Displaying items by tag: UltraTech Cement
Consultant alleges fraud at Binani Cement
21 March 2018India: Vijaykumar Iyer, a resolution professional with Deloitte Touche Tohmatsu India working for Binani Cement, has alleged that fraudulent transactions have taken place involving the promoters of the company. Iyer made an application in mid-March 2018 to the National Company Law Tribunal (NCLT) in Kolkata asking the court to take action and ‘appoint an appropriate investigation agency to investigate the directors of Binani Cement and the counter parties,’ according to the Economic Times. Sources quoted by the newspaper say that the application is likely to receive a hearing imminently. Binani Cement has denied the allegations.
Iyer’s application said that he had appointed Haribhakti & Co as a ‘forensic consultant’ in November 2017 for reviewing and identifying ‘suspect’ transactions. He said that since the inception of the corporate insolvency resolution process, he had not been provided access to all the required information and documents. He alleges that Binani Cement made several payments to ‘potentially related and/or connected customers and entities,’ such as Saraswati Sales (SSPL) and US$75.4m was outstanding at the end of November 2017, suggesting that sales were made to SSPL despite the fact that corresponding payments were not made to the corporate debtor. Other inconsistencies were also found suggesting that money was being removed from the business without paying outstanding debts.
Dalmia Bharat beat UltraTech Cement in a bidding war to buy Binani Cement for US$974m in early March 2018 in an auction was run by the National Company Law Tribunal under insolvency proceedings. However, UltraTech Cement has since made a US$1.11bn bid directly to Binani Cement to stop the insolvency process. UltraTech Cement has said it is ‘shocked’ by the allegations by Iyer and that it was unaware of any pending investigations when it made its latest offer.
India: UltraTech Cement has made a new US$1.11bn bid directly to Binani Cement in order to buy it. Binani’s parent company Binani Industries is independently seeking to stop the insolvency proceedings of its cement subsidiary using the money offered by UltraTech Cement in a so called ‘comfort letter.’ In a statement UltraTech Cement said it had in principle agreed to buy 98.5% of the shares of Binani Cement.
However, a consortium led by Dalmia Bharat won an auction for Binani Cement with a bid of US$974m in early March 2018. The auction was run by the National Company Law Tribunal under insolvency proceedings. Binani Cement has since complained that the bidding process was not run on a transparent process, according to the Economic Times newspaper. It added that the ‘shortcomings’ in the insolvency process had prompted the company to look at other options. The on-going struggle by UltraTech Cement and Dalmia Bharat is expected to test local bankruptcy law.
India: The Ministry of Coal has cancelled Jaypee Cement’s coal block at Mandla in Madhya Pradesh citing breach of agreement. In a letter the ministry said that the cement producer was ‘not serious about the development of the coal mine,’ according to the Business Standard newspaper. The ministry has accused Jaypee Cement of switching the plant using coal from the mine without permission and of exceeding the agreed output.
The Mandla coal mine was allocated to Jaypee Cement in March 2015 after a bidding process. At first it supplied Jaypee’s Balaji cement plant in Andhra Pradesh. However, production from the mine switched to the Shahabad cement plant in June 2017 following the acquisition of the Balaji plant by UltraTech Cement.
2017 for the cement multinationals
07 March 2018HeidelbergCement’s acquisition of Italcementi really sticks out in a comparison of the major multinational cement producers in 2017. Both its sales revenue and cement sales volumes jumped up by more than 10% year-on-year from 2016 to 2017. It still puts HeidelbergCement behind LafargeHolcim and CRH in revenue terms but the gap is shortening. Although, as we reported at the time of its preliminary results in late February 2018, on a like-for-like basis its sales and volumes only rose by 2.1% and 1.1% respectively.
Graph 1: Sales revenue from multinational cement producers in 2016 and 2017 (Euro billions). Source: Company financial reports.
The European markets may be back on their feet but serious growth came from mergers and acquisitions. Along the same lines, India’s UltraTech Cement is set to reap the reward of its US$2.5bn acquisition of six integrated cement plants and five grinding plants from Jaiprakash Associates in mid-2017. Although as can be seen in graphs 1 and 2 it had been doing fairly well even before this.
Graph 2: Cement sales volumes from multinational cement producers in 2016 and 2017 (Mt). Source: Company financial reports.
We’ve included Ireland’s CRH this year to present the scale of the company. When it says that it is the world’s biggest building materials company, it means it! CRH doesn’t publish its cement sales volumes, which makes it hard to compare it to other cement producers. In part this may be due to the company’s regional-focused structure and its approach to the construction industry. In Global Cement Magazine’s Top 100 Report 2017 – 2018 feature, CRH was placed as the seventh largest cement producer by installed capacity with 50.5Mt/yr. The major story with CRH in recent years has been its steady stream of acquisitions, notably Ash Grove Cement in the US in 2017.
LafargeHolcim may remain the biggest cement producer in the world outside of China but it made an income loss of Euro1.46bn in 2017. At face value its cement sales volumes fell by 10.2% to 210Mt in 2017 from 233Mt in 2016 but this was mainly due to divestments in China, Vietnam and Chile. On a like-for-for-like basis its volumes rose by 3.3%. To this kind of mood music the emphasis on the release of its 2017 results this week was the announcement of a five-year plan to refocus the company. However, reports of overcapacity in Algeria that also emerged this week suggest the group may have its work cut out.
Cemex described 2017 as a ‘challenging year’ as its operating earnings fell due to a lower contribution from the US and South America despite growth in Mexico and Europe. Hurricanes in Florida had a negative impact in the US and the Colombian market suffered from falling production in 2017. UltraTech Cement uses a different financial year to the other companies detailed here, which makes comparisons a little harder. However, its profit after tax fell in the third quarter that ended on 31 December 2017 due to rising costs of petcoke and coal. Undeterred though, its expansion drive continues this week with its continued efforts to try and win the bid for Binani Cement. Vicat, meanwhile, reported falling earnings in part due to the poor market in Egypt. Yet overall its sales and volumes rose in 2017 aided by recovery in France. Finally, Buzzi Unicem rode out the Italian market with its acquisition of Zillo Group delivering a rise in sales and cement volumes.
Wider trends are hard to call given the differing geographical spreads of these cement producers. Europe has been recovering from a decade of stagnation and Asian markets are no longer reliable. South America is mixed with places like Brazil, and now Colombia, underperforming. Yet Argentina is proving one of the fastest growing construction markets at the moment with local plants unable to meet demand. Africa remains profitable and promising as ever but divided between the north and the Sub-Saharan region.
Once the effects from mergers and acquisition activity by the larger cement producers start to fade then the actual situation may become clearer. In the meantime, the effects of the recent cold snap in Europe on the first quarter results for 2018 could be pretty varied. The Financial Times newspaper, for example, quoted one pundit from the Construction Products Association who estimated the industry lost 1% of its annual output to the bad weather in the UK. This may not be great news for any company relying on the European market.
UltraTech Cement fights rejected bid for Binani Cement
07 March 2018India: UltraTech Cement is querying the National Company Law Tribunal (NCLT) why its bid for Binani Cement had been rejected. The auction for the bankrupt Binani Cement was won by a consortium consisting of Dalmia Bharat and Bain Capital’s India Resurgent Fund and Piramal Enterprises, according to the Business Standard newspaper. UltraTech Cement is questioning how the bid selection process was conducted.
Although JSW Cement won the first round of bidding, the NCLT decided to ask for more bids. Bidders were then informed that their bids would be assessed using a weighted system that would consider each company’s background, experience and upfront cash to be paid to the secured lenders.
India: Dalmia Bharat Cement and UltraTech Cement have each submitted bids of around US$930m for Binani Cement. The amount also includes upfront cash payments, as well as an offer of close to 20% stake in Binani to lenders, according to sources quoted by the Hindustan Times. A winning bid is expected to be chosen by the end of February 2018.
Both bidders have been asked for additional details related to their bid to allow the creditors to make their final decision. UltraTech Cement, for example, has been asked to provide information on a Competition Commission of India (CCI) penalty imposed upon it in 2016.
UltraTech Cement gets green nod for limestone mining project
31 January 2018India: The Environment Ministry has approved a US$9.4m opencast limestone mine project by UltraTech Cement in Bhavnagar district, Gujarat. The cement producer has proposed to lease a 632 hectare site with a production capacity of 2.07Mt/yr, according to the Press Trust of India. The mine has total mineral reserves of 63.6Mt with a lifespan of 32 years. Conditions of the approval include relocating 147 families and a group of local farmers.
Limestone from the mine will be used to support a proposed cement plant in Bhavnagar district. It will also be sent to UltraTech’s other plants in the state.
Jaiprakash Associates narrows net loss in third quarter
22 January 2018India: Jaiprakash Associates has narrowed its loss to US$23m in the third quarter of its financial year from US$171m in the same period in 2016. Despite this its income fell by 30% year-on-year to US$178m from US$258m, according to the Press Trust of India. The company has sold its assets, including a large number cement plants to UltraTech Cement, to reduce debt.
UltraTech Cement’s profit drops on fuel prices
18 January 2018India: UltraTech Cement’s profit after tax has dropped in the third quarter of its financial year that ends on 31 March 2018 due to rising costs of petcoke and coal. It also blamed a ban on petcoke usage in some states. Overall, its consolidated profit after tax for the first nine months of its financial year rose by 10% year-on-year to US$3.58bn from US$3.25bn in the same period in 2016. Its profit after tax fell by 10.5% to US$278m from US$311m.
The cement producer said that it had successfully launched the ‘UltraTech Brand’ in all the markets served by the plants it acquired from Jaiprakash Associates in 2017. It reported that production capacity utilisation is at 60% from a low of 18% at the time of the purchase. It is currently appointing new dealers and retailers in its new territories.
Binani Cement receives six bids
17 January 2018India: Binani Cement has received six bids in its sale process. Offers were received from UltraTech Cement, JSW Cement, Ramco Cement, HeidelbergCement India, Dalmia Cements and a pair of Indian investors, according to the Daily News & Analysis newspaper. The bids ranged from around US$630m to US$940m. However, each bid came with various clauses that made the committee of creditors refer them to a consultancy for evaluation.