Displaying items by tag: India

Half-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.

India: JK Lakshmi Cement Ltd has informed the Bombay Stock Exchange that Shri Hari Shankar Singhania, chairman of the board of directors of the company and president, JK Organisation, passed away on 22 February 2013 at the age of 80.

One of the comments on the Global Cement LinkedIn group about last week's column posted the US Geological Survey's (USGS) estimated cement production list for 2012.

John Kline commented that the report highlighted the increasing weight of developing countries. There is nothing surprising here, but it is worth noting the implications of this in Lafarge's financial results for 2012, which we report on today. 27% (Euro4.28bn) of the group's sales came from its Middle East and Africa region.

By cement volumes sales 63% or 89.5Mt came from its Middle East/African and Asian regions. Lafarge CEO Bruno Lafont explicitly acknowledged this in his statement accompanying the announcement saying, "Emerging markets continue to be the main driver of demand and Lafarge benefits from its well-balanced geographic spread of high-quality assets".

One of the other commentators remarked on the massive difference between the estimated productions of China (2.15Bnt) and India (250Mt). India was second in the list but has only an eighth of China's production!

Talking of India, our recent article 'The incredible Indian cement industry' in the February 2012 issue of Global Cement Magazine presents a good overview of the situation there. This week's news item on Madras Cements' third quarter results picks out a couple of threads from the complex Indian Picture. Firstly, Madras Cements was fined US$48m by the Competition Commission of India (CCI) for alleged price-fixing. Although the producer is growing its sales, this fine hangs ominously over the balance sheet.

Secondly, the producer's transportation and handling costs grew by a massive 37% year-on-year in the quarter. Rail freight prices increased in India in 2012. These kinds of increase cannot be welcome on cement producers' balance sheets. Unsurprisingly a 'marginal' reduction for cement is under consideration by the Indian Railways.

The Global Cement India Conference, was held in Mumbai this week on 18-19 February 2013, will update us on situation in India. Look out for the report soon.

India: The Chettinad Cement Corporation has appointed SK Prabakar to the board of the company as the nominee director of Tamilnadu Industrial Investment Corporation (TIIC). Prabakar is already the chairman and managing director of the TIIC. He replaces MD Nasimuddin.

A stark reminder came this week of the thankfully rare but potential risks of working in the cement industry. Five deaths were reported at Ambuja Cement's Bhatapara cement plant in India on 31 January 2013.

According to a press release Ambuja issued, the steel construction supporting a fly ash hopper located on top of a building, and connected to the cement mill, collapsed at the Bhatapara plant. Further details in local press reports added that about 200t of fly ash fell from a height of 15m. Five labourers and plant employees working at the site were buried under the debris and subsequently died. Four officials from the company have since been arrested and the plant closed while investigations are conducted.

Previously in January 2013 burn injuries were reported as another Ambuja cement plant, this time at Darlaghat. Eight workers received burns after a blast from a boiler unit.

However, despite these incidents the safety figures for Ambuja Cement and the other major Indian producers are high. In Ambuja Cement's 2011 sustainability report it recorded that its lost time injury frequency rate (LTIFR) was 1.04 for total employees and supervised workers. Its LTIFR has been dropping steadily since 2008, when it was 3.18.

This compares to other major Indian cement producers as follows. UltraTech Cement reported that its LTIFR for permanent employees was 0.82 in 2011-2012, a consistent drop year by year since 2008-2009. ACC reported that its LTIFR for its own and subcontracted employees was 0.31 in 2011. Shree Cement reported a LTIFR of 0.91 in 2010-2011 for employees and contractors. For international comparison the Mineral Products Association set a LTIFR target of 1.79 or lower for 2014 in the UK. Lafarge's global LTIFR in 2011 was 0.63 and Holcim's was 1.6.

An Ambuja's plant in Rajasthan picked up two national awards from the Government of India for Safety Performance in mid 2012. One was for first place for outstanding performance in Industrial Safety based on 'Lowest Average Frequent Rate'. The second was a runners-up prize for the category 'Accident Free Year'. Lafarge India, UltraTech, ACC and the other major producers all hold similar accolades. Sadly, any safety record is only as good as the shift that has just finished.

India: PC Abraham has been appointed as the managing director of Loesche India. He took the post at the start of October 2012.

Abraham joined Loesche India in 1995 and has been working as executive director of the technical department. Under his leadership, Loesche India established a technical field service department. He was also responsible growth in the after sales business of the company.

Step forward UltraTech Cement into the vertical rumour mill! The Indian cement producer is the latest company reported as wanting to buy Jaypee Group's cement business in Gujarat. It follows Italcementi, Aditya Birla and CRH, who announced in October 2012 that negotiations had been 'terminated' as the parties had been unable to agree terms.

This time the asking price has risen, with Ultratech allegedly offering US$160-165/t and Jaypee holding out for US$180-185/t. Whilst UltraTech hasn't publicly confirmed the move, it pointedly hasn't denied it either. The Aditya Birla Group subsidiary only commented to the Bombay Stock Exchange that it had not issued any press releases on the subject. Aditya Birla Group itself was reported in October 2012 as pursing interest at US$130/t for Jaypee's 9.8Mt/yr operations in Gujarat and Andhra Pradesh.

Given the number of rumours and cash-rich CRH's very public failure to strike a deal it seems likely that Jaypee has a specific price in mind and it's sticking to it. Prasad Baji of Edelweiss Securities stated in a television interview with CNBC-TV18 that he thought that the cement industry cycle was starting to look up. Crucially he predicted that India's capacity utilisation was set to rise from its current level of 78% to 82% despite price declines in the current quarter.

This is in sharp contrast with Fitch Ratings which rated the Indian cement industry with a negative outlook at the start of 2012 and reports in late May 2012 that capacity ultilisation had actually fallen from 76% to 71%. Since then ICRA Research reported in late September 2012 that it expected Indian capacity ultilisation to stick to 76% for 2012 with prices showing 'resistance' in some regions to cost increases due to rising input costs.

With all this in mind it seems likely that UltraTech will join the growing list of Jaypee's spurned buyers when it fails to reach terms or when the rumours simply fizzle out. However if UltraTech does strike a deal the Indian industry will be the one to watch in 2013. According to data in the Global Cement Directory 2013, an acquisition of nearly 10Mt/yr production capacity would boost UltraTech's capacity to 62Mt/yr making it the 12th largest cement company in the world.

India: Sagar Cements has announced its director, Wemer CR Poot, has resigned from the board with effect from 28 September 2012. John Eric Fernand Pascal Cesar Bertrand has been appointed as the new company director from 17 October 2012.

Anyone need a spare cement plant? If so then it looks like India is the place to head to this week.

First, Italcementi denied that it was in talks with Jaiprakash Associates to buy one of their Jaypee Cement plants. Then, after much speculation, CRH announced publicly that it had entered negotiations to purchase an equity stake in Jaypee's entire cement business. In addition the Indian government has also revived a plan to sell six Cement Corporation of India (CCI) factories that have been closed for almost 10 years.

All of this raises a question: how much are Indian cement plants actually worth?

According to one source, Italcementi was thought to be offering US$100/t (installed capacity) in the bid it supposedly made but has denied making. Jaypee 'wanted' US$150/t. However analyst commentary with the CRH announcement suggested that Jaypee's asking price was too high! This is hardly surprising. Back in June 2012 when Jaiprakash announced that it was selling its plants it was reported that Holcim was offering up to US$160/t. Alongside the CCI story an analyst was quoted as putting the cost of Indian cement production capacity at US$110/t-US$120/t. Yet these plants have been shut for a decade.

Unlike in Europe, Indian cement industry profits have been rising in double digits in recent years. However, input costs like energy and transport are rising and they are starting to hit margins listed in quarterly reports. Serious additional costs have also arisen from the anti-cartel fines issued by the Competition Commission of India. Throw in questions on infrastructure raised by last week's nationwide power-cuts and Italcementi's (non)decision to stick to US$100/t seems prescient.

Unlike Italcementi however CRH has money to spend. Back in June 2012 it was reported that the company had Euro1.5bn to invest. With Euro250m gone in the first half of 2012 on so-called 'bolt-on' acquisitions that still leaves plenty in the pot to pick up the CCI plants. Now that would be a surprise.