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News India

Displaying items by tag: India

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CRH buying into India – Whatever next…?

29 July 2015

Ireland's CRH this week submitted a binding bid for various Indian assets of LafargeHolcim that will be sold by the newly-formed group as a condition of its formation. CRH will compete for the assets with HeidelbergCement and Barings Private Equity, which sold its stake in the same assets to Lafarge India prior to the merger. According to the Irish Examiner, the scale of the bids is in the region of US$600 - 800m. On the back-burner is another deal that could see CRH snap up a 74% stake in Tongyang Cement and Energy in South Korea.

These moves are consistent with CRH's new-found commitment to rapid expansion into new markets and an apparent desire to become a far bigger player in the global cement industry. It is in line with the sentiment expressed by its CEO Albert Manifold back in February 2015, when he stated in a letter to shareholders that CRH had given 'hell or high water commitments to Lafarge and Holcim' regarding its earlier Euro6.5bn purchase of assets as part of the LafargeHolcim merger. At that point CRH appeared almost 'over committed' to the huge deal, with some analysts asking whether or not CRH had paid too much.

Let's stop a minute to look at where CRH finds itself. Europe, its main cement market, is still under siege from a general lack of investment, both private and public. The UK is likely to perform well, although an ongoing Competition Enquiry at Irish Cement is an unwelcome distraction. CRH's new eastern European ventures are all in fairly small markets. Poland, in which CRH operates Grupa Ozarow, appears to act as the model for these acquisitions, but they remain at risk from the prolonged Eurozone crisis.

In Brazil, another new market, CRH is 'up against it,' with massive competition from Votorantim and InterCement, smaller local players and LafargeHolcim. A decline in cement demand here so far in 2015 year-on-year is not a good omen. Neither is Votorantim's decision this week to turn one of its plants into a distribution centre due to continued low demand.

In Canada CRH will gain 3.1Mt/yr of former Holcim capacity, around 20% of that market's capacity. This, along with its 2.7Mt/yr acquisition in the Philippines, probably represents CRH's best opportunities out of its newly-acquired assets.

However, with the confirmation that it intends to invest in 5Mt/yr of former Lafarge assets in India, a market not exactly enjoying buoyant conditions at present, CRH appears to be further exposing itself to another 'sub-optimal' market. We recently reported on the 100Mt/yr of capacity that is sitting idle in India at present , hardly a situation to instil confidence in a new entrant.

Whether CRH will be forced to leave some of these markets, buy into others or otherwise shuffle its cement assets to better suit the world economy remains to be seen.

Meanwhile, on the other side of the aforementioned mega-deal, LafargeHolcim gave the first indications of how it will go about re-branding in various markets this week. While a new brand will be introduced in markets with 'a balanced overlap' of former Lafarge and Holcim assets, countries without overlap will see existing Lafarge or Holcim 'brands' become 'endorsed' by LafargeHolcim. In countries with unbalanced overlap, either Lafarge or Holcim will be the endorsed brand.

Of course, in every market that it has bought a LafargeHolcim asset, CRH will also have to re-brand. So far it has announced that its operations in France will be branded as 'Orsima' from 1 August 2015. No elaboration on how this name was derived has been provided, but let's hope that there are not too many other new names to remember!

Published in Analysis
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Ambuja Cements’ first quarter 2016 net profit falls by 45%

28 July 2015

India: Ambuja Cements has reported a 45% fall in its standalone net profit to US$35.4m for the first quarter of its 2016 financial year, which ended on 30 June 2015. Its total standalone income fell by 8% year-on-year to US$392m. Ambuja's board has approved the amalgamation of its wholly-owned subsidiary, Dirk India Pvt Ltd, with the company with effect from 1 April 2015. The move is now subject to the approval of shareholders, the High Court and appropriate authorities.

Published in Global Cement News
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Century Textiles reports net loss in the first quarter of 2016

28 July 2015

India: Century Textiles and Industries has posted a net loss of US$4.53m for the first quarter of its 2016 financial year, which ended on 30 June 2015. During the period, its net profit was US$10.4m and its sales rose by 5.59% to US$304m. Its cement division registered sales of US$175m, up from US$158m in the first quarter of its 2015 financial year.

Published in Global Cement News
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Emami Cement to build cement plant in West Bengal

23 July 2015

India: Emami Cement plans to build a 1.5 – Mt/yr capacity cement plant in Panagarh, Bardhaman, West Bengal, according to the Palestine News Agency. The plan also includes a 10MW captive coal-fired power plant. Land has been allotted by the West Bengal Industrial Development Corporation (WBIDC). The estimated cost of the project is US$65.7m.

Published in Global Cement News
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Subsidy or scandal? Looking at the Amma Cement Scheme

22 July 2015

Tamil Nadu's subsidised cement scheme attracted negative attention this week when a prominent Indian politician called for it to be investigated. PMK party founder S Ramadoss alleged in a statement covered by Indian press that cement from the scheme is either being not being procured at the levels the state government are declaring or it is being sold on the black market.

Without investigating Ramadoss' comments too deeply in this article the Amma scheme does deserve looking at along with the pressures that have created it in the Indian cement market. The scheme takes its name from the nickname, Amma or mother, of the current Chief Minister of Tamil Nadu J Jayalalithaa. It follows previous populist subsidy schemes such as Amma Vegetables, Amma Water and Amma Theatres. As such it is exactly the kind of initiative you might expect a rival politician might criticise.

The scheme was created in mid-2014 to cope with fluctuating cement prices in the state. At that time Tamil Nadu consumed 1.7 – 1.8Mt/month of cement and around 400,000 – 450,000t was supplied by Andhra Pradesh. Subsequently prices rose in the neighbouring state, the purchases from Andhra Pradesh fell to 150,000 – 300,000t/month and the price went up in Tamil Nadu. The Amma Cement Scheme was created in response. It was intended to purchase 200,000t/month from private manufacturers. This would then be sold in eligibility bands with limits on the number of cement bags that could be bought dependent on size and type of project.

When the scheme launched in January 2015 the Times of India saw it as a politically canny move that would benefit middle-income rural citizens who could afford to build their own homes. Urban residents are less likely to build their own homes and so they wouldn't use the scheme as much. For example, at the start of the scheme sales in one rural district massively overtook sales in the city of Chennai.

Looking nationally, in July 2015 the Cement Manufacturers' Association (CMA) cried out that 100Mt/yr of India's production capacity was not being used due to supply and demand mismatching. It placed the value of this 'dead investment' at US$8.66bn. At present, the CMA places installed capacity at 380Mt/yr and utilisation at 275Mt/yr (70%). Previously utilisation was 94% in 2007 – 2008. Locally, Global Cement Magazine placed cement production capacity in Tamil Nadu at 33.9Mt/yr at the start of 2015. Demand was recorded at 20Mt in 2014, giving the state a capacity utilisation of 60%.

Cement demand was reported down in the southern states of India in 2014. Producers subsequently cut production to hold prices and stem their losses. With the CMA hoping for national infrastructure and housing projects to whip up demand generally, it seems possible that producers have little incentive to provide cement for the Amma scheme. One economist the Times of India quoted wondered whether the private producers would continue to sell cement to the state government at the necessary volumes. Sure enough, one of Ramadoss' criticisms of the scheme is that it may not be procuring the targeted volumes. If this is the case then the state government will have to pay more for their cement to hit the volumes they want.

Published in Analysis
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UltraTech Cement profit falls by 6%

21 July 2015

India: UltraTech Cement has reported a 6% fall in its consolidated net profit to US$92.9m for the first quarter of its 2015 – 2016 fiscal year, which ended on 30 June 2015. The Aditya Birla Group company had posted net profit of US$98.8m in the same period of 2014. Its consolidated net sales rose by 6% year-on-year to US$1bn from US$942m in the same quarter of 2014. Cement and clinker sales rose to 12.1Mt from 11.7Mt in the same period of 2014.

"Energy costs improved by 7%. The reduction in fuel prices was partially offset by the increase in railway freight. Input prices remained stable, except for the rise in royalty for limestone and levies under the Mines and Minerals (Development & Regulation) (MMDR) Amendment Act 2015," said UltraTech Cement in a statement.

Published in Global Cement News
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CRH submits bid for LafargeHolcim’s Indian assets

21 July 2015

India: CRH has reportedly submitted a binding bid for the Indian assets of the newly formed LafargeHolcim, according to the Irish Examiner.

CRH is already paying Euro6.5bn for certain assets in the Americas, Europe and Asia that needed to be offloaded to enable the LafargeHolcim merger. The transaction, which will make CRH the third-largest building materials business in the world, is set to formally conclude by the end of July 2015, although it will take slightly longer to finalise the takeover of the Asian assets.

HeidelbergCement and Barings Private Equity (Asia) have also reportedly submitted bids for LafargeHolcim assets in India. The reports have suggested a price of US$600 - 800m for the Indian assets, which include Lafarge's Sonadih cement plant and the Jojobera grinding station in the east of the country.

Published in Global Cement News
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ACC struggles amid rising costs

20 July 2015

India: Rising costs have reduced ACC's profit substantially in the April – June 2015 quarter, despite its revenues meeting expectations.

In spite of selling more cement, ACC's net realisation fell by 3% compared to the January - March 2015 quarter and was also slightly lower year-on-year. The fall was attributed to low cement prices in the June 2015 quarter, which is normally robust considering the fast-paced pre-monsoon activity, as well as a significant rise in operating cost per tonne. ACC's June quarter performance reflects the trend of cost pressures and weak realisations across the sector.

Published in Global Cement News
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Shiva Cement's cement dispatches up by 16%

20 July 2015

India: Shiva Cement's dispatches of cement and clinker in the April – June 2015 quarter rose by 16% year-on-year, according to MoneyControl.

Published in Global Cement News
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Ramadoss alleges Amma cement scam

20 July 2015

India: PMK founder S Ramadoss has rebuked the Tamil Nadu government over its recent statement that Tamil Nadu Cements Corporation has sold 10m bags of Amma cement, benefiting 133,000 families, according to the Times of India.

Amma cement has been sold through 470 warehouses or godowns in Tamil Nadu from 10 January 2015. "Jayalalithaa Jayaram (chief minister of Tamil Nadu) announced that 200,000/month of cement is being procured from private cement manufacturers and sold through government godowns for US$2.99/bag. As per this announcement, the government should have procured 1.25Mt or 25m bags of cement. Since the prices of Amma cement are low, they should have sold like hot cakes," said Ramadoss. He added that the government statement means that only 40% of the procured cement has been sold so far.

Ramadoss alleged that those who approach the government cement godowns to purchase Amma cement are often driven away. "Tokens are issued for those who want to purchase Amma cement and about 100,000 people who got tokens are awaiting supply. If the Tamil Nadu government actually procured 200,000t/month then all those who applied for cement should have been served," said Ramadoss. He said that the only reason for this not to have happened was either that the amount of cement claimed by the government was not procured, or the procured cement was sold to the black market.

Ramadoss has demanded that the government of Tamil Nadu publish a white paper on the total amount of cement procured, the amount of cement sold and measures taken to ensure seamless supply of cement.

Published in Global Cement News
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