Global Cement News

India: Binani Industries is in talks with potential financial investors such as JP Morgan and state-owned funds in the Middle East to sell up to a 40% stake in its subsidiary Binani Cement as it seeks to raise capital to cut its debt and expand its cement capacity. Potential investors may include Abu Dhabi Investment Authority and Qatar Investment Authority.

The company, which has a total cement capacity of 11.25Mt/yr, has integrated cement plants in Rajasthan, India and a 2Mt/yr grinding unit in Dubai's Jebel Ali Industrial Area. The company has previously expressed an interest in expanding both inside and outside of India.

At US$130/t of installed capacity, Binani Cement will be valued at US$1.47bn. A 40% stake is thus worth around US$568m."The valuation of Binani Cement will be evolved in discussions with the financial investors and will be in compliance with the regulatory guidelines," said Sunil Sethy, executive vice-chairman and MD of Binani Industries."Given the overcapacity (in the Indian market) the absence of mergers and acquisitions has been surprising."

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.

Peru: Peruvian cement producer Cementos Pacasmayo has reported that it more than doubled its net income in 2012, to US$61.6m from US$26.2m in 2011. Fourth quarter income was reported having increased by 41% year-on-year to US$15.5m from US$11m in 2011. Cementos Pacasmayo sold 617,500t of cement in the fourth quarter of 2012, a 14% rise from 540,800t sold in the same period in 2011.

"The strength in public and private investment, favourable financing conditions and the creation of high quality jobs resulted in higher cement sales volume," the company said.

Cementos Pacasmayo supplies cement to northern Peru, where about 22% of the population lives and which accounts for approximately 15% of Peru's national gross domestic product.

India: The Indian Cement Manufacturers' Association (CMA) has demanded a reduction in the excise duty for building materials from 12% to 6-8% in the next Indian Union Budget.

"To encourage cement industry and to bring it at par with other core and infrastructure industries, the excise duty rate be rationalised from 12% to 6-8%," said the CMA in a budget memorandum to the Finance Ministry. The CMA added that the excise duty rates on cement are amongst the highest, beaten only by the rates on luxury goods such as cars. It admitted that the Indian industry suffers from an 'excess of surplus capacity'.

"The levies and taxes on cement in India are far higher compared to those in countries of the Asia Pacific Region. Average tax on cement in the Asia Pacific Region is just 11.4%, with the highest levy of 20% being in Sri Lanka," said the CMA. According to the CMA the Indian cement industry had a production capacity of around 340Mt/yr in March 2012.

The CMA also pitched the idea of levying basic customs duty on imports of cement. Alternatively, it suggested that the import duties on goods required for manufacture of cement be abolished.

At present, the import of cement into India is freely allowed without having to pay basic customs duty. However, all the major inputs required for manufacturing cement - such as a limestone, gypsum, petcoke - attract customs duty.