Displaying items by tag: India
Vicat publishes business activity update
24 June 2020France: Vicat says that group business activity increased month-on-month between April and May 2020. In a special update on business in the context of the coronavirus, the company said that the outbreak’s impacts varied across the 12 countries in which it operates, all of which locked down due to the pandemic.
In France, the level of business is “slightly lower” than in May 2019 following a steady recovery from a “strong slowdown in mid-March 2020.” Macroeconomic and competition issues continue in Egypt and Turkey, not however due to the coronavirus outbreak, while volumes and prices have generally increased in Switzerland, the US, Brazil and Western Africa, except in Senegal, where the government has cancelled infrastructure projects. Following the pan-Indian lockdown between 24 March 2020 and 17 April 2020, business in India has resumed, albeit at a “level significantly below that of the same period of 2019.”
The group says that it is planning cost-cutting measures and has postponed a planned US price rise to late 2020.
India: Retail investor Radhakishan Damani has announced plans to acquire a majority stake in The India Cements. The deal is subject to the approval of competition authorities.
India: JK Cement’s sales rose by 10% year-on-year to US$763m in the financial year to 31 March 2020 from US$691m in the same period in 2019. Its sales volumes of cement decreased slightly to 9.8Mt and its profit after tax nearly doubled to US$63.5m. However, its sales fell slightly in the fourth quarter, sales volumes of cement dropped by 7% year-on-year to 2.9Mt and it reported a significantly reduced standalone net profit.
The cement producer said that its operations had gradually stabilising since coronavirus lockdown measures were relaxed. All of its integrated and cement grinding plants had resumed production and despatch. It noted that due to lower power demands less fly ash was available so it is sourcing this from other locations. Labour shortages are also affecting bag supplies and the availability of drivers. As part of cash conservation measures it has restricted capital expenditure to US$66m in the current financial year.
Odisha road built from industrial waste materials
18 June 2020India: Odisha has received its first cement-free road near Amanapada, Cuttack District. The Pioneer newspaper has reported that researchers from the Kalinga Institute of Industrial Technology (KIIT) developed the new material, made from 100% industrial waste, in order to cut the CO2 emissions involved in cement production and in anticipation of an acute limestone shortage in India in 25 – 50 years. KIIT founder Achyuta Samanta thanked the students whose work brought this pilot project to fruition. “The new technology has the potential to bring about a revolution in engineering construction,” he said.
JSW Cement delays capacity expansion
15 June 2020India: JSW Cement has said that it will delay a planned US$382m expansion of its installed capacity of 14Mt/yr to 25Mt/yr in 2023 until at least January 2021. The Business Standard newspaper has reported that JSW Cement previously postponed work to raise its capacity to 20Mt/yr in 2020, and that the economic situation following the coronavirus lockdown is “not conducive to the construction agenda.” JSW Cement chief executive officer (CEO) Nilesh Narwekar said, “The plans are being deferred by 6 – 12 months but we are not sure that they will happen.” Financing for the work was due to be split 50:50 between internal accruals and bank loans.
India: In the fourth quarter of the fiscal year ending 31 March 2020 Dalmia Bharat sold 5.17Mt of cement worth US$326m, down by 13% year-on-year from US$374m in the same period of the previous fiscal year. Net profit for the quarter was US$3.16m. The company said that the figure was “not comparable to the previous year’s fourth quarter profit of US$34.6 due to a change in reporting standards, according to the Press Trust of India. Full year net profit fell by 32% to US$31.3m from US$45.9m and revenues grew by 2% to US$1.27bn from US$1.25bn.
India: The government of Tamil Nadu has responded to a labour shortage resulting from the coronavirus lockdown by training up local minors for construction jobs. The Hindu newspaper has reported that the regular workforce consists mainly of some of India’s 9m annual migrant workers who travel from rural areas to construction hubs such as Tamil Nadu’s state capital of Chennai.
The state-owned Tamil Nadu Cement Corporation (TANCEM) has said that it will increase cement production at its Arasu plant in Ariyalur to 3000t/day from 2000t/day in anticipation of construction growth in the second half of 2020.
India: The state government of Telangana has instructed cement producers that the price of cement must fall to support the construction sector. Telangana Minister for IT, Industry, Municipal Administration and Urban Development Rama Rao said, “There is a need to extend a helping hand to the sector and the government is therefore seeking cooperation of the cement companies in bringing down the prices so that real estate picks up momentum.” The Hindu newspaper has reported that producers “responded positively to the request.” Each will decide internally on the measure of price reductions.
All Telangana producers will continue to supply cement to government projects at a pre-agreed rate.
India: UltraTech Cement has cuts its capital expenditure budget to around US$130m due to the coronavirus pandemic. Work on its 2.2Mt/yr Cuttack grinding unit, which was scheduled for commissioning in March 2021, has been slowed down. Upgrades at its West Bengal and Bihar grinding plants are nearly completed and a waste heat recovery system (WHRS) at its UltraTech Nathdwara Cement subsidiary will be completed in the current financial year.
The leading Indian cement producer said that government directives in response to the health crisis had ‘adversely’ affected revenue. Since ‘select’ activities were allowed to re-open from 20 April 2020 and the company says it is now, ‘dispatching cement from all locations.’ It added that the majority of demand was currently coming from retail markets as some institutional projects restart construction. It operates 22 operational integrated plants, 23 grinding units and 6 bulk terminals. The company said that ‘conserving cash’ is its motto in 2020.
Update on India, June 2020
03 June 2020Under the current circumstances it’s not surprising to see how much Indian cement production fell in April 2020. Like many other countries, its lockdown measures to combat the coronavirus outbreak suppressed industrial output. Yet seeing an 86% year-on-year fall in the world’s second largest producer is shocking. Cement production declined to 4.1Mt from 29.2Mt. Further data shows, as part of the Indian government’s eight core industries, that steel and cement production suffered the most. Coal, crude oil, natural gas, petroleum refinery products, fertilisers and electricity generation all fell by far less.
Graph 1: Change in Indian cement production year-on-year (%). Source: Office of the Economic Adviser.
By comparison in China monthly cement output only fell around 30% at the peak of its outbreak. The difference is that China implemented a graduated lockdown nationally, with the toughest measures applied in Wuhan, the place the outbreak was first identified. As we reported in April 2020 demand for cement in Wuhan had fallen by around 80% at the time its lockdown ended. Production and demand are different, but India’s experience feels similar except that it’s on a national scale. The last time the country had a dip in cement production recently was in late 2016 when the government introduced its demonetisation measures and dented cement production growth rate (and national productivity) in the process.
UltraTech Cement, Orient Cement, Ambuja Cement, India Cement, Dalmia Bharat, JK Lakshmi Cement, Shree Cement and others all suspended operations to varying degrees in the first phase of the lockdown in late March 2020. Operations of industrial plants in rural areas was then cleared to restart in mid-April 2020, although subject to local permissions and social distancing rules, as the country’s lockdown zones took shape. All of this started to show in company results towards the end of March 2020 as sales started to be hit. The worst is yet to filter through to balance sheets.
March 2020 was a particularly bad time for the government to shut down cement plants because it is normally the month when annual construction work peaks. Cement production usually hits a high around the same time. The monsoon season then follows, reducing demand, giving producers a poor time to restart business. Credit ratings agency Care Ratings has forecast that capacity utilisation will drop to 45% in the 2020 – 2021 financial year. This follows a rate of 65 – 70% over the last six years with the exception of 2019- 2020, which was dragged down to 61% due to lockdown effects. On top of this labour issues are also expected to be a major issue to the sector returning to normality. The mass movement of workers back to their homes made world-wide news as India started its lockdown. Now they have to move back and Care Ratings thinks this is unlikely to complete until after the monsoon season, by September 2020. Hence, it doesn’t expect a partial recovery until the autumn, nor a full recovery until January 2021 at the earliest.
Not everybody is quite as gloomy though. HM Bangur, the managing director at Shree Cement recently told the Business Standard newspaper that he was expecting a rebound following the resumption of production in May 2020. He also reported a capacity utilisation rate of 60% at his company, higher than Care Rating’s prediction above, and he noted a difference between demand in rural areas and smaller cities (higher) compared to bigger cities (lower).
India is now pushing forward with plans to further unlock its containment measures to focus on the economy. However, daily reported news cases of coronavirus surpassed 8000 for the first time on Sunday 31 May 2020. How well its more relaxed lockdown rules will work won’t be seen for a few weeks. While this plays out we’ll end with quote from HM Bangur that will resonate with cement producers everywhere: “sales are imperative.”