Displaying items by tag: India

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.

Pakistan: Flying Cement has made changes to its board of directors, effective 6 August 2012. The new board consists of Mr Agha Hamayun Khan (Chief Executive), Mr Kamran Khan (Director and Chairman) and Mr Momin Qamar, Mr Yousaf Kamran Khan, Mr Qasim Khan, Mrs Shaista Imran, Mrs Samina Kamran and Mrs Misbah Momin as directors.

Agha Hamayun Khan replaced Kamran Khan with effect from 23 July 2012.

India: Mangalam Cement Limited has said that Mr R C Gupta, Company Secretary, Compliance Officer and Chief Financial Officer of the company resigned with effect from 8 August 2012.

Ireland/India: International building materials group CRH has confirmed its entry into negotiations to buy an equity stake in Indian producer Jaypee Cement Corporation. Jaypee Cement owns three cement facilities in the Indian state of Gujurat, in the west of the country, and another in Andhra Pradesh, in the south-east.

CRH said in a statement that the operations in Gujurat consist of clinker plants with a total capacity of 3.6Mt/yr. There are also two cement grinding plants with a total capacity of 2.8Mt/yr. Jaypee Cement is India's third-largest cement maker.

"The completion of any transaction would be subject to satisfactory due diligence, the approval of the respective boards of directors and the granting of regulatory approval," said CRH.

CRH chief executive Myles Lee said at the group's AGM in May 2012 that the company was focused on opportunities in China and India in order to drive long-term growth. CRH has spent close to Euro250m on bolt-on acquisitions in the first half of 2012. This included a further equity injection into its China associate Yatai Building Materials. CRH first entered the Indian market in 2008 through a joint venture with My Home Industries, a cement maker in Andhra Pradesh.

India: The Indian government has revived a plan to sell six Cement Corporation of India (CCI) factories, which have been closed for close to a decade. The six plants are located in Madhya Pradesh, Karnataka, Haryana and Delhi, with two in Chhattisgarh.

The Board for Industrial and Financial Reconstruction (BIFR), which looks into ailing public sector units, has reconstituted an asset sale committee to arrive at a valuation for the six plants.

Cement Corp. officials refused to talk about the valuation but an industry analyst estimated that the six defunct plants could be worth over US$300m. Collectively, the production capacity of the six plants is 2.65Mt/yr.

"On average, the cost of buying readymade cement production capacity will be US$110-120/t," said V Srinivasan, a cement sector analyst at Angel Broking. At this price, the plants may fetch US$288-317m.

Possible companies that are looking to increase their cement capacity include UltraTech Cement, Lafarge, Holcim and Birla Corp. CCI also has three operational cement plants, with a combined capacity of 1.4Mt/yr.

The power cuts in northern and eastern India this week will have presented citizens with a situation very familiar to Indian cement producers. With over half the country reported to be without electrical power after three power grids collapsed, industrial users are likely to have been shut down as the authorities try to bring back domestic supplies.

According to figures from the National Council for Cement and Building Materials, Indian cement producers used 79kWh/t of electrical energy in 2009 as production hit 181Mt. The Cement Manufacturers' Association placed these figures at 68-93kWh/t for a modern plant and 100-120kWh/t for older ones. In June 2012 the Central Electrical Authority reported the country's entire installed electrical capacity was 205GW.

It's difficult to estimate how much damage problems in power supply may have caused the Indian cement industry over the last few decades in either reduced volumes or increased running costs. The Cement Sustainability Initiative and European Cement Research Academy broke down the share of electrical power in a dry process plant as follows: 38% for cement grinding, 24% for raw material grinding, 22% for clinker production including grinding of solid fuels, 6% for raw material homogenisation, 5% for raw material extraction and blending and 5% for conveying, packing and loading. Generally speaking, interruption of power causes production losses and low capacity utilisation, idle running of equipment during stops and restarts of the plant, thermal losses during reheating, damage to refractory and other problems such as slowing down the train network.

Subsequently there has been a drive in India towards captive power generation and waste heat recovery (WHR) mechanisms, especially as input energy costs have risen. For example it has been reported that ACC's average cost of electricity per kWh from its captive plants is US$0.067 versus US$0.087 for grid power. Companies like Shree Cement have since gone into the electricity export market with their surpluses and, as shown by SP Ganeshan at the Global CemPower Conference in June 2012, interest in WHR is booming. Currently, the Indian cement industry has about 4000MW of installed captive generation capacity, including coal-based plants, diesel generating sets and wind turbines. Through various greenfield and brownfield expansion projects it is anticipated that another 2000MW of captive capacity will be added by 2016.

One sign of how well the Indian cement industry is coping with its energy requirements is the 74% rise in fourth quarter profit reported by Shree Cement in May 2012, in part due to savings made from captive power generation. Perhaps they could advise the Indian electricity board.

India: Birla Corporation has promoted BR Nahar to the managing director of the company. The decision was made at the board of directors meeting held on 28 July 2012. Nahar, a Fellow Member of the Institute of Chartered Accountants of India, holds more than 33 years professional experience. He became Birla's executive director and chief executive officer in 2006. He has served in diverse fields at senior positions in various large corporate houses.

India: After setting a precedent by fining 11 cement companies a combined US$1.13bn in June 2012, the Competition Commission of India (CCI) has now imposed a penalty of US$71.5m on Shree Cement for indulging in restrictive trade practices.

The CCI has imposed the penalty on Shree Cement while issuing final order in the case against cement manufacturers and their trade body, the Cement Manufacturers Association (CMA). "The commission has also imposed a penalty on Shree Cement at the rate of 0.5 times its profits for the years 2009-2010 and 2010-2011 aggregating to US$71.5m," said the CCI in a statement.

"We have not seen the CCI order. Let us first go through the order and then we will decide on the future course of action in consultation with our lawyers, " commented H M Bangur, the managing director of Shree Cement.

The CCI found 11 cement manufacturers, including Shree Cement Limited and CMA, in contravention of the provisions of the Competition Act, 2002 which deal with anti-competitive agreements including cartels. As the cement companies (except Shree Cement) were already found to be in cartel in Case No. 29 of 2010 and penalised by the CCI via its order dated on 20 June 2012, the CCI decided not to order remedies including imposition of penalty on such companies again for the same period of contravention.

It has been reported by local media that since the fine in June 2011 Indian cement prices have continued to rise, with Rayalaseema Rashtra Samiti president Kuncham Venkatasubba Reddy threatening an indefinite hunger-strike over high prices.

India: Birla Corporation has earned a profit after tax of US$15.3m in the first quarter of the current financial year (ending 30 June 2012) against US$20.2m in the same quarter of the previous year. This represents a more than 24% drop year-on-year. Birla's net sales from operations for the quarter were US$118.5m. 

Commenting on the results, Harsh V Lodha, chairman of the company, said that the profitability of the company continued to be affected due to the closure of limestone mining operations at its Chanderia units on account of an order from the high court of Jodhpur. It was also observed that higher coal and freight prices had caused reduced margins.

India: Two of Holcim's Indian subsidiaries have reported rises in their second quarter 2012 profits. Ambuja Cement has reported a 35% growth in net profit for the quarter ending 30 June 2012 due to increased sales, to US$84.6m from US$62.8m in the same period of 2011. Net sales by the company rose by 17.9% to US$463m during the quarter from US$392m in 2011. Ambuja Cement attributed this to a 7.3% rise in sales volume, to 5.54Mt from 5.16Mt.

During the quarter, absolute Earnings before interest, taxes, depreciation and amortisation (EBITDA) for the company rose by 22.8% to US$133m. However Ambuja Cement declared that higher operational expenses impacted upon this rise. Total expenses for the company, including raw material and power costs, rose by 15.7% to US$354m from US$306m. The company expects that profit margins are likely to remain under pressure due to steep rise in cost driven by higher raw material prices and rise in distribution and freight costs.

Meanwhile, ACC has reported a 26% rise in consolidated net profit for the second quarter of 2012 due to strong revenue growth, to US$74.8m from US$59.2m in the same period in 2011. Total consolidated turnover for ACC in the quarter rose by 15% to US$526m from US$458m in 2011. The company sold 6.05Mt of cement during the quarter compared to 5.93Mt in the same period in 2011.

Like Ambuja Cement, ACC mentioned 'steep' escalations in most of its key input costs including slag, fly ash, gypsum and power. The company also commented that the increase in railway freight rates with effect from March 2012 substantially impacted both inward and outward costs.

Both Ambuja Cement and ACC were fined in June 2012 by the Competition Commission of India for their alleged involvement in a price-fixing cartel. Ambuja Cement was fined US$210m and ACC was fined US$207m. ACC is currently taking steps to appeal against the fine.

India: Sagar Cements has appointed K Rajendra Prasad as its nominee director on the company's board. Previous to this Prasad was working as the deputy general manager (EPM) at the Andhra Pradesh Industrial Development Corporation in Hyderabad.

Shree Digvijay Cement Company, a subsidiary of Cimpor, has reported that Antonio Carlos Custodio de Morais Varela resigned as a director of the company on 17 July 2012. The move follows Custodio de Morais Varela's assignment to the executive committee of Cimpor following the takeover of the Portuguese producer by Brazil's Camargo Corrêa.