Displaying items by tag: India
Is the Indian summer over?
21 August 2013'Below expectations' was the headline message from Holcim's half-year results this week. Canada, Mexico and Morocco were all singled out as problem areas for Holcim but surely India represents the biggest headache for the debt-reducing multinational.
How badly its bottom line was hit by India in particular, Holcim declined to say. Overall its entire Asia Pacific region saw sales volumes of cement fall by 3.7% to 37.8Mt to 36.4Mt for the first six months of 2013. In 2012, India represented over half of the group's Asia Pacific installed cement production capacity. This suggests that the actual drop in sales in India was probably at least 6%, more if the other countries in the territory did better than in 2012. Overall profits for the Asia Pacific region fell by 14% to US$650m. What we do know is that Holcim announced major restructuring to its businesses in India in late July 2013 to cut costs.
The other major cement producers in India have fared similarly badly. UltraTech's first quarter profit, for the period ending on 30 June 2013, fell by 13.5% to US$111m. Its revenue fell by 2% to US$820m. Jaiprakash Associates also reported a 2% dip in its cement sector revenue to US$247m in the quarter ending on 30 June 2013. Profits fell by 24% to US$27m. India Cements' sales revenue rose by 3% to US$196m. Yet its operating profit fell too, by 41% to US$19.8m.
Both Holcim and India Cements blamed falling cement prices in the south of India. India Cements directly mentioned overcapacity. The only explanation UltraTech offered for its poor performance was rising input and logistics costs.
Problems in India are not unexpected. Overcapacity has loomed over the Indian cement industry for some time as the race for growth far overtook the increase in demand. In the wider economy, India hit its lowest gross domestic product increase in a decade, 'just 5%', for the financial year ending on 31 March 2013. Meanwhile the Indian Rupee fell to a record low of 61 against the US Dollar in late June 2013. Not good news at all for any cement producers looking to offset energy or raw materials costs from abroad.
As predicted in our overview of the Indian cement industry back in February 2013, the smaller cement producers are now likely to get picked off by the larger firms as capacity utilisation falls and fuel costs rise. It is interesting to compare this free-market led cement industry consolidation to the state-directed one happening in China.
The Indian media are certainly wise to this with reports and speculation on endless takeover rumours. One example of this is the Irish building materials conglomerate Cement Roadstone Holdings's (CRH) decision to purchase Sree Jayajothi Cements that was announced in early August 2013. However with CRH itself having just reported that it made a loss in the first half of 2013 it may be regretting that it finally has a presence in the south of India.
India: India Cements has reported that its net profit has fallen by 73% year-on-year to US$2.74m for the first quarter of the 2013 – 2014 fiscal year that ended on 30 June 2013. Its net profit for the same period in the 2012 – 2013 fiscal year was US$10.1m. The Indian cement producer attributed the weak performance to overcapacity in the south of the country, poor demand for cement and low prices, increasing energy costs and depreciation of the rupee against the US dollar.
India Cements' sales remained stable at US$201m in the first quarter of the 2013- 2014 fiscal year compared to US$196m of the same quarter in the previous year. Clinker production rose by 18% year-on-year to 2.08Mt from 1.80Mt. The combined volume of cement and clinker production rose by 11% year-on-year to 2.65Mt from 2.38Mt. The company also reported that its captive power plant at its Vishnupuram cement plant had been commissioned in July 2013 and is expected to stabilise operations in the autumn of 2013.
Dalmia Cement to open Belgaum plant in March 2014
14 August 2013India: Dalmia Cement has announced details about the 2.5Mt/yr cement plant it is currently building in Belgaum, Karnataka. Mumbai newspaper DNA has reported that the Indian cement producer predicts that the plant will create over 1000 jobs when it opens in March 2014. Dalmia has invested over US$210m on the project.
"Though we have had a good presence in Tamil Nadu and Kerala, Karnataka has not been a great market for us so far. We have to address this state seriously by ramping up our presence here," said chief executive officer of Dalmia Cement, Vipin Agarwal. He added that the Indian cement producer intends to become one of the top three producers in the state. Currently, the top three cement producers in Karnataka are UltraTech, Zuari and ACC. The company's market share through sales is about 5% from Karnataka, compared to about 14% each from Tamil Nadu and Kerala.
Dalmia has three other cement plants in southern India, including two in Tamil Nadu (Dalmiapuram and Ariyalur) and one in Andhra Pradesh in Kadapa.
Star Cement starts river exports to Bangladesh
14 August 2013Bangladesh/India: India's Star Cement has started exporting clinker to Bangladesh by river. According to a report by the Times of India, the cement producer aims to export over 50,000t/month of clinker to Bangladesh by this route.
"Exporting clinker to Bangladesh by the river will give an edge to the company to encounter the stiff competition it is likely to face from manufacturers of Southeast Asian countries, all of whom cater to 99% clinker requirement of this country," said a Star Cement official.
In a pilot project in 2012 Star Cement had started clinker exports to Bangladesh by road. The company has deals with several leading cement producers in Bangladesh to meet their clinker requirements and is planning more.
CRH's My Home Industries to buy Sree Jayajothi Cements
12 August 2013India/Ireland: Following earlier speculation, Ireland's Cement Roadstone Holdings (CRH) has announced that its 50:50 Joint Venture in India, My Home Industries Ltd has reached an agreement to acquire the shares of Sree Jayajothi Cements, a 3.2Mt/yr cement producer in south India for a value of Euro175m.
Dow Jones reports that the investment will be financed from My Home Industries' existing debt capacity and by equity inputs from the joint shareholders (Euro70m). CRH's equity interest will amount to Euro35m.
US$100m Reliance Cement plant approved for Bengal
07 August 2013India: The state government of Bengal has approved a US$100m cement plant project by Reliance Cement that has been waiting for clearance since 2011, according to the Times of India. 100 acres of land near Durmut village in Raghunathpur, Western Bengal have been allocated to the project.
The project, Reliance's third cement plant, will have a production capacity of 3.5Mt/yr, comprising 1.75Mt/yr of Portland Pozzolana Cement and 1.75Mt/yr of Portland Slag Cement. Currently Reliance Cement operates two cement plants in Madhya Pradesh and Maharashtra.
Half-time progress report 2013
31 July 2013Half-year results from some of the major global cement producers are starting to present a detour from the usual European doom-and-gloom and optimism for the BRIC economies (Brazil, Russia, India, China and South Africa) of recent years.
Yes, Europe is dragging balance sheets down (particularly certain countries), but some indicators are starting to stabilise following a good second quarter. Very possibly the cost cutting programmes of the multinational cement producers are starting to kick in. Alternatively, perhaps these cement markets have finally bottomed out.
Lafarge has suffered a bad six months with cement sales down by 6%. However, its sales decline in Western Europe has slowed down with the worst news now coming from Central & Eastern Europe. Cemex has reported a better second quarter in 2013 with overall sales up by 4%. It too can show softened declines in its European territories. Italcementi and its subsidiary Ciments Français both saw revenues falling in the half year but either at a reduced rate or with a slowdown in the rate that earnings before interest, taxes, depreciation and amortisation (EBITDA) are declining.
Only HeidelbergCement's results have resisted any direct signs of an improvement in Europe. Overall revenue has remained stable for the half year with its profit up year-on-year. In Europe its revenue reduction has worsened to 4.7% for the half year. However it did observe a 'significant' improvement in cement sales in the UK.
Meanwhile, one of the cement industry's more reliable markets in recent years – India – is showing signs for concern.
As our news roundup this week reports, the country's largest standalone cement producer, UltraTech, had its profits drop year-on-year by 13.5% to US$111m for the most recent quarter and its net sales actually dropped slightly. Holcim has also been active in India with the announcement that it is simplifying its corporate structure to cut costs. In addition Lafarge reported that its market growth in India was 'subdued', considerably down from the 24% growth in cement sales seen in that country in the first half of 2012.
The news from UltraTech and Lafarge suggest that the rate of growth of the Indian cement industry is slowing. The unanswered question from Holcim's activity in India is whether they are doing it to counteract European losses or to counteract a loss of profitability in India.
Holcim's half-year results will make interesting reading when they are released in mid-August 2013 and may help to decide whether the worst is over in Europe.
India: JK Cement has appointed Shri Jagendra Swarup as an additional director on the board of the company until its next annual general meeting.
UltraTech Q1 profit sinks by 13.5% to US$111m
31 July 2013India: UltraTech Cement has reported a 13.5% drop in profit after tax to US$111m for the quarter ending on 30 June 2013. The cement producer, part of the Aditya Birla Group, offered no explanation for the decrease in profit. It did state that the quarter saw logistic and raw materials costs rise, linked to rises in railway freight and diesel prices.
The company's net sales for the quarter fell by 2% year-on-year to US$820m from US$837m. Profit before interest, depreciation and tax fell by 10% to US$205m from US$228m. Combined domestic cement and clinker sales were 9.94Mt. In its outlook UltraTech expected business to be challenging depending on housing demand and infrastructure spending.
In its development plans UltraTech reported that it has commissioned its 3.3Mt clinker plant in Karnataka. US$350m has been set aside to set up grinding plants, taking the company current capital expenditure total to US$2.25bn. Cement production capacity is planned to rise by 10Mt/yr by 2015 bringing the company's total capacity to 64.45Mt/yr.
Jammu and Kashmir to expand Pulwama plant
31 July 2013India: The state government of Jammu and Kashmir intends to set up a 1000t/day cement plant at its existing site at Pulwama, according to its official spokesman. The plant will be built in a 12 hectare site at government's existing cement plant at Khrew in Pulwama. The new plant will fill the gap in demand in the local market. According to a preliminary survey, the state requires 3Mt/yr but it only has an installed cement production capacity of 1.5Mt/yr with demand growing at 10%/yr.