by 4.8 percent this quarter, whilst the manufacturing sector saw an increase of 2.8 percent.

3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 1. agriculture, forestry 2. mining & quarrying & fishing

3. manufacturing

4. electricity, gas & water supply

5. construction

6. trade, hotels, 7. financing, insurance, 8. community, social & GDP at factor cost real estate and transport personal services business services &communication

GDP Q1 2012-13

376011

53419

313696

37374

180261

544027

388606

286491

2179885

GDP Q12013-14

423712

50724

320159

47487

190993

576810

461234

339598

2410718

GDP Q12014-15

474092

54804

343126

58648

211437

624797

537198

393200

2697303

Source: CWCentral Statistics Office, Ministry Of Statistics & Program Implementation India, CW Research

Quarterly estimate of GDP at factor cost in Q1 (April-June) of 2014-15 (at current prices)

Production of cement, one of the key indicators of the performance of the construction sector, registered a growth of 9.5 percent.

Future growth is forecasted due to the government’s plans to invest in infrastructure and housing programs.

30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% -5.00%

1. agriculture, forestry & 2. mining & quarrying fishing

3. manufacturing

4. electricity, gas & water supply

5. construction

6. trade, hotels, transport 7. financing, insurance, 8. community, social & &communication real estae and business personal services services

-10.00% change Q1 2013-14

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change Q1 2014-15

GDP at factor cost

Source: CWCentral Statistics Office, Ministry Of Statistics & Program Implementation India, CW Research

Percentage change over previous year Q1

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feature

India cement sector set to build momentum, accelerate into 2015 global cement markets revised up for 2014

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CW Group forecasts 2014 global growth to accelerate to 4.2 percent and consumption to reach 4.21 billion tons, up from 3.9 percent forecasted in February this year. We anticipate that renewed confidence in construction market conditions will positively affect the general global outlook, annual consumption reaching 4.8 billion tons by 2018.

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feature GLOBAL CONS. AND PER CAPITA FORECAST (‘14-‘18) Global Consumption (million tons)

“There are several markets which we anticipate will surprise in terms of consumption growth and production output. The revival of several real estate markets, the economic stabilization of markets which had been severely affected by the financial crisis, as well as renewed confidence in the construction sector give us reason to be cautiously optimistic in what the future growth of cement markets is concerned,” Robert Madeira, Managing Director and Head of Research commented for ICCM.

700

5000

600 500

4000

400 3000 300

Per capita cement consumption growth for 2013-2018 will also contract in comparison to previous year. However, usage will rise from 592 kilograms per person in 2014 to around 646 kilograms per person by 2018.

Worldwide annual cement production capacity will reach 5.4 billion tons by 2018.

Total addition to the 3.9 billion tons base capacity is estimated to reach 1.5 billion tons by 2018. In 2014, the largest increase in capacity will come from Egypt. The year will end with capacity increases of over 10 percent for Indonesia, Iraq, Russia, Tunisia and Vietnam.

2000

200

1000 0

100 2009

2010

2011

2012

2013

JULY / AUGUST 2014

2014

2015

2016

2017

2018

0

We expect ex-China cement consumption to grow at a slower pace through 2018 than it had in previous years India Cement Outlook After witnessing an economic slowdown in 2012-2013 mainly because of the slump in infrastructure and corporate investment, the Indian economy is on a path of recovery since the Narendra Modi led new government took over in May 2014. The Indian economy expanded marginally to 4.7 percent in second quarter of 2013-14 after bottoming out to 4.5 percent recorded in 2012-13. The recovery although slow, is expected to gather pace in the coming quarters owing to the new government’s business-friendly policies and heavy spending on infrastructure projects. The International Monetary Fund (IMF) projects the Indian economy to grow at a rate of 5.4 percent in 2014 and 6.4 percent in 2015 assuming that government will revive investment growth in the coming months.

Construction Sector The construction sector of the country slowed down mainly because of the elections. In the second quarter of 2014, the construction sector grew at a rate of 4 percent, higher from 2.8 percent reported in first quarter of 2014 but down from 6.4 percent reported a year ago. The slowdown

7

Per capita (kg)

6000

Source: CW Research

lobally, cement consumption picked up by 7.6 percent per year on average between 2009 and 2013, but our research shows a deceleration in some markets that will translate into a 3.6 percent hike per year on average for the 2013-2018 period. We expect ex-China cement consumption to grow at a slower pace through 2018 than it had in previous years.

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in the construction sector can be termed temporary and can be attributed to the elections that diverted funds from housing and other projects into election campaigns. The construction activity is going to pick up as stalled infrastructure projects are expected to be revived and new ones given a go-ahead by the new government at center.

Cement Market Despite the slowdown in the construction activity, the demand for cement improved in the country mainly because of the delayed monsoon and higher retail demand. This is reflected from the fact that country reported a 7.5 percent rise in cement production in April-May compared with the same months last year. The momentum is expected to continue as the new government in its Union budget 2014-15, announced a series of infrastructure projects that are likely to boost cement consumption in the country. For example, several initiatives announced to promote infrastructure and housing investment in the Union Budget 20142015 are likely to have a positive impact on cement demand.

The long term funding availability for infrastructure projects is likely to facilitate more investments in the sector and benefit cement companies in the coming years.

According to forecasts, net profits of large cement manufacturers such as UltraTech Cement and ACC are expected to grow around 7-10 percent from the year-ago period. The industry’s capacity utilization is expected to increase to 75 percent in 2015-16 from the current 68-70 percent.

If the measures announced by the government in the Union Budget drive invest-

GLOBAL CONSUMPTION BY REGION (2009-2018 VOLUME) 6000 China

5000

Asia ex-China 4000

Africa Middle East

3000

E Europe & CIS Western Europe

2000

Latin America

1000 0

North America 2009

2010

2011

2012

2013

2014

ments into infrastructure projects, allIndia cement consumption may grow at a rate of 7-8 percent in 2015-16. As demand increases and capacity utilization improves slowly, cement prices are expected to rise.

However, if demand improves, going forward, margins should improve as better pricing power and higher capacity utilization may lead realizations to grow faster than costs thereby allowing cement firms to increase their profits in the coming months.

Indian economy is on a path of recovery FORECAST SEGMENTATION (2018) 85% North America

China

80% 75%

Latin America

70%

Africa

Western Europe

65%

Middle East

60%

Asia ex -China

50% 45%

2%

3%

4%

5%

6%

7%

Y-axis = 2018 capacity utilization; X-axis=2013-18 CAGR; size of bubble = 2018 market size (relative tons)

Source: CW Research

E. Europe & CIS

55%

2015

2016

2017

2018

Source: CW Research

Increased provision under ‘Rural Housing Fund’ and interest deduction on housing loans are likely to boost urban as well as rural housing demand and in turn demand for cement. The new government has already showed its determination to eliminate the hindrances in economic and infrastructural growth and announced proposals to develop 100 new satellite towns, 16 new ports and allocated funds for rural infrastructure. It has also announced a Rs 37,000 crore investment in roads, airports, new ports and new infra projects in the newly created states Telangana and Seemandhra, all of which are expected to further lift cement demand.

Global perspective The Chinese cement market will slow down in the coming years. After consumption expanded by 10 percent in 2013, demand in 2014 will contract and end with a much lower percent growth. The accelerated development in cement capacity China fostered in the past comes to a halt in the coming years, with capacity expected to rise slightly from 2013 to 2018.

Chinese cement consumption will recover at lower single digit percent on average per year by 2018, well below the average growth reached between 2009-2013.

When taking a look at the wider regional level, we continue to predict divergent performance for different regions of the world.

As opposed to previous years, developed regions will come to see slight recoveries in cement demand. In our previous forecast, we expected demand in the United States to remain subdued, but we now revised our forecast and consumption growth is expected to be in the medium single-digit percent on average per year by 2018. We also revised the contraction expected on the Western European market, now forecasting a yearly recovery to be in the low single-digit range.

For 2013-2018, we expect developed regions to escape downward trends and developing regions to underperform when compared to previous years.

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feature GLOBAL 2014 YOY OUTLOOK GROWTH

The reduced cement consumption the Western European market experienced between 2009 and 2013 will finally turn around in the upcoming years. Government austerity and apprehension about over-building patterns still prevent major evolution from happening, yet Europe’s residential market is on the path to recovery, backing up our encouraging prospects for cement demand.

Nonetheless, progress will remain sluggish for this regional market, with Italy and Spain continuing to underperform. Consumption rates for both markets are not

Another market that showed a big recovery in cement consumption is Africa.

Consumption levels will climb by 5.8 percent on average per year by 2018. Nigeria continues its traditional growth and we expect consumption to expansion to persist. Egypt is another notable market in the continent. The country will continue to handle the largest share of the continent’s capacity and will be responsible for one fifth of the total cement consumption in Africa, overcoming the difficult political situation that has affected the country recently. African cement consumption levels will continue to be fueled by continued foreign investments in infrastructure and constructions.

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We also expect growth rates on the Russian cement market. Production will hike by a medium single-digit percent per year on average while consumption is anticipated to increase by similar rates on average per year. New infrastructure construction for the 2018 World Cup, joined by the government’s initiative of kick starting a largescale affordable housing program, will continue to sustain Russia’s cement market Downward prospects are expected for regions that were traditionally strong cement markets. Consumption levels will subdue considerably in Latin America, Middle East and in China. In Latin America, after 2013 cement consumption figures bettered 2012’s performance, demand will rise by at a much lower pace in 2014.

All-India cement consumption may grow at a rate of 7-8 percent in 2015-16 2013-18 YOY OUTLOOK GROWTH

2013-2018 CAGR -7% to -5% -5% to -3% -3% to -1% -1% to 2% 2% to 4% 4% to 6% 6% to 8% 8% to 10% 10%+

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Source: CW Research

Our research has revealed that notable recoveries in cement volumes in 2014 were felt in the United States and in Africa. As opposed to previous years, when the United States cement consumption was unstable on account of lack of confidence in the sustainability of big construction projects, the effects of the global economic crisis and general reluctance in making real estate investments, this year’s year on year figures surpass our expectations. We expect a medium to high single-digit percent surge in demand in the United States for 2015 and similar encouraging figures for the upcoming years. Residential projects recovery, coupled with higher investment in infrastructure and non-residential buildings will sustain the progress of cement consumptions in the United States.

Source: CW Research

2014 YoY -41% to -30% -30% to -20% -20% to -10% -10% to -5% -5% to 0% 0% to 3% 3% to 6% 6% to 10% 10%+

probable to climb enough to meet domestic capacity, meaning production capacity will either stagnate or increase slightly.

Germany and the United Kingdom will resume their traditional roles as engines of development, both of the countries being anticipated to experience average per year growth in consumption higher than in the last few years. The total consumption per year the two countries will reach in 2018 will amount for a third of Western Europe’s total consumption for the year.

GLOBAL CONSUMPTION FORECAST (‘14-‘18) & COMPARISON TO LAST FORECAST SLOVAKIA

Colombia, Bolivia and Peru will experience the highest growth rates in consumption in the continent, while Argentina, Brazil and Mexico will see consumption increase at a slower rate than in the past.

Argentina’s case is worth mentioning since consumption will contract by 2018, starkly contrasting with the middle single-digit percent growth it experienced between 2009 and 2013.

Consumption remained at levels similar to 2013 in the Middle East, but growth for the upcoming years is expected to accelerate. The feverish with which consumption grew in the Middle East was sustained by the large numbers of mega-construction projects in Saudi Arabia, UAE, Abu Dhabi and Qatar, but we expect progress in consumption to stall for the last half of 2014, picking up at a constant speed in the years to come. Large scale projects will continue to dominate the construction sector, GCC countries being expected to ride the new construction boom.

We expect utilization and consumption to temper on the Asian cement market as well. In India, the outlook is positive mostly due to the announced governmental projects in infrastructure and housing that will lead to a pick-up in cement demand.

2016

2017

2018

0%

Source: CW Research

0.006527084

2014E 2015 0.015877585

4503.990218 4467.542688

4365.164463 4300.560108 0.015022312

4039.807257 3987.560336 0.013102478 2013

4% 2%

The CW Group’s Global Cement Volume Forecast Report (GCVFR) is a twice-yearly update on projections for cement volumes at the national, regional and global basis.

The report brings together the CW Group’s principal research team to provide the latest insights on the evolution of cement volume trends for 58 important cement markets worldwide, as well as regional and global totals. The mid-year update (also included in the subscription price) is an extended report, additionally including executive briefs of country macro- as well as supply-demand dynamics for the GCVFR coverage universe.

COLOMBIA

6%

0.007332279

2012

10% 8%

0.008158295

3400

3762.439626 3740.229517

3800

0.005938167

4200

4210.801951 4144.989529

5000

4654.066568 4620.190045

Fcst revision

4600

About the GCVFR

1H2014 fcst 4812.272564 4781.066142

2H2014 fcst

Final observations “We are seeing the global cement market making sure steps towards a more balanced future, but that is not to say that the sector is safe from meeting the volatilities it has experienced in the past.

Political instability and geopolitical tensions may once again take their toll on the cement market, preventing it from performing to the rates we have anticipated in this forecast. Nonetheless, the global economic growth to be felt in the coming years, coupled with the positive outlook on GDP levels, can be expected to secure a smoother progress for the cement sector,” stated CW Group’s Robert Madeira.

This year’s forecast gives a positive outlook on the future of cement volumes. Though growth will not reach the figures experienced between 2009 and 2013, the better performance of markets which were troubled in the past (e.g. United States, Europe) gives a positive nod to the future.

The biggest disappointment will come from China- though the market will still hold the biggest share of the cement global market, its previous hike will significantly slowdown in the years to come.

The report contains the CW Group’s 5-year outlook for: - National cement consumption (tonnages) - National cement production (tonnages) - National net-trade estimates (tonnages) - Industry-wide utilization rate (%) - Cement production capacity (integrated & grinding tonnages) Methodology: The GCVFR forecast is a data-oriented forecast report, providing extensive details on the outlook for key cement markets around the world. Our methodology goes beyond the obvious and average forecast, to incorporate as many inputs and as much information as needed.

The GCVFR not only builds on the CW Group’s industry-leading and proprietary databases and the industry’s most extensive market intelligence platform, but also combines our analysts’ views with inputs from multiple other external analysts, industry associations, market observations, monthly tracking information, discussions with executives and management at cement manufacturing groups, plus a CW Group quantitative overlay model (econometric and statistical quant models).

More information: For questions, inquiries and orders please contact your CW Group Client Service Coordinator, or sales@cwgrp.com

CW Research

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FEATURE

The Indian

Sector sentiment

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fter a period of political unrest that made its effects felt on the cement industry, there are encouraging signs that demand and productivity will soon increase. The developments expected in infrastructure projects and in rural and urban housing are expected to lead to a growth in demand, but not all of those acting in the cement industry are too confident that the following 12 months will surpass the previous six in productivity and demand.

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FEATURE

hough the last couple of months brought about a minor, but noticeable setback in India’s cement industry, things seem to be recovering. Prospects of an increase in the demand for cement are high, with some expecting to see India’s cement industry experience a growth rate of 7-8 percent in FY 2015-2016. Nonetheless, concerns regarding the problematic infrastructure of the country, on which the industry is dependent, are not to be ignored.

Encouraging signs for the following months The infrastructure of the country, as well the fact that little has been done in order to help it develop, had the unfortunate effect of slowing down the entire economy last year, and its negative effects were clearly felt by the cement industry .

The new government elected in 2013 has announced its intentions to invest more capital in improving India’s rural infrastructure -- a piece of news which can only please those working in the cement industry. More than that, the government is pushing towards a speedier growth of the economy, announcing governmental policies that are designed to encourage businesses and the private sector. On account of the approach of the new government on the country’s economy, the International Monetary Fund has given a positive nod to India, predicting that the following years bring economic growth.

On account of the approach the new government on the country’s economy, the International Monetary Fund has given a positive nod to India, predicting that the following years will bring economic growth

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The infrastructure of the country, as well the fact that little has been made in order to help it develop, had the unfortunate effect of slowing down the entire economy during the previous year, and its negative effects were clearly felt by the cement industry Another reason that the cement sector has not been performing as well as hoped during the last year may have to do with the fact that construction sites were scarce in India. Most of the capital usually directed towards construction projects was diverted to political campaigns, leading to a noticeable slowdown in the construction sector.

Slight rise in production The cement market saw a rise of 7.5 percent in production in April-May 2014, on account of the demand increase brought about by high demand in retail and by the delayed monsoon. Surveys conducted amongst those working in the cement industry have shown that almost half of the respondents describe the performance of the industry as OK, whilst 30 percent of the respondents claim that the cement industry has performed poorly.

An encouraging 23 percent have responded that the industry has performed well.

When asked whether the last 6 months met their overall expectations, as many as 60 percent of the respondents answered that the performance of the market was beneath expectations, whilst 34 percent considered that the last 6 months met their expectations.

Increase in demand The next 12 months are expected to be fruitful for the industry. The government has already announced its intentions to support the development of infrastructure, and it has also made plans to invest in housing in urban and rural areas. Talks about big investments in ports and other such big projects are still in progress and are expected to materialize soon.

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How did the last 6 months meet the industry’s expectations

3%

34%

60%

3% Below my expections Exceeded Met my expectations Nowhere near my expectations

Assesment of the overall performance in the past 6 months

23% 47% 30%

OK Poorly Well

Prospects on the performance of the industry in the next 12 months when compared with the previous 6 months

2% 14%

3%

81%

About the same Much better

Somewhat better Somewhat worse

Moreover, the demand for urban and rural housing is expected to rise. All in all, these developments can only affect the cement market in a positive manner, making an increase in demand foreseeable in the months to come.

These encouraging signs have been noticed by those in the industry. A soaring majority of 88 percent of the respondents are confident that the next 12 months will meet with a performance that will surpass that of the last 6 months. About a quarter of the respondents expect the industry to perform about the same as it did in the recent past. Only a insignificant percentage of those surveyed claim that the industry will perform worse than in the last 6 months.

Goals and prospects for the next 12 months The positive outlook of those working in the industry is noticeable when examining themes for the following year. More than a quarter are considering strategies that would lead to improving domestic sales, whilst 20 percent are interested in widening their foreign reach and finding new export opportunities and partners. The same percentage of respondents is planning to make cost control a goal for the next 12 months, whilst 14 percent are betting on increased demand and are looking to expand their capacity in order to meet that increased demand.

The prospect of high demand and new export opportunities have also given more than half of the respondents in the survey the confidence that their career will receive a boost in the following months, many of them expecting their businesses and positions to benefit from the recovery of demand. More than that, 29 percent are highly confident that their careers in the cement industry will come to grow and evolve.

The growth in demand that is in sight for the cement industry in India is, nonetheless, not encouraging enough to lead to the hiring of more people. Half of those surveyed claim that their personnel number will most likely stay the same, whilst 38 percentage of those interviewed are hoping to be able to hire a few more people in the months to come.

When asked to assess the biggest challenge of the next few years for the cement industry and businesses, the responses

Main themes for the next 12 months

8%

6%

14% 20%

29% 20%

3%

Capacity expansion Controlling costs Environmental issues Finding new export opportunities Improving domestic sales Operational improvement Safety and occupational health

Confidence in experiencing a career boost

29% 66%

5%

Fairly conďŹ dent Highly conďŹ dent Stay the same

The next 12 months are expected to be fruitful for the industry.

The government has already announced its intentions to supporting the development of infrastructure, and it has also made plans to invest in housing in urban and rural areas INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

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FEATURE

varied widely. There is still a significant proportion of those working in the industry which are not confident in the fact that the demand of cement will come to meet the supply, and the biggest challenge for them is dealing with excess capital.

Main concerns of the industry The clean energy bills which are now being pushed by the new government greatly worry some respondents. The government is pushing to increase the importation of coal and the use of alternative sources of energy, and this can only mean that fuel and energy prices will grow significantly. Just 10 percent consider the biggest challenge to be the shortage of skilled labor. These concerns are grounded in the fact that more and more young Indians are steering clear of jobs in construction, being more interested in careers in the service sector.

These concerns, coupled with the fact that the demand for cement is more than likely to be on the rise, have led the respondents of the survey to have split opinions on whether the profitability of their businesses will grow or stay the same. Fifty five percent of the respondents are confident that they will see a boost in their profit figures, whilst 44 percent are not so optimistic, hoping that they will make as big of a profit as they have in the past 6 months.

The reservations of the latter group of respondents can be linked to the fact that India’s infrastructure is still causing some serious setbacks for the industry. If the government succeeds in making its plans regarding infrastructure a reality, then profitability will be a sure thing. More than that, there are still fears that the

Challanges the cement sector is likely to face in the next years

13% 10% 8%

5% 2%

27%

35%

Shortage of skilled labor Security of fuels Raw material affordability ProďŹ tability Excess capital Environment/emissions Energy prices

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Assessment of the future number of employees

38%

5%

52%

5%

Remain the same Lay off workers A lot more A bit more

Will profitability improve or not?

45%

55%

Improve No change

predicted demand is not high enough to please all the players in the cement industry. On the other hand, those confident that their business will be more profitable in the months to come are betting on finding more export partners and opportunities which will lead to a significant boost in demand.

Another factor that makes us believe that respondents have reservations about the rise in demand is the fact that most of them are planning to keep the input costs at current level now. Only 22 percent think that their input costs will improve and 15 percent think that they will worsen. The majority of signs seem to point to most cement businesses being not quite ready to put much confidence in the forecasts made for the market. There is a significant cost pressure that many fear will undermine the benefits of high demand.

An issue that does not slip the mind of those working in the cement industry is the increasing price of energy resources, not to mention the security of fuels.

Overall, the future increase in profitability of the cement industry in India is still dependent on whether the much needed infrastructure projects go through or not. Even if demand improves to the figures that are expected by the most optimistic analysts of the market, the poor infrastructure of the country will continue to take its toll on the industry since the plans of the cement industry’s main actors are largely dependent on how the infrastructure evolves.

We can only imagine that these problems will not find resolutions soon and that the industry will not be as prosperous as it anticipates.

Future prospects Overall, the future increase in profitability of the cement industry in India is still dependent on whether the much-needed infrastructure projects go through or not.

Even if demand improves to the figures that are expected by the most optimistic analysts of the market, the poor infrastructure of the country will continue to take its toll on the industry since the plans of the cement industry’s main actors are largely dependent on how the infrastructure will evolves.

Better pricing is an outcome that can be expected from the probable surge in demand, but that is not to say that there is not an underlying concern that the rise in demand will not be enough to help India’s cement industry meet the 7-8 percent rise that is expected in 2015-2016.

The performance and the future prof-

How will input costs change?

15%

22%

63%

Improve Stay the same Worsen

itability of the industry are once again dependent on the political situation of the country, so we should not be hasty in depicting too bright of a future for the cement industry in India.

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feature India Consolidation Continues

Shree acquireS JP grinding unit in Haryana

art of Shree Cement’s plan for the near future is to increase its productivity means. The increase in demand expected in the following 6 months led the company to look for grinding units which would allow company’s production to meet the demand.

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feature

rospects of upsurge in demand for cement in India led Shree Cement to purchase a grinding unit from the Jaypee group. The Jaypee group is continuing its efforts to reduce its Rs 60,000 crore debt.

After offloading the Gujarat cement plant to Ultratech for Rs 3,800 crore, the group’s latest move made in order to reduce debt is selling a 1.50 million-ton cement grinding unit to Shree Cement. The unit is located in Panipat, Haryana and will be purchased for Rs 360 crore. An agreement for the deal was signed in July 2014 and the due diligence process is currently underway.

GOAL to meet higher demand

The deal is going through for about last one month or so. We have been talking them and it is a continuous melting process Effects on Jaypee’s debt The talks on the sale began in July and the deal is expected to go through once the due diligence process will be completed.

“The deal has been a go for about the last month or so. We have been talking to them and it is a continuous melting process.”

HM Bangur answers in interview.

Shree Cement is one of the biggest cement manufacturers in Northern India. The company also has two other divisions which produce and sell power.

The decision to buy the unit came as a result of expectations that the demand for cement will grow, with HM Bangur confident that the cement market will grow at 8 percent. In preparation for this growth, the acquisition was made to cover the shortage of grinding capacity. In terms of EBITDA per ton, the Shree Cement manager was not able to give a clear estimation, but mentioned that marketing costs in North India will go down by Rs 200 a ton and that the production costs will go down as well.

Whether the sale to Shree Cement was made after evaluating multiple bids or not is not something on which HM Bangur has information, but he stated that they had not given a secret bid and that there are chances that JP Associates consulted with other possible buyers.

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Taking into consideration JP Associates’ debt, the price of Rs 360 crore that Shree Cement is paying for the Panipat grinding plant seems unlikely to make a substantial change in JP’s efforts to pay off its debt.

“We were already interested in this part of the grinding plant and we were putting up everything from the Greenfield. I don’t know about the JP strategy but we were interested only in one unit,” stated HM Bangur.

The unit is located in Panipat, Haryana and will be purchased for Rs 360 crore.

An agreement for the deal was signed in July 2014 and the due diligence process is currently underway

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Plans TO immediately cater TO the future demands of the market Counting on an upsurge in demand, the company’s new plant in Panipat will be instrumental in catering to the cement needs of the country immediately. Even if demand does not increase in the following six months, the plant will be a useful investment for the following year.

The decision to buy the unit came as a result of the expectations that the demand for cement will grow, HM Bangur being confident that the cement market will grow at 8 percent. In preparation for this growth, the acquisition was made to cover the shortage of grinding unit Location of Shree Cement’s plants

Where the price of cement is concerned, the expectations are mixed, HM Bangur estimating that there are equal chances for the price to go up or down, but that the end of the monsoon season will firm the price.

New plant (acquisition) Existing plants

If the infrastructure and development plans of the government materialize, then the rise in demand that Shree Cement is forecasting for the next 6 months is likely to occur, allowing the company to immediately cater to the cement needs of the country with the help of its new grinding plant.

We were already interested in this part of the grinding plant and we were putting up everything from the Greenfield. I don’t know about the JP strategy but we were interested only in one unit

The Shree cement plants in Beawar, Ras, Khushkhera, Jaipur, Rajasthan, Laskar and Bihar have a total capacity of 17.5 million tons per annum. The Panipat grinding plant is estimated to add 1.50 million tons per annum to the overall capacity.

Indian Transactions showing the purchase price per ton Acquirer

Target

Purchase price per ton

Ultratech Company

Jaypee cement plants in Gujarati

US$128 per ton

August 2014

Shree Cement

Jaypee grinding unit in Haryana

US$38 per ton

August 2014

Vicat

Sagar Cement

US$26 per ton

March 2014

Chettinad Cement

Anjani Portland Cement

US$76 per ton

September 2014

CW Research

Acquisition date

UltraTech moved forward with its plans of expansion, purchasing Jaypee cement plants in August 2014 after having made similar acquisitions in September 2013. Vicat is now the sole shareholder of Sagar Cement - Vicat’s Indian two cement plants now have a total production capacity of 8 million tons per year. Orient Cement has announced its intention to triple cement capacity by 2020 by means of plant acquisitions in Madhya Pradesh and Chhattisgarh.

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CEMENT MARKETS

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CEMENT VOLUMES Cement consumption in Spain in the first 8 months of 2014 reached 7.1 million tons, a drop of 1 percent versus the same period in 2013. In August consumption totaled 0.9 million tons, down 16 percent down from July and almost flat compared with the same month of last year.

Spain’s cement demand remains at a historical minimum, following an intense deceleration in public spending in infrastructure and housing development.

In the United States, the construction sector continues to recover from the crisis.

According to Oficemen, cement manufacturing companies in Spain are exporting around 53 percent of production, which account for approximately 9 million annual tons of cement. Spain has become the largest exporter of cement in the European Union since the local demand plummeted during the financial crisis in 2007-2008. Consumption will decline between 7 and 8 percent this year, reaching seven years of decline in a row.

In the United States, the construction sector continues to recover from the crisis. Housing starts surged 22.9% in July, to reach their highest pace since November 2007. The National Association of Home Builders released data showing builder confidence at its highest level since November 2005, which creates encouraging expectations for the remaining of the year.

New construction starts in July climbed 6% with nonresidential building supported by a strong month in manufacturing plant projects as well as improvement in commercial building.

Russia’s cement production grew 3 percent to 7.6 million tons in July 2014. The construction sector in Russia continues to show signs of accelerated recovery. Infrastructure development currently accounts for the largest portion of the construction market as the government invests in projects ahead of the 2018 FIFA World Cup. The country is also investing in improving its road network.

The recovery in France has lost ground in the last months. Cement consumption rose 2 percent in July compared to June, but the demand is down 11 percent from the same month of last year. The year-to-date drop has now reached 4 percent. The French Prime Minister has responded to the overall weakening conditions by implementing measures to revive the con-

Jul 2014 Year-on-Year Cement Production Growth Rate (%) 20% 10%

-50%

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Source: CW Research

-40%

Saudi Arabia

Vietnam

Thailand

China

Russia

Argentina

-30%

Colombia

-20%

Japan

0% -10%

CW Research CEMENT MARKETS

struction sector. The government would offer tax rebates for the sale of land destined for development, and rolled back plans for complex regulation of rentals.

Domestic cement production in Argentina surged 4 percent in July as compared to the previous month. However, year-on-year cement production fell 4 percent. Recession has hit the country and in particular the construction sector. Demand for most construction materials dropped in July from the same month of last year. Cement declined 5.4 percent, asphalt dropped 4.4 percent and clay bricks contracted 3.1 percent.

Jul 2014 Year-on-Year Cement Demand Growth Rate (%) Spain and US as of August 20% 10%

-40% -50% -60%

Colombia’s increasing investments in infrastructure and social housing programs have been driving up cement consumption in Colombia. July production increased 10 percent from June and is up 11 percent from the same month of last year. In Peru, the economy has started to recover, but at a slower pace than expected. The economy grew only 1.6 percent in July, below the analysts’ consensus. Cement demand grew 5 percent during the month but year-on-year figures are still at the same level as 2013.

China’s cement production suffered a setback and closed at 223 million in July following a decline in consumption over recent months. Overall, industrial production in China has experienced its weakest growth since December 2008 and the Chinese government has taken several measures to bolster confidence in the real estate sector and boost sales. Housing sales in China in the first seven months of the year fell 10.5 percent amid efforts from local governments to make it easier for homebuyers to purchase second homes.

Source: CW Research

Saudi Arabia

Pakistan

Spain

France

US

Indonesia

-30%

Peru

-20%

Germany

0% -10%

The recovery in France has lost ground in the last months

After an unexpected recovery in demand in May, mostly driven by legislative elections, cement sales in Indonesia plummeted 26 percent in July on slower deliveries due to the Lebaran holiday as well as delays of some projects due to political uncertainties in the market on the results of the 2014 presidential election. Expectations are that the industry will face a challenging year in 2014.

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Volume variation analysis for selected countries that are major consumers, producer, importers and exporters of cement. This is a selection of notable markets. Additional detail is available from CW Research as well as on-line at http://www.cemweek.com to the market data section.

Cement Production (million tons)

Cement Consumption (million tons)

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Cement Production MoM (%)

Cement Consumption MoM (%)

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Cement Imports (million tons)

Cement Exports (million tons)

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Cement Exports MoM (%)

Cement Imports MoM (%)

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MoM: month vs previous month; YoY: month vs same month last year; YTD: year-to-date; YTD%: year-to-date vs previous year

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CEMENT ENERGY MARKETS

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CEMENT ENERGY MARKETS Coal Market Update Volumes recover in all export hubs except for Indonesia July global coal trading volumes recovered 2 percent from previous month, with significantly higher volumes out of Australian and Colombian ports.

Colombian coal deliveries surged 30 percent in July and reached 8.9 million tons. The volume has been recovering after coal exports suffered a setback at the beginning of the year when local authorities forced Drummond to stop loading ships, a measure that lasted around 3 months. In addition, at the end of June, protests on Cerrejon’s private railway by security workers caused stocks at the port to fall to one or two days of shipments. The government in Colombia is targeting coal production of at least 95 million tons for 2014, but indicated that final numbers will likely easily exceed that level. Big producers in Colombia have all boosted exports, especially Drummond, which has been focused on reducing the inventory buildup during the export halt.

China’s new regulations on low value coal raise concerns among exporters

South African coal deliveries in July stood at 5.5 million tons, 10 percent higher than June and down 12 percent from July 2013. The majority of coal exports out of the Richards Bay terminal go to Southern Asia (around 60 percent), followed by Western Europe (around 20 percent). Just recently, Ukraine announced it will buy one million tons of coal from South Africa because the military conflict in its Donbass region has disrupted domestic coal production.

China just announced that beginning in 2015 it will restrict the production, consumption and import of coal with high impurity levels. The measure, which will not apply to power plants, traders and utility sources, has raised concerns among exporters. Australia, which exported 2.1 million tons more coal in July compared to June, the highest volume since December 2013, could be at high risk since the measure affects more than half Australia’s thermal coal exports to China.

Indonesia’s coal exports dropped 6 percent in July to 27.7 million tons, the lowest level since January 2014. The government has been implementing measures to reduce exports in order to drive prices up. On July 15, authorities released a regulation forcing Indonesian thermal and metallurgical coal exporters to secure an export license before they export. The implementation was expected

by September 1. But Indonesia’s Ministry of Trade has decided to delay it to October 1 to provide additional time for more license applications to be processed. Total exports are projected to decline 11 percent this year due to lower production, at around 310 to 350 million tons. Volume in 2015 will be unchanged. Indonesia will also likely be hit by the Chinese ban on low value coal.

Coal Global Trading (million tons)

Jul-14

Source: customs data

Jun-14

Apr-14

May-14

Feb-14

Mar-14

Jan-14

Rest

Dec-13

Oct-13

Nov-13

US

Sep-13

Jul-13

Aug-13

Jun-13

Apr-13

Colombia

May-13

Mar-13

Feb-13

Jan-13

South Africa

Dec-12

Nov-12

Oct-12

Russia

Sep-12

Aug-12

Jul-12

Australia

Jun-12

Apr-12

Feb-12

Mar-12

Jan-12

Dec-11

Oct-11

Nov-11

Sep-11

Jul-11

Aug-11

Indonesia

May-12

120 100 80 60 40 20 0

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Energy Prices Update Coal The average coal price remained at 74U$/ton in August due to continued weak demand from the market. Major coal exporters are already assessing the impact of the Chinese ban on all coal imports containing more than 15% ash and 0.6% sulphur.

The average coal price remained at 74U$/ton in August due to a still continued weak demand from the market. Major coal exporters are already assessing the impact of the Chinese ban of all coal imports containing more than 15% ash and 0.6% sulphur

The price of Australian coal has dropped nearly 18 percent this year to five-year lows. The price hit US$70 per ton in August on heavy oversupply and soaring Chinese demand.

According to industry experts, Australia will be hard hit by the new Chinese regulations on coal. Almost half of all Australian exportable thermal coal would not meet the cutoff - however, the largest buyer of Australia’s thermal coal is still Japan. Prices are mostly based on long-term contracts (set around April) and the latest negotiated prices were fixed at about $US73 per ton (close to current price).

In Indonesia, the world’s biggest exporter of coal, volume has dropped from last year, which should make room for a future price hike. However, the HBA average export price plunged to US$70 in August, the lowest since June 2009. Prices have been unsteady in recent weeks due to uncertainty in the implementation of the new export regulation that forces companies to process a ministerial license in order to export coal out of the country.

Top thermal coal exporter Indonesia is also assessing the impact of the new Chinese regulation on its own exports. According to an industry group in Indonesia, the plan is unlikely to happen quickly and any impact is likely to be offset by an uptick in Indian

US exported

Colombia exported

Australia Newcastle

Indonesian HBA

South Africa Richards Bay

150 130 110 90

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Aug-14

Jun-14

Apr-14

Feb-14

Dec-13

Oct-13

Aug-13

Jun-13

Apr-13

Feb-13

Dec-12

Oct-12

Aug-12

Jun-12

Apr-12

Feb-12

Dec-11

Oct-11

Aug-11

Jun-11

Apr-11

Feb-11

Dec-10

Oct-10

50

Aug-10

70

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

Steam Coal FOB Average Prices (US$/ton)

CEMENT ENERGY MARKETS

CW Research

The current general sense in the industry is that prices have hit bottom and will start to recover in the medium term

demand. However, they see a greater impact to Indonesian production and exports from new export and royalty rules being introduced by the Indonesian government. If global coal prices remain low then exports and production must be curbed.

The current general sense in the industry is that prices have hit bottom and will start to recover in the medium term.

US Petcoke Export Price (US$/ton) rolling 12-month average

120 100 80

40 20

Petcoke The price of U.S. uncalcined petcoke for export markets lost another 10 percent in August and closed at around US$76 per ton. The downward trend in the price follows a long period of depressed coal prices worldwide. In the US Gulf prices remain under pressure due to lower global prices while volume out of the refineries in the region. Reports at the beginning of September indicate that BP Plc has temporarily closed a coker at its refinery in Toledo, Ohio. The plant has a capacity of 160,000 barrels per day. The reason for the closure and the timing were not known. The refinery is a joint venture between BP and Husky Energy Inc.

A-14

J-14

J-14

M-14

A-14

M-14

F-14

J-14

D-13

N-13

O-13

S-13

A-13

J-13

J-13

M-13

A-13

M-13

F-13

J-13

D-12

N-12

O-12

S-12

A-12

0

Source: customs data

60

Despite the low prices, oil companies continue to invest in new coker capacity

In China Sinopec’s refineries (Sinopec is China’s largest producer and supplier of refined oil products) petcoke prices have remained stable overall amid balanced supply and demand and normal selling.

Despite the low prices, oil companies continue to invest in new coker capacity.

ExxonMobil just announced it would invest $1 billion to install a delayed coker unit at its To learn more, please contact the CW Research team at sales@cwgrp.com or +1-702-430-1748.

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320,000-b/d refinery at Antwerp. The unit will convert heavy, higher sulfur residual oils into transportation products such as marine gas oil and diesel fuel. Earlier in the year, Mangalore Refinery & Petrochemicals Ltd. (MRPL) in India commissioned 2 units in the Phase 3 expansion at the Mangalore refinery, including a 650,000 ton/year coker for heavy gas oil hydrotreating as well as a 3 million ton/year delayed coking unit.

Natural Gas The Henry Hub spot price traded at US$3.9/MMBtu in August, 3 percent lower than July following overall mild weather forecast for the fall. However, prices started to climb at the end of the month based on hopes for demand for the fuel after early-season snowstorms hit the northern Midwest of the country.

Natural gas prices in the European Union picked up at the end of the month on the escalation in the Ukraine/Russia conflict

European prices in the region remained weak in August (US$9.1/MMBtu) because of high inventories. The European Union reported more than 73 billion cubic meters of inventory at the beginning of September, the highest since November 2009. However, natural gas prices in the European Union picked up at the end of the month on the escalation of the Ukraine/Russia conflict. Russian natural gas flows to the European Union through Slovakia via Ukraine have been declining and are at their lowest since at least 2011. Eastern European countries reported declines in supply from Russia at the beginning of September. In Austria, gas shipments from Russia were down 15 percent from previously ordered volumes, in Slovakia volume is down 10 percent and in Poland gas flows from Russia have fallen 45 percent. The region is encouraging all parties to find a short-term solution for the problem and the Energy Commissioner is leading talks between Russia, Ukraine and the EU on the terms of Russian gas sales to Ukraine.

Natural Gas Prices (US$/MMBtu)

18

US

Europe

16

14 12 10

4

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Aug-14

Dec-13

Apr-13

Aug-12

Dec-11

Apr-11

Aug-10

Dec-09

Apr-09

Aug-08

Dec-07

Apr-07

Aug-06

Dec-05

Apr-05

Aug-04

Dec-03

Apr-03

Aug-02

Dec-01

Apr-01

Aug-00

Dec-99

Apr-99

0

Aug-98

2

Source: EIA, World Bank

8 6

Volume variation analysis for selected countries that are major importers and exporters of coal and petcoke. This is a selection of notable markets. Additional detail is available from CW Research as well as on-line at http://www.coalweek.com/ to the market data section.

Coal - Exports (million tons)

Petcoke - US Exports (million tons - Sep)

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Coal Exports MoM (%) US petcoke exports prices MoM (%)

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Petcoke - US export prices (USD/ton - Sep)

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cement market and competition

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arket and competition

The first quarter performance of India’s cement companies with volume and price of cement varying according to region. The quarter ending 30 June 2014 was described by price volatility through the entire country and by varied volume growth.

The volume of production grew above 12 percent for cement companies in North, Central and Western India, remaining subdued for those Southern cement producers. JK Lakshami, Sanghi Industries, Mangalam Cement and Saurashtra Cements posted 30 percent volume growth, outperforming other competitors on the market.

29 JULY / AUGUST 2014

Prices improved in the Southern regions, bringing about criticism from the construction sector, but they declined in other regions of India because of the monsoon.

Also, Indian cement companies reported higher-than expected costs of production because of increases in the prices of petcoke and diesel fuel.

In their Q1FY15 reports, ACC, India Cement, Ramco Cement and UltraTech posted a decline in profit. Price volatility will continue to be a problem for cement producers even if the pick-up in demand reaches double digits. Capacity utilization will stay in check, so growth in demand

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will not be able to lead to stability of prices.

Indian government involvement on cement market The Indian government is inviting cement companies to a public auction in order to arrive at the cheapest price possible for procuring raw material needed for infrastructure works. The move comes as an attempt to improve road and highway development by depressing the cost of materials.

The highway ministry will soon begin to search for the cheapest rate possible

29

Photo by: www.binaniindustries.com

Binani Cement India Plant

by inviting the public and private sector cement companies to quote their ex-factory prices. The ministry will then inform the private contractors which cement companies are willing to offer the cheapest rate for a particular period. The ministry will also pass this information to developers and contractors of other governmental projects.

“Since the cement companies can expect bulk orders, they can actually offer a cheaper rate. Once we arrive at a base price, we will calculate the cost of greenfield cement concrete projects,” said a ministry official. Road minister Nitin Gadkari communicated to road engineers that sizable cement companies have answered to the bid, offering raw material at Rs 160 per bag of 50 kg against the prevailing market price of Rs. 300-350.

Re-auctioning of coal blocks India’s Government asked the Supreme Court of India to make a speedier decision on the case of the 218 licenses for coal mines released by the government since 1993.

Though the top court deemed the allocations as illegal, it has yet to cancel them.

The Government asked the Apex Court about a clarification on the 218 coal mines found illegal on account of India’s severe shortage of coal.

Nonetheless, the government sought exemption for 46 of the 218 coal mines.

The re-auctioning of the coal blocks will be conducted by the Government in case their allocations are revoked by the Supreme Court.

The intention of the government is to take quick and transparent action in allocating coal blocks, as opposed to the UPA rule that affected productivity among sectors which use coal for energy. Known as “Coalgate”, the UPA Government’s grants of coal blocks to the steel, cement and power industries were found to be illegal by the Auditor General report in 2012.

The sale of mining rights had been done for less than the market value and the licenses were allocated without transparent biding under the UPA rule.

Analysts are weary of the Supreme Court’s Spotential cancelling of blocks, stating that the actions will only result in more power shortages across India.

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cement M&A AND FINANCE 5

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&a and finance

JayPee Cements continues selling units JayPee Cements continues to sell units in an effort to cover its debt. Shree Cement began talks with Jaiprakash Associates about acquiring a 1.5 million ton cement grinding unit in Panipat in May 2014. The deal will be finalized as soon as the due diligence process is over.

According to HM Bangur, managing director of Shree Cements, the deal stipulating the terms of the acquisition has recently been signed and the due diligence process is currently underway. The acquisition deal is worth Rs. 360 crore and is expected to go through shortly.

“Shortage of grinding capacity led to the decision for this acquisition. We expect the Indian cement market to grow at 8 percent. To prepare for growth in the cement industry, we have decided on this acquisition”, the executive said. H M Bangur also mentioned in interview that the Panipat grinding unit was the only unit the company planned on purchasing from the JP group. The new grinding unit consolidates Shree Cement’s position as one of the leading cement manufacturers in the Northern region of India.

The acquisition became completed and effective starting June 12, 2014. The two units were purchased in September 2013 for a sum of Rs. 3,800 crore. A demerger implementation committee was appointed by the board of directors of UltraTech, having allotted 1.14 lakh equity shares of the company as fully paid shares to shareholders of JCCL according to the terms of the deal. UltraTech released a statement saying that it had to discharge the amount equal to the difference by issuance of equity shares to shareholders of JCCL because the actual net working capital is higher than the net working capital on the closing date in terms of the scheme. At its meeting held on August 28, the demerger committee allotted 27,261 equity shares of the company as fully paid-up to shareholders of JCCL. After the acquisition of the two units from Jaypee, UltraTech now has a cement capacity of 58.8 million tons in India and a capacity of 62 million tons including its overseas capacity.

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focus UltraTech expects growth for this financial year UltraTech Cement, India’s largest cement producer, expects a 25 percent growth in income during FY 15. Expectations of higher turnover are based on the fact that demand is thought to grow and on the housing and infrastructure projects announced by the new government.

“Growth for this year for UltraTech will be much more robust than last year.

The turnover expected for 2014/15 is Rs. 25,000 crore”, said Chairman Kumar Mangalam Birla. If the chairman’s estimations prove to be true, than the growth in turnover UltraTech would experience would be the highest since the complete incorporations of Grasim’s cement assets into UltraTech.

Furthermore, the chairman mentioned that the economic growth of India will make its effects felt on the cement industry, given that the cement industry is closely linked with the economy and with the government’s projects in housing and infrastructure. Though the chairman cannot commit to specific growth numbers, he expects the current year to be far stronger than the previous one.

UltraTech completes acquisition UltraTech has acquired an integrated cement unit in Sewagram and a grinding unit in Wanakbori from Jaypee Cements.

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Capacity expansions Orient Cement, Sagar Cements and Dalmia Group are planning to expand their capacities. Birka Group’s Orient Cement has plans to triple its capacity by the year 2020, and is now looking for a cement plant that would increase capacity. Managing director and chief officer of Orient Cement, Deepak Khetrapal, said that the company is now involved in strategic discussions with three different companies for acquiring a cement plant with a capacity of up to 2 million tons per annum. Deepak Khetrapal has refused to disclose the identity of the companies with which Orient Cement is in talks, only mentioning that they are seeking a plant in Madhya, Pradesh or Chhattisgarh. Orient Cement’s plan is to increase its capacity of 5 million tons per annum to 15 million tons per annum. The plan also includes the set up of Greenfield facilities and the expansion of the existing one. Orient Cement has set up a Greenfield facility of 3 million tons per annum capacity at Gulbarga, Karnataka, which is expected to become operational by the first quarter of FY 2015. The plans of the firm also include opening another Greenfield project in the next five years.

Sagar Cements acquires capital needed for expansion After having sold its entire stake in its joint venture with France’s Vicat, Indian Sagar Cements Cements plans to use part of the capital acquired from the deal in order to purchase equipment for its Matampally plant, whilst the remaining amount will be used for funding organic and inorganic growth for increasing Sagar Cements’ role in the cement industry in the South of India.

Sagar Cements and Vicat formed a joined venture in 2008 in order to set up a plant in Gulbarga in Karnataka with a capacity of 5.5 million tons. Up until selling its shares in the joint venture, Sagar Cements held a 47 percent stake. In 2010, Vicat acquired the majority of shares in Hyderabadbased Bharathi Cement for an undisclosed amount. Following its latest deal, the French cement company now has two plants in India.

Sagar Cements is also seeking to acquire BMM Cements of Banglor. If the plan acquire BMM cements goes through, a consolidation in the 130 million-ton South Indian cement market will occur. The capacity in the south of India accounts for more than a third of India’s total capacity of 360 million tons.

The manufacturing and limestone assets of BMM Cements have already been inspected by a team from Sagar Cements, and the legal and financial due diligence process is currently underway. BMM Cements, part of BMM Ispat Group, has a 1 million-ton capacity Greenfield cement facility, along with a 25 megawatt captive power project nearby Tadipatri in the district of Andhra Pradesh.

Dalmia group plans merger The Dalmia Group is reportedly keen on merging its cement companies, Dalmia Bharat and OCL India. The move is sought in order to take advantage of India’s improving cement market.

companies’ valuation. Concerns about valuations of some small and mid-cap cement companies have also expanded, as Shree Cement, JK Lakshami Cement and India Cements are now trading at forward PE multiples of more than 20 times estimated earnings.

Signs of enhancement in cement demand and prices helped keep cement stocks afloat, but even though these stocks have delivered good returns so far this year, further gains or expansions in valuation without a commensurate improvement in earnings can underline valuation concerns. Demand grew 5 percent in the last financial year and is estimated to rise to 7 percent this year, but is it unlikely that the industry’s utilization levels will improve in the next term. The current utilization levels are estimated at 74-76 percent and they may improve only slightly in the next financial year.

A merger between the two companies had been attempted in 2008, but it failed.

Dalmia Bharat owns a 48 percent stake in OCL India, and the swap ratio in the deal is seen to be in favor of OCL India’s shareholders. The two cement companies combined have a cement capacity of almost 20 million tons, with Dalmia Bharat’s capacity the bigger of the two.

Dalmia Bharat is moving forward with a mega restructuring plan, planning on merging with its unlisted arm, Dalmia Bharat Enterprises. Private equity firm KKR owns a 14.5 percent stake in Dalmia Bharat Enterprises and will come to win a minority stake in the future merged listed entity.

High share values for cement players Several major cement companies’ shares, including those of ACC, Ambuja Cements and UltraTech Cement, are valued at more than 21 times forward price-to-price-multiples, casing concerns about large cement

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cement projects and expansions 5

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1 rojects and expansions

Southern builders consider building own cement plants High prices of cement have been an issue for builders in the south of India. Most cement companies refused to roll down prices even after the builders’ association halted buying cement in protest of high prices.

The situation led builders to consider the possibility of building their own cement plants that would help them meet their bulk needs at lower costs. Key members of a committee comprising thousands of infrastructure firms and property developers stated that they are thinking of jointly buying one of the distressed cement units in the south and installing the technology to bring down operational costs.

Shree’s Bihar plant begins operations Shree Cement commissioned a grinding unit of 2 million tons per annum at Aurangabad in Bihar on June 30, announcing in a press release that the facility became operational on July 10.

The new grinding unit is part of Shree Cement’s strategy of expanding its capacity from 13.5 million tons per annum to 25 million tons per annum by 2015. Shree aims at consolidating its position in northern India’s cement market and stepping into the country’s eastern market.

33 JULY / AUGUST 2014

New facilities in India Thailand’s Siam Cement has plans to set up a manufacturing plant in India as part of its expansion strategy. Siam Cement will invest about $50 million in the new facility, which is expected to become operation within two years.

Siam Cement is listed on the Thai stock exchange, its annual sales worldwide reaching USD 20 billion.

Karnataka, the seventh largest cement manufacturing state in India, is becoming an attractive site for new cement manufacturing units. No less than 32 units by 16 companies are being created in the state, the total investments in the state’s cement sector rounding up to about Rs. 40,000 crore.

The largest investment in new facilities comes from Rajashree Cements and Jaypee Cements, both of which are investing Rs 3,200 crore for their new plants.

Rajshree will set up a unit with a capacity of 5 million tons per annum, whilst Jaypee’s unit will have a total production of 6 million tons per year. Both of the units will be located in Chittapur Taluk of Gulbarga.

Lafarge will also make a Rs. 1,500 crore investment for a 3 million-ton per year plant in the same location. Cement demand has been on the increase in Karnataka over the past few years, and sup-

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focus Environmental concerns In December 2013, the State Government of Uttarakhand announced that UltraTech cement would invest Rs. 5,000 crore to set up a plant at Tyuni in Dehradun district and another at Someshwar in Almora. The perspective of a cement plant operating in Almora makes farmers weary of the effects of the facility on their livelihood, namely on agriculture. Locals also fear that their water source will come to suffer as well.

Sanjay Rawat, Additional General Manager, State Industrial Development Corporation of Uttarakhand, mentions that the two regions are still being closely surveyed by UltraTech Cement and that only after the completion of the survey will the company have enough data to assess the feasibility of cement units in the proposed areas.

ply has also seen a jump. At the moment, India’s largest supplier of cement is the state of Andhra Pradesh.

volume & pricing

V

cement

olume and pricing

Cement companies looking to augment the volume of production Cement demand is expected to expand to about 7-8 percent this financial year, and cement companies across India are preparing to meet the growth in demand by expanding existing capacity.

For instance, India’s TNPL plans to increase the plant’s capacity by 300 MT per day at a capital outlay of Rs. 30 crore. The company currently uses mill wastage, like lime sludge and fly-ash, to produce cement, operating with a plant whose capacity reaches 600 MT per day. The new facility is expected to be completed by December 2015.

Indian cement prices hike High cement prices brought about reac-

tions and protests from the constructions sector, yet major cement companies refused to make significant changes in their pricing.

The Builders’ Association of India asked the government to set up a regulatory body for cement. The construction group asks for a regulatory authority on the lines of the Telecom Regulatory Authority of India and the liberalizing of the market to allow imports from the Asian market. The latter would help in controlling the price of cement in India.

The group gave the example of the current price of Arasu Cement, manufactured by Tamil Nadu Cements Corporation, which stood at Rs 275, whereas in Pakistan a bag

of cement costs Rs. 160. R. Radhakrishnan, former president of the Builders’ Association of India, said that India’s cement sector saw no regulation of prices despite the interference of the Competition Commission of India in 2012.

The cement price spike also concerns PMK, a political party active in Tamil Nadu, which urged the government to take steps to control the cement price.

The hike in the price of cement was described as unreasonable, especially since demand for cement was not high enough to justify the price of cement going up.

focus Expected pick-up in demand Analysts expect the second half of the year to come with a pick-up in demand across the country. The government’s focus on infrastructure and the overall economic growth of the country makes UltraTech Cement CFO K C Birla confident that the cement sector will perform better in the following months. The CFO also mentions that demand is expected to

revive after the end of the monsoon season and once the infrastructure projects planned by the government are executed.

On the other hand, the additional 56 million tons in capacity which will likely be added to India’s cement sector total capacity over the next three years may bring about price volatility, cement oversupply and a rise in fuel and fright costs. Vinitia Singhania, managing director of JK Ce-

ment, stated that only 65-70 percent of the annual 330 million tons in cement capacity currently available to India is being used every year, and that companies which are now looking to expand their capacity will only lead to oversupply in the market.

Kotak Institutional Equities said in a report that price volatility will continue to be an issue for the cement market and that additional capacity per annum will intensify the issue.

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cement people

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eople

Independent director of UltraTech Cement resigns Mr. M. Damodaran, independent director of UltraTech Cement, has resigned from the board of the company. The decision was due to increasing workload, consequent time commitments and a need to reduce his board level engagements. The resignation took effect on June 20.

J.K. Cement director passed away Jagendra Swarup, independent director in the board of J.K. Cement, passed away on July 30. J.K. Cement representative stated that, consequent to the death of Jagendra Swarup, a change will be made in the company’s directorate, but the company has yet to disclose what the changes are.

UltraTech Cement directors facing fraud case Three directors of UltraTech Cement, alongside senior officials of Rjasthan’s Mines Department, are now facing fraud and corruption charges over the alleged transfer of a limestone mine in the Gotan area in the district of Naguar.

The Rajasthan Anti-Corruption Bureau filed a first information report against several former shareholders of Gotan Limestone Khanji Udyog and against three UltraTech directors, namely, CK Birla, Rahul Mahnot and MB Aggarwal. The director of Mines and Geology and other

35 JULY / AUGUST 2014

officials of the department were also put under the radar.

focus

The case surfaced after 1,000 hectares of land near the village of Dhanapa in the Naguar district were leased. The land was allotted to partnership firm Gotan Limestone Khanij Udyog in 1984. However, after the company’s partners formed the private limited company Gotan Limestone Khanji Udyog in 2012, the leased was transferred in spite of the rule that lease of natural resources cannot be transferred, sold or subleased under political influence during the previous regime.

New COO and CFO for Orient Cement

BJP leader, Kirit Somaiya, filed the case in May this year and stated that after the lease was transferred, the company sold its stake to UltraTech in August 2012.

According to his statement, UltraTech allegedly bought the lease under a conspiracy and the Mines department officials facilitated it.

Appointment to Chettinad Cements Board blocked Chettinad Cements’ shareholders oppose the appointment of M A M Ramaswamy to the company’s board. The former chairman of the company allegedly bribed the Registrar of Companies, leading shareholders to question his business ethics.

During the annual General Meeting of Chettinad Cements, an individual share-

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Orient Cement’s Board of directors appointed new COO and CFO for the company during the meeting held on August 17. Rahul Deshmukh is now the COO of Orient Cement, whilst Sushil Gupta was appointed CFO. The cement major is planning to expand its capacity and is making internal changes meant to aid in the expansion of the company.

holder opposed the motion to re-appoint Ramaswamy as the director of the company, while another shareholder proposed an amendment to the ordinary resolution stating that Ramaswamy should not be reappointed as director. The resolution was put to vote during the meeting and it was carried out.

In a statement following the meeting, the company stated that M A M Ramaswamy’s contribution at the help of the company’s operations until 1999 is being acknowledged by appointing Ramasawamy as Chairman Emeritus for life.

regional

news

Axle load limits for truck transportation imposed by Pakistani authorities are severely cu Multiple regional expansionary actions are announced by cement companies operating in

egional news

Pakistan cement sector Cement sales in Pakistan dropped 31 percent month-on-month and 14 percent year-on-year in July this financial year.

Local sales fell by 32 percent month-onmonth, whilst exports dropped by a similar rate in year-on-year figures.

Total exports during July plunged to 503,000 tons from 749,000 tons, while the domestic market dropped to 1.73 million tons from 1.85 million tons in the same month last year. Total dispatches in July Balochistan, Pakistan

38 MaY / JUNe 2013

domestic market with 0.39 million tons of cement, with their exports nearing 0.22 nies was tons. increased, which naturally led to million an increase in local prices. Cement sector players the of government Duringrepeatedly the first 11asked months the current tofiscal reconsider the increased burden year, Pakistani cementtaxcompanies and to return the cement sector to norsold more than 30.5 million tons, aaround mal sales tax regime. one million tons above the corresponding period of the last fiscal year. Cement Export exports market notched evolution 7.7 million tons this fiscal Exports to more Afghanistan dropped year versus than 7.8 million tonstoin 183,927 tons in July from 441,812 in July the last fiscal year for the first 11 months. last year. Iranian cement became a more favorable option for Afghanistan due to lower prices. Experts predict that the CW Group Coal Week CemWeek BMWeek INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE is likely to continue in the following CemWeek CW Group trend Coal Week BMWeek CemWeek BMWeek CW Group months Coal Weekgiven that NATO forces are preparing to leave Afghanistan.

Photo by: Michael Foley

R

In th lizati back 2007 are e ate a push boos

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 appliamounted to 2.23 million tons, indicatingof cation impacts not only the availability atransportation, 14.12 percent decline as compared to costs the but also the logistics 2.6 million tons dispatched in the same incurred. month last year.

Northern cement units dispatched around Both domestic issues and developments 2.29 million tons of cement in May 2013, in export markets led towere the market’s per-to 24.3 percent of which sent by sea formance in July. Locally, uncerexternal markets, mostly political to Afghanistan, tainty, unkind 2.7 government policies and while around percent were dispatched lowering demand lead to smaller figures. to India. The southern units provided the The government has yet to address several issues impacting the cement sector.

The overall tax burden for cement compa-

pakis Their Attoc Kara that lion f Iraq. lion in Hu

Luck on its ed to millio

Pakistan’s cement exports were also hurt by claims that Pakistani cement was dumped in SACU. South African local cement players, including Afrisam, Lafarge Industries South Africa, NPC Cimpor and PPC, alleged in an application submitted to the International Trade Administration Commission of South Africa that cement is being dumped on the Southern African Customs Union market by Pakistan cement companies. The allegations are currently being investigated by the ITAC and Pakistani cement makers are facing anti-dumping probes. Pakistan exports approximately 1.6 million tons each year to South Africa, but the recent allegations are unlikely to cause the Pakistani cements producers to lose the South African market.

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regional news “There is a common perception that the industry would face a significant loss (on anti-dumping probe), and that the Lucky Cement would take huge hit, which is not correct”, said Amin Ganny, chief operating officer at Lucky Cement. “These allegations are only going to strengthen our resolve to stay ahead of the industry in terms of innovation and strategy”, he added. Moreover, Pakistani cement prices are still attractive enough to keep South African export partners interested, and South Africa is a cement-deficit country which may not afford to ban cement imports from Pakistan.

Expansions on the regional market New cement plants or extensions are being planned in Bhutan, Pakistan and Sri Lanka. The establishment of a cement plant in Bardo Gewog, Bhutan was approved by the District Coucil of Zhemgang. The District Council accepted the proposal by citing the socio-economic benefits the cement plant would bring.

Similar proposals for cement, limestone and other quarries were formulated in the past, but none of them went through. The project has to obtain clearances from the Department of Geology and Mines and from the National Environment Commission before work on the new facility can begin. If the project is greenlighted by the above mentioned institutions, the cement plant would be the first of its kind in Zhemgang.

On the other hand, lower exports were cushioned by a rise in dispatches to India, which became the second largest export destination for Pakistan. Exports rose over 40 percent during the last fiscal year due to improved logistic services. Pakistan exported 667,305 tons of cement to India during FY 2014, having exported 428,214 tons in FY13. Despite the increase in exports in India, Pakistan cement companies are still facing some non-tariff barriers issues. Because of the non-tariff barriers imposed by the Indian authorities, cement exports to neighboring countries have been declining since FY08. At the moment, eight Pakistani companies are exporting cement to India and an increase in demand is expected in Indian Punjab.

Pakistan’s Cherat Cement is to install a new cement production unit at its factory site in Nowshera, Khyber Pakhtunkhwa.

The investment will amount at around Rs. 12 billion and the capacity of the plant will be over 1.3 million tons of cement per year. According to the company’s executive director, Abid A. VAzir, the plant will be commissioned in 30 months. The decision to add a new production unit able to boost production was taken due to an increase in demand for cement on

importing marketsmarkets for Pakistani exported cement List of importing for Pakistani exported

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2010

500000

2011

400000

2012

300000

2013

200000 100000

Kenya

Comoros

Iraq

Madagascar

India

Mozambique

Tanzania, United Republic of

Sri Lanka

South Africa

Afghanistan

0

JULY / AUGUST 2014

Sri Lankan cement units In Sri Lanka, the now defunct cement factory in Kankesanthurai has a chance of being re-established by the Sri Lankan Government. The factory’s status was brought to the attention of the State Resources and Enterprise Development Ministry by Sri Lanka Cement Corporation Chairman N.S.M. Samsudeen. An investment of Rs 1.5 billion will make the factory operational within a year from the date of commencing the project.

The capital needed for making the factory functional will be sought from the Bank of Ceylon. The reopened cement unit is expected to produce a minimum of 12,000/50-kg cement bags every day starting with the commencement of operations.

2009

600000

World

Exported value, USD thousands

cement

the local market. Moreover, the company expects demand to further increase after the government acts on its plans of starting major infrastructure projects. The present government plans to focus on housing projects, constructing highways and hydropower plants. The increase in demand is also expected due to increased spending in the private sector.

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India’s Maha Cement of My Home Industries Limited is looking to enter the Sri Lankan market after having been awarded an SLS certificate by the Sri Lanka Standard Institute. “Maha Cement is known for its brand and latest technology. We are expanding our business to SAARC nations and other countries. This is why we are going to enter the Sri Lankan market in a big way”, said Sabasiva Rao, Executive Director, MHIL. MHIL plans to expand its current cement production of 8.4 million tons to 10 million tons by next year.

orders & equipment highlights

O

rders & equipment

Indonesian cement plant orders from Capstone Turbine Corporation Capstone Turbine Corporation, a clean technology manufacturer of micro-turbine energy systems, received an order from Indonesia for a Capstone C800 system to power a cement factory in Balikpapan. The delivery is due in September 2014.

The Indonesia cement plant sought an alternative to its initial diesel reciprocating engines in order to cut costs and improve efficiency. After the delivery and installation of the micro-turbine, the plant will be powered exclusively by the Capstone C800 micro-turbine. The micro-turbine produced

by Capstone is a modular generation system that provides high availability, reliability and low operating costs that meet the needs of the Indonesian cement plant.

Third consecutive Siwertell cement unloader order Mussa Insaat Dis Ticaret, the Turkish construction services company working in Libya’s reconstruction projects, ordered a third road-mobile Siwertell cement unloader worth $10,000 from Cargotec.

The trailer-based, diesel-powered unit will have a rated discharged capacity of 300 tons per hour and will be equipped with a dual bellows system and dust filter. Delivery of the unloader is scheduled for the end of September 2014.

“This is the third road mobile cement unloader order for the same custom-

focus Aumund India equips Wonder Cement

er within a very short period,” says Jörgen Ojeda, Director for Siwertell mobile unloaders. “It will take its place in our customer’s cement unloading operations at several sites along the Libyan coast, helping to meet the demand for cement needed for the country’s extensive rebuilding programs. The customer ordered this third unloader to further strengthen its position on the Libyan market.”

The director also mentions that Swirtell mobile unloaders are ideal for the circumstances in Lybia since they have the flexibility to unload cement at the most convenient port of work in hand, minimalizing road transportation. The mobile unloader is easy to move from one port to another and it can be prepared for work in a short amount of time by a single person.

“This repeat order indicates a very satisfied customer that appreciates the well-known reliability of Siwertell mobile unloaders, along with their high unloading capacity and low operational and maintenance costs,” adds Mr. Ojeda.

Aumund India is to furnish all necessary machines for a second production line at the Wonder Cement plant in Nimbahera, District of Chittorgarh within the state of Rajasthan.

The two companies successfully cooperated in the past, Aumund India having serviced and supplied Line I at the Nimbahara plant. The contract for Line II is worth 5 million Euros and includes supplying the plant with 32 individual machines from the Aumund Product Portfolio.

Beyond the delivery and installation of the machines, Aumund will also be in charge of future maintenance services.

The second line of production will more than double Wonder Cement’s Nimbahera plant’s capacity, leading to a capacity of 7 million tons per year. Wonder Cement is part of the RK Marble group, one of the leading companies in the marble industry.

Wonder Cement’s Nimbahera plant is completely based on the latest environmental norms, keeping emissions clearly below maximum permissible values.

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orders & equipment

Siwertell Unloader

Siwertell unloader ordered for Myanmar cement facility CITIC Heavy Industries Co Ltd has placed an order to Cargotec’s Siwertell for a railtraveling ship unloader. CITIC is one of China’s largest conglomerates, headquartered in Luoyang, Henan province.

The unloader, able to unload coal from barges at a rate of 800 tons per hour, has been ordered to support energy production requirement for a new cement production plant in Myanmar, being Swirtell’s first delivery to the country. The new facility is built as part of a collaboration between CITIC and Thai Siam Cement Group subsidiary Mawlamyine. The new Myanmar plant will have a capacity of 5,000 tons per day.

“MLC will benefit from all the excellent attributes of our Siwertell unloaders including efficiency and quiet, safe, environmentally-friendly operations without dust or spillage,” says Oa Jeppsson, Swirtell Sales Manager. The unloader, which will come in pre-assembled parts, is scheduled for delivery for mid-2015. The delivery will also include an enclosed discharge arrangement for transferring coal to the jetty conveyor.

Amongst its key features, the MJ47 jaw crusher comes with a heavy duty double-deck vibrating feeder, a large capacity dump hopper, extra heavy-duty galvanized I-beam frame and a discharge conveyor.

The piece of equipment is part of a modular product range, working together and interchangeably with other products from the same module.

Wartsila plans to install more WHR System Wartsila India is eyeing cement units for combines heat and power plants. The company believes that cement companies can bring down costs of electricity and reduce emissions with the help of power plants which use waste heat. WHR systems generate additional electricity and reduce dependence on the grid.

“We have a good relationship with the cement industry. Their needs and our expectations can be a good meeting point,” said Rakesh Sarin, Managing Director, Wartsila India. There are few cement plants

Jaw Crusher launched

by Terex Minerals Terex Minerals’ latest large capacity primary jaw module crusher module, MJ47, has been launched. MJ47 was designed for large quarries and for contractors who need a jaw crusher module with increased crushing capacity and application abilities.

39 JULY / AUGUST 2014

in India which have already installed WHR systems, so the MD mentions that Wartsila is starting from base zero on the market. Over 100 plants in India are expected to install WHR systems. The power plants will also assist cement companies to meet peak demand with flexible capacity.

Terex® MJ47 Modular Jaw Crusher

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Wärtsilä 46

FLSmidth reports result for the first half of 2014 According to FLSmidth’s Interim Report, the company saw significant improvement in margins, a decline in order intake due to lack of large orders and positive operating cash flow.

Net working capital and revenue developed broadly as expected. For Q1-Q2 2014, the report notes that revenue increased 15 percent to DKK 10,873 million, with EBIT growing 89 percent to DKK 620 million.

Profit increased 99 percent to DKK 352.

Infrastructure & projects

NEW PROJECTS Tamil Nadu Government announces new road projects Tamil Nadu Chief Minister Jayalalitha announced road projects worth Rs 2,325 crore to give a push to road infrastructure and improve the state’s economy. The projects include six-laning of state highway between Oragadam – an industrial belt and Singaperumalkoli at a cost of Rs 120 crore. The government has also allocated Rs 250 crore for laying roads with pedestrian walkways and drainage in newly-added areas of the Chennai Corporation and construction of two bridges in suburban Medavakkam and Kilkattalai at a cost of Rs 185.50 crore. The government has also assigned a sum of Rs 1,020 crore for the maintenance and development of all state roads for a period of five years.

Government announces new projects worth Rs 2 lakh crore The government, in its annual 2014-15 budget proposed new infrastructure projects worth Rs 2 lakh crore. The government has allocated a sum of Rs 7060 crore for the development of one hundred Smart Cities and an additional 8000 crore towards the Rural Housing Scheme. Some of the key projects

include the construction of a metro railway in Lucknow and Ahemdabad. The government also plans to develop 8,500 km of national highway and has already set aside a sum of Rs 37,880 crore, of which it has allocated Rs 3000 crore for the northeast.

PM launches new road and port projects in Haryana and Maharashtra Prime Minister Narendra Modi announced construction of a slew of road and port projects in Haryana and Maharashtra. In Haryana, the government has planned four-laning of a 160-km-long national highway from Kaithal highway to the border of Haryana and Rajasthan. The project involves construction of 23 underpasses and construction

of over 20 km of service roads along villages situated on the route. In Maharashtra, the PM has already laid the foundation for the four laning of Solapur-Maharashtra/Karnataka border and for port connectivity highway project at JNPT near Mumbai. The project is scheduled to be built at a cost of Rs 1,927 crore and expected to be complete by December 2017. The PM also laid the foundation for a port-based multi-product special economic zone at JNPT near Mumbai at an estimated cost of Rs 4,000 crore. Both these projects are to be executed on Engineering Procurement and Construction (EPC) basis through special purpose vehicle under the National Highway Development and Port Connectivity Programme.

Photo by: Yogendra Joshi

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nfrastructure & projects

Mumbai at night

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infrastructure & projects

The company bagged new orders in its building and factories business worth Rs 1,008 crore and a turnkey order from a private developer for residential towers in Kolkata. The company also bagged new orders worth Rs 1,283 crore in water infrastructure and renewable energy business segments.

The company has secured a major order from Uttar Pradesh Jal Nigam that involves construction of two parallel 2,100 mm diameter steel gravity and repeat orders from Mohali Area Development Authority and Haryana State Industrial Corporation for construction of water and waste water infrastructure.

IL&FS Engineering secures orders worth Rs 105 crore IL&FS Engineering and Construction Company Ltd has received a Letter of Intent (LoI) from the Lodha Group for civil construction works of proposed residential buildings in Mumbai. The project involves construction works of proposed residences in phase II of Palava, Khoni village in Dombivali near Mumbai.

UPDATE ON PROJECTS Work on 189 stalled projects to resume The Union Road and Transport Ministry announced that construction on stalled highway projects worth Rs 1, 80, 000 crore will resume within a month based on removing various hurdles such as environmental clearances and delays in land acquisition. Around 189 projects announced by the previous government were stalled due to delays in forest and environment clearances and land acquisition issues. However, the government announced that the work on the stalled projects should resumed by August 15.

MMRDA, CIDCO to jointly develop Mumbai Trans-Harbor Link State development agencies Mumbai Metropolitan Region Development Authority (MMRDA) and City and Industrial Development Corporation (Cidco) have joined hands to jointly develop the much delayed Mumbai Trans-Harbor Link (MTHL) and multi-modal corridor projects. Currently, the MMRDA is the nodal agency for the construction of 126 km Virar-Alibaug Multi-Modla Corridor and MTHL projects worth Rs 12,975 crore and Rs 9,630 crore respectively. The Cidco is now ready to part-finance the MTHL as part of the MMRDA’s plan to fund the project through state and central assistance as equity.

Bombay at dawn

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Photo by: Prashant Ram

L&T bags new orders worth Rs 3000 crore Engineering and construction major Larsen & Toubro has bagged new contracts worth Rs 1,832 crore from various business segments since July 2014.

analyst recommendations MANGALAM CEMENT ICICI Securities Ltd. has maintained a ‘BUY’ rating for Mangalam Cement with a target price of Rs 277, increasing it from a CMP of Rs 241. The recommendation comes because of the company’s strong expansion plans.

In May, the company commissioned commercial production of a new cement mill with a capacity of 1.25 MTPA. The company is expected to utilize its new capacity at more than 90 percent within the next six months of commissioning, which is expected to drive the growth of the company in the coming years. The commissioning of the new mill increased the company’s capacity to 3.25 MTPA from 2.0 MTPA. Additionally, the company, which has a large presence in northern and central India is set to benefit from the favorable demand-supply scenario in these regions in the coming months. ambuja cement Motilal Oswal has remained ‘NEUTRAL’ on Ambuja Cements with a target price of Rs 235, downgrading it slightly from CMP of Rs 218. The recommendation comes because of the company’s better than estimated performance. On a similar note, ICICI Securities Ltd. has maintained a ‘HOLD’ rating for Ambuja Cements with a target price of Rs 225, upgrading it slightly from Rs 212. The recommendation comes as the company posted better revenue growth in Q2CY14 led by high realization (7.0 percent) and volume growth (7.6 percent) YoY.

for India Cements with a target price (TP) of Rs 85, downgrading it from a current market price (CMP) of Rs 108. The recommendation comes as the company reported a decline in cement volumes for the fourth consecutive quarter owing to an overall decline in demand in south India. shree cement ICICI Securities Ltd. has recommended a ‘HOLD’ rating for Shree Cement with a target price of Rs 8,600, upgrading it from CMP of Rs 7,900. The positive recommendation comes as the company continues its healthy expansion plans, which are expected to fuel its future growth. The company is set to commission its 2 MT clinker units in Rajasthan by H1FY15, whereas grinding units of 2 MT each at Rajasthan and Bihar are expected to be commissioned within the next two years. HDFC Securities Ltd. has recommended a ‘BUY’ rating for Shree Cement with a target price of Rs 8,900, upgrading it from CMP of Rs 7,897.

The positive recommendation comes as the company reported much higher EBITDA/t, impressive volume growth and strong realizations in 4QFY14. On a similar note, Kotak Mahindra Securities Ltd. has recommended an ‘ACCUMULATE’ rating for Shree Cements with a target price of Rs 8,260, increasing it from CMP of Rs 7,862.

ULTRATECH CEMENT ICICI Securities Ltd. has maintained ‘HOLD’ for UltraTech Cement with a target price of Rs 2,700, upgrading it from CMP of Rs 2,522.

The recommendation comes because the company is expected to grow at a higher rate than the industry in the coming years. Much of this growth is going to be led by the company’s capacity expansion plans. The company is aiming to increase its total capacity to 70 MT from current 59 MT by FY16E. Along with its expansion plans, the company is also expected to benefit from increasing demand for cement based on higher spending on infra development in the coming months.

RATINGS CHAnGES

india cements ICICI Securities Ltd. has recommended a ‘HOLD’ rating for India Cements with a target price (TP) of Rs 110, upgrading it slightly from the current market price (CMP) of Rs 100. The recommendation comes as the company - the largest player in south India - is expected to benefit from the creation of the new state of Telangana in southern India.

The creation of the new state is expected to boost the company’s overall utilization in the southern region in the next two years.

The company is also said to benefit from the bottoming-out of demand in South India.

However, on the other hand, HDFC Securities Ltd. has maintained a ‘SELL’ rating

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MOST POPULAR ON CEMWEEK.COM The most-read stories on CemWeek over the past two months reflect the industry’s mixed outlook. The India column shows the 20 most popular stories from CemWeek featuring India-related coverage, and the Global column shows the global events that gathered the most attention worldwide during the period. Visit CemWeek.com to access the full stories.

IndIa

GlObal

1 J K Cement’s stocks more than doubled

1 Cementos Molins acquires Bolivian cement manufacturer

2 India’s Shree Cement acquires cement grinding unit

2 Russian Nev’yansky Cementnik boosts production

3 India’s Sagar Cements sells stake in Vicat Sagar Cement Pvt

3 Lafarge sells its cement business in Pakistan

4 Indian fair trade regulator fines cement companies

4 Colombian cement company considers acquiring assets of Lafarge and Holcim in AL

5 India’s UltraTech Cement posts disappointing Q2 results

5 Lafarge Romania invest in solid waste co-processing at cement plant in Medgidia

6 Cement companies invest in plants in India’s Karnataka

6 Cemex sales in Colombia increased

7 Cement prices to increase for common users in Telangana, India

7 Lafarge and Holcim sell Brazilian assets

8 Indian cement manufacturers maintain their position in spite of protest

8 Romanian companies to invest in Egypt’s cement sector

9 Cement demand growth in India to recover

9 Peru’s Yura invests in machinery and equipment

10 India cement demand to pick up in 2H

10 Sale of Holcim Romania assets attracts interest

11 India’s Ultratech Cement to invest in capacity expansion

11 Italian Buzzi Unicem executes agreement with Wietersdorfer

12 Aditya Birla plans new cement plant

12 Russian Pikalevsky Cement boosts production

13 Birla HomeTech considers setting up cement plant in India’s Kurnool district

13 Holcim’s Siggenthal cement plant restarts production

14 Cement prices in India’s Telangana-Andhra Pradesh region plummeted

14 Holcim plans to invest in Mexico

15 India: Cement price spike concerns PMK

15 Venezuela and China to build new cement plant

16 India’s SCCL to explore mining overseas

16 Lafarge looking forward to Holcim merger

17 Indian cement demand is set to further increase

17 Turkish Çimsa acquires Sançim Bilecik Çimento

18 Pakistan’s cement exports to South Africa are likely to drop

18 Holcim and Lafarge in talks with European competition regulators

19 Pakistan cement makers unlikely to lose South African market

19 Cement prices stabilize in Egypt

20 Lafarge sells its cement business in Pakistan

20 Korea’s cement industry electricity consumption increases

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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.

Conferences where the CW Group will be presenting

COLOMBIA

AshTrade Americas 2014 Fly Ash Industry Conference

October 15-16, 2014

webinars hosted by cw research

TPR 3Q2014

Houston, United States

October 16, 2014 at 2:00 PM GMT Solid Fuels Summit (SFS) India 2014

November 11, 2014

Holiday Inn New Delhi International Airport, New Delhi, India

cw summits AshTrade India 2014 Fly Ash Industry Conference

November 11, 2014

Holiday Inn New Delhi International Airport, New Delhi, India

Cement Business & Industry (CBI) India 2014

November 12-13, 2014

Holiday Inn New Delhi International Airport, New Delhi, India

CW Summit Middle East 2014 November 9-10, 2014 Dubai, UAE

For questions or inquiries please contact Liviu Dinu, Market Services & Marketing Consultant at the CW Group at ld@cwgrp.com For more information please visit http://research.cwgrp.com/meetings

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 the CBI series to expand the scope to include participants from the entire region this time around.

CBI India 2014 Conference will focus on the various aspects of India’s cement industry from a business growth & investment perspective. Notably, the program will take a dual-track business and technical approach to the issues around: Market perspective, forecast and competitive outlook PAST PARTICIPANTS: ACC Ltd. | Alley-Cassetty Companies, Inc. | Alliance Polysacks Pvt. Ltd. | Alternative Resource Partners | Ambuja Cements | Argus Media | ASEC Trading | Beroe Consulting Pvt. Ltd | BEUMER Group GmbH & Co. KG |Bharathicement Corporation Pvt. Ltd | Binani Cement | Browz | Burundi Cement (BUCECO) | Cachapuz Cement Manufacturers Association (CMA) | Cimpor | Claudius Peters India | Coal Insights | Credit Suisse | CRH India | CW Group | Dalmia Cement | Evonik Degussa India | Fives FCB | FLSmidth | FLSmidth Maag Gear AG | Golder Associates Canada | Golder Associates India | Golder Associates UK | HeidelbergCement Group | Hi-Bond Cement India | IFC | India Cements Ltd | J.K.Cement Ltd | JK Sons | KHD | Lafarge Inda | Larsen & Toubro Limited | Loesche | Loesche India | Madras Cement Limited | Magnesita Refractories | Mapei Construction Products | McKinsey & Co | Middle East Green Energies | Mitsui & Co. India Pvt. Ltd. | Mjunction Services | Mondi Oman LLC | Oman Cement | Orient Cement | Promac India | RAMCO Enterprise Process Solution | Ready Mixed Concrete Manufactureres | Association (RMCMA) | Refratechnik | Reliance Cement Company Pvt. Ltd. | Rexnord | Sagar Cements Limited | SAIF | Sanghi Industries Ltd. | Segezha Packing | Shree Cement Ltd. | SKF India Limited | Somi Conveyor Beltings Ltd | Starlinger & Co. GmbH | String Automation Pvt. Ltd. | The Crescent Group | Timken India Limited | UltraTech Cement Ltd. | Union Cement | Vicat | Vyankatesh Chemical Industries | W.R. Grace | Zuari Cement, Italcementi Group

India contact: Dr. SN Pati | dr.snpati52@gmail.com | 09891415719

Alternative fuels, new business models Environmental performance management Finance and capital markets Coal as mainstay fuel option and outlook EfďŹ ciency, innovation, new developments Technology, operations and best practices

Global contact: Beatrice Ene | be@gmiforum.com | +40-722-764-802 SUPPORTED BY

Organized by GMI Global LLC To learn more visit the GMI website: www.gmiforum.com