Displaying items by tag: India
India fines cement firms US$1.1bn over cartel
22 June 2012India: In one of the largest fines of its kind, India's antitrust body has imposed a penalty of a combined US$1.1bn on 11 cement companies for price fixing. The companies penalised by the Competition Commission of India (CCI) include ACC and Ambuja Cements (both units of Swiss cement-maker Holcim), UltraTech Cement, Jaiprakash Associates, India Cements, Madras Cements and the local unit of France's Lafarge.
"The commission has found that the cement companies have not utilised the available capacity, so as to reduce supplies and raise prices in times of higher demand," said the CCI in its judgement. It said that the penalty on each company amounted to 50% of their profit for the financial years 2009-10 and 2010-11.
ACC has been fined US$201m and Ambuja has to pay US$204m. India's largest producer of the building material, Ultratech Cement, has to pay US$206m, while Lafarge's Indian unit will have to shell out US$84m. Jaiprakash Associates has been fined US$232m.
On 21 June 2012 the CCI said that the cement companies' action of limiting supplies to the market through an 'anti-competitive agreement' was not only detrimental to consumers but also to the economy, as the building material is a critical input for infrastructure projects. The regulator asked the companies to pay the fine within 90 days. The companies can challenge the regulator's orders in the Competition Appellate Tribunal, a quasi-judicial body and can then appeal to India's Supreme Court.
In response UltraTech said that it hasn't indulged in any cartelisation and that it would appeal against the order in the appellate tribunal. In Zurich Holcim said it would, "contest the allegations and findings against (ACC and Ambuja) in the order and will pursue all available legal steps to defend their respective positions." In Paris Lafarge said, "We will see the detailed report and decide the suitable actions to take. Lafarge has a strict policy to comply with competition laws."
The CCI started accepting cases in 2009, replacing a relatively toothless antitrust body that had been in place since 1970, and has been becoming increasingly assertive. The biggest penalty it had imposed so far was in 2011, when it ordered DLF Ltd., India's biggest property developer by sales, to pay US$120m for abusing its dominant market position by changing agreements signed with some property buyers.
The judgement comes at a bad time for cement companies, as demand for construction materials is weak due to sluggish economic growth and a fall in spending on infrastructure projects. The cost of raw materials such as coal is on the rise as well, pressuring margins.
India Cements gets expansion go-ahead
19 June 2012India: South India's largest cement maker by volume, The India Cements Ltd, has received clearance from the environment ministry to proceed with capacity expansion of its existing two plants.
The company sought the Terms of Reference (TOR) approval for expanding capacities in Padaveedu, Salem district at its Sankaridurg plant and in Dalavoi, Ariyalur district. The green ministry approved the TRO of India Cements on 25 April 2012 and 26 April 2012 respectively.
Company officials maintain that this is only a process and nothing has been finalised vis-a-vis expansion of capacities. "We are getting the required approvals in advance. Nothing is on the board. We want to be ready and when there is a need we should not be seen as waiting for regulatory approvals," said a company official.
Jaypee under the hammer
18 June 2012India: India's biggest cement producer, Jaiprakash Associates, says that it is planning to sell its cement units in Gujarat and Andhra Pradesh as a part of its divestment plan. In a move that is very similar to those of debt-ridden European and North American cement producers, local media has reported that Jaiprakash has been in talks with at least two different investors, including domestic group Aditya Birla and Lafarge from France. It is looking to sell its 'Jaypee Cement' unit plants, which are already run as a separate company.
Birla and Lafarge have finished their first round of talks with Jaypee. Final bids will be completed in two months. Jaypee wants to exit the cement production business in order to focus on its core activities.
Earlier, it was also reported that Switzerland's multinational Holcim Ltd. was prepared to spend up to US$1.6bn on the three plants, which have a joint capacity of 9.8Mt/yr.
UltraTech and Ambuja prop up Indian market's hopes
06 June 2012India: Strong sales from India's two largest cement makers, Aditya Birla Group's UltraTech and Swiss major Holcim's Ambuja Cements, in May 2012 are likely to return the industry to growth figures above 10% after a gap of two months.
Following India's 'disappointing' GDP growth of 5.3% for the first quarter of 2012, strong dispatches just before the start of the monsoon season has given hope to cement industry experts for better growth in 2012-13.
Ambuja Cements sold 1.93Mt in May 2012 against 1.73Mt in May 2011, a rise of 11.9%. UltraTech Cement, registered sales growth of 10.6%. However, Ambuja's sister concern, ACC, could not match up with the other key producers and reported a growth of 3%. It sold 2.05Mt compared to 1.99Mt in May 2011.
"With 10-12% growth from country's two top cement makers, it seems the industry will hit growth of 11-13% in May 2012," said the research head of a Mumbai-based brokerage firm.
The Indian Cement Manufacturers' Association (CMA) will be releasing the sector's overall statistics in June 2012. UltraTech Cement, ACC and Amubja Cements collectively control close to one-third of the country's cement market, which has an overall capacity of 330Mt/yr.
India - Calm before the storm
30 May 2012Two trends have put the squeeze on the Indian cement industry this week. Firstly it emerged that producers were slashing prices ahead of the coming monsoon season. Then the Centre for Monitoring Indian Economy (CMIE) proclaimed that it expected cement prices to rise by 5.9% in the 2013 financial year.
Producers cutting prices in May, before the monsoon, is important because it suggests that overall cement demand is already down. Once the rains come demand will go down even more. A slowdown in construction, particularly in infrastructure projects, a labour shortage and a sand shortage have all been blamed. Looking ahead however, as the CMIE has done, suggests that prices have to go up due to the increase in railway freight charges announced in March 2012 and the excise duty hike announced in the Union Budget 2012-13. All that remains in the middle are the profit margins that the cement industry has become accustomed to.
Back in January 2012 Fitch Ratings predicted a 'negative outlook' for the Indian cement industry in 2012, based on overcapacity and higher interest rates. Now it seems that total capacity utilisation is down in 2012 compared to 2011, from 76.2% to 71.3%. Throw in the railway and duty increases and one might be tempted to feel that Fitch went easy on the subcontinent.
Yet, the cement producers have already found one silver lining in the monsoon season. Industry sources were soon reported as using price increases in the country's south zone and price decreases in the north zone as evidence that cartel-like behaviour couldn't possibly be happening. In a country as large as India perhaps they should have added the words 'nationally coordinated.' Despite the price drops, prices in the cities have been reported at an all-time high due to supply shortages - a situation that may be familiar to some consumers in Saudi Arabia.
Indian cement prices down in May 2012
30 May 2012India: Indian cement companies have slashed their prices in May 2012 due to poor demand, event before the monsoon season has started.
Prices declined in all regions, except the south and central regions of the country, where prices have been stable. Demand has slowed, compared with April 2012 levels. Most dealers in India expect prices to decline after mid-June 2012, said Jaspreet Singh Arora an analyst at Anand Rathi.
Vinita Singhania, managing director JK Lakshmi Cement, said that demand in April 2012 has gone 'absolutely haywire' due to a slowdown in construction activities and certain infrastructure projects not being implemented. A senior official of the Indian Cement Manufacturers' Association said that in 2012 cement prices have declined even before the arrival of monsoon due to oversupply. "The price correction has come a little earlier than expected because demand didn't pick up in line with our expectations," the official said.
India: Martin Kriegner has been appointed CEO of Lafarge India as part of the current group-wide reorganisation drive. He will hold responsibility for all of Lafarge's cement, aggregates and concrete activities in the country.
"I am happy to return to India as Country CEO, at a time when the construction sector is evolving quickly in the country. By combining all of our activities together we will be able to support this evolution by offering integrated and innovative solutions at an earlier stage of construction in close proximity with our customers, allowing the full benefits of our innovative products and services to be realised," said Kriegner.
Martin Kriegner, an Austrian citizen, joined Lafarge in 1990 and became the CEO of Lafarge Perlmooser AG, Austria in 1998 before he moved to India as head of the cement activity in 2002. Prior to this assignment he served as regional president, based in Kuala Lumpur, Malaysia. Lafarge has four cement plants in India: two plants in the state of Chattisgarh and a grinding plant each in Jharkhand and West Bengal.
Shree Cement reports 74% rise in Q4 net profit
15 May 2012India: Shree Cement has reported a rise of 74% in its net profit to US$21.2m for the fourth quarter of the financial year 2011-12, which ended on 31 March 2012, compared to US$12.2m for the same period of 2010-11.
Shree's net sales rose by 43% to US$289m for the quarter, compared to US$203m in 2011. For the full financial year the company reported a rise of 27.3% in its standalone un-audited net profit to US$50m, compared to US$39m in the previous financial year. Net sales for the company also increased by over 31% to US$884m in 2012 compared to US$676m in 2011.
HM Bangur, managing director of Shree Cement, attributed the jump in profits to better capacity utilisation, increased sales and increases in other income streams thanks to legal action ruling in the company's favour. "Our capacity utilisation has been much better. In the fourth quarter of 2012 compared to the same period in 2011, cement sales increased by 30% in volumetric terms and instead of 25.7Mt, we have sold 33.5Mt," he explained.
Bangur expects growth to slow down in the financial year 2012-13 and he is optimistic about the surge in the sale of power. "The pace will definitely slowdown because the 30% growth rate is not easy to maintain. I expect the cement market to grow by 9% and the company to grow by 12% in volume terms." In the 2012-13 period Shree Cements forecasts that it will increase its capacity by 12.5-13Mt.
Bangur added that claims of cartelisation in the cement sector were unfounded and that the forthcoming judgement by the Competition Commission of India (CCI) on its investigation into the sector are eagerly expected.
Madras Cements promotes Dharmakrishnan to CEO
25 April 2012India: Madras Cements has promoted its executive director for finance, A V Dharmakrishnan, to chief executive officer.
"A V Dharmakrishnan has been designated as chief executive officer of the company with effect from 1 April 2012," the Chennai-based cement maker said in a BSE filing.
Dharmakrishnan is a chartered accountant who began his career with Madras Cements in 1982. He has been an additional director at Rajapalayam Mills and Ramco Systems since 2008 and serves as a director On-Time Transport Company Limited. In addition he is a member of Institute of Chartered Accountants of India.
Madras Cements is the flagship company of the diversified Ramco Group and it produces 13Mt/yr at its five manufacturing plants across Tamil Nadu, Karnataka and Andhra Pradesh. Apart from cement, Ramco Group has presence in real estate, paper production, hardware and stainless steel.
Ultratech profit rises 19% on higher sales and prices
24 April 2012India: Ultratech Cement Ltd, part of the Aditya Birla group, has said that its net profit for quarter ending 31 March 2012 rose by 19% compared to the same quarter of 2011. It attributed the increase to higher sales volume and an increase in product prices.
The profit at India's largest cement company by sales climbed to US$165m for the January-March 2012 period, from US$138m in the same period in 2011.
Sales also increased by 19%, to US$1.01bn from US$582m.
Indian cement companies were helped in the last quarter by revived construction activity which boosted both sales volume and product prices. However, improvement in the profit margin was limited by a rise in costs of coal and diesel. Ultratech sold 11.54Mt of cement during the quarter compared with 10.70Mt in the same period in 2011.
Ultratech didn't say how much prices rose in the January-March 2012 quarter but brokerage firm Emkay Global Financial Services Ltd said that prices grew by 10% compared to the same period in 2011. Ultratech said its variable costs also rose by 10% as a result of higher energy prices. It also added that the surplus capacity in the Indian cement industry is likely to continue until 2015. Together with the rising cost of raw materials this is expected to put pressure to profit margins.