The Indian cement industry has made rapid strides in the recent years. With a rise in infrastructure and housing projects in the coming years, demand for cement will increase tremendously. This is where modern machines and latest technological developments will help cement manufacturers keep pace with the increased demand. Indian Cement Review takes a look at the vast cement machinery market in India.Modern cement plants work on the principle of zero downtime, high product quality and better output with minimum energy consumed per unit of cement production. As per recent forecasts, projections for the next three years predict that the cement industry will grow at a compounded annual growth rate (CAGR) of around three per cent. This implies that cement production in India is set to reach 303 million mt in 2014. Keeping in mind the present degree of utilization, the growth rate for the installation of production facilities is seen at roughly 8 per cent per annum. In order to optimize production and minimize losses, the cement industry needs to install machinery which is in sync with the latest technology. Foreign Direct Investment (FDI) of up to 100 per cent is allowed in the industry under automatic route as well as technology collaboration. The industry is de-licensed and import of old and new machinery too is allowed free.Process TechnologyTill date in India, cement used to be manufactured through the wet process. In the wet process, each raw material is proportioned to meet a desired chemical composition and fed to a rotating ball mill with water. Materials exiting the mill are called "slurry" and have flowability characteristics. The slurry is pumped to blending tanks and homogenized to insure the chemical composition of the slurry is correct. After the completion of the homogenization process, the slurry is stored in tanks until required. However, in recent years, cement manufacturers have adopted the dry process of cement manufacturing which is superior in terms of fuel economy. In this process, each raw material is proportioned to meet a desired chemical composition and supplied to a rotating ball mill or vertical roller mill. The raw materials are dried with waste process gases and ground to a size where majority of the materials are less than 75 microns. The dry materials exiting either type of mill are called kiln feed which is pneumatically blended to ensure that the chemical composition of the kiln feed is well homogenized and then stored in silosTechnical evolution in the manufacturing processWith the introduction of dry process technology in the cement industry based on preheater and precalciner, a substantial development has been seen in different unit operations. In order to achieve improved fuel efficiency, various kiln systems have been developed. Modern dry process kilns are now standardized between 1500 tpd to 4500 tpd. The other innovative features in the manufacturing process include use of vertical roller mills in place of ball mills for grinding raw materials and coal, use of preblending stockpile and continuous homogenizing silos for homogenization of raw materials, use of roller press and high efficiency separators for energy efficient cement grinding, electronic packing machines for improved weight reliability and efficiency and advanced process control and instrumentation. The present dry process plants which have been installed are equipped with the most effective pollution control measures for complying with the rules laid down by the pollution control authorities. In order to meet the stipulations, many old plants are now installing pollution control equipment of advanced design including ESP, fabric bag dust collectors, gravel bed filters etc.Size of Indian cement machinery marketPresently, there are around six major suppliers of complete cement plant machinery in the organized sector having a combined sales turnover of around Rs 600 crore per annum and are in a position to fully meet the demand of the domestic cement industry. Alongwith the unorganized sector, the total production is worth between Rs 1,400 crore to Rs 2,000 crore per annum.Research & DevelopmentWith the recent advances in technological equipments and a thrust in economizing production, research & development has assumed a prime importance in choosing the right machinery for the right process. The absorption and adaptation of technology depends on the R&D activities of the licensees. The chief organisations which are engaged in R&D activities for the cement industry in India include the National Council for Cement and Building Materials (NCCB), Central Research Station (CRS) of ACC and Dalmia Institute of Scientific and Industrial Research (DISIR). Two main indigenous machinery suppliers who have their own R&D divisions are Larsen & Toubro and Walchandnagar Industries.A centralized R&D Centre has also been set up by the Cement Corporation of India. The R&D units have contributed immensely in making the cement industry technologically competitive through the development of indigenous technology and adapting international technology protocols. A centralized R&D institute can play a major role in various technological and production processes of the cement industry. These processes can comprise of several areas like energy conservation, production optimization, quality enhancement, human resources development, modern computerized methods for quarry planning and waste heat recovery.Mini cement plant machineryThere are an estimated 300 mini cement plants in operation in India which have contributed immensely to the growth of the cement industry in India. The manufacturing process at these plants is based on either vertical shaft kiln (VSK) technology or rotary kiln technology. Several advantages are accrued through the use of VSK technology which includes cement production in a decentralized manner and low cost of installation. The plant can be designed for lower capacity due to which small limestone deposits can be used. At the plants, there is low dust emission and low maintenance and refractory cost.Machinery used at mini cement plants can be fabricated by small workshops and the plants have low space requirement. Clinker at the plants is easier to grind and therefore consumes less power.Dry production process with suspension preheater is usually followed by mini plants which operate on rotary kiln technology. Machinery for the plants is supplied by medium scale manufacturers. Designs for the mini cement plants, which are based on rotary kiln and VSK technology have been developed indigenously.Technological trendsEven though Indian cement manufacturers have been largely adaptable to the changing technological trends in cement machineries, there are certain areas which face lacunae and which need to be addressed immediately. It has been observed that the facilities and capability for conducting complete raw materials, fuel and product investigation are not possessed by a majority of the machinery manufacturers. Indigenous capabilities are limited in the areas of equipment design and commissioning services with particular reference to modern cement plants.R&D activities are undertaken on a modest scale and are limited to a few specific areas. Another area which needs to be paid attention to is the training of personnel. No long term planning module has been developed for their personnel by most of the cement plants and machinery manufacturers. No significant success has been achieved by India in the export of cement machinery.The country has not majorly exported modern dry process plant machinery except the export of machinery for dry process plant in Indonesia as per an arrangement between the governments of the two countries and export to Nepal. The failure to export machinery has been attributed by Indian machinery manufacturers to the high machinery cost and the lack of confidence in Indian cement machinery on the part of the importers.Recommendations for increased technology adaptationA modern and state of the art R&D infrastructure needs to be set up by all cement manufacturers for developing and adapting to newer technologies. A reputed R&D organization should try to have testing facilities which are on par with those used by foreign cement machinery manufacturers. Facilities at the organization should cover the entire gamut of chemical, physical and mineralogical testing. A centralized training institute needs to be established in collaboration with leading cement machinery manufacturers. The main thrust of the institute should be on manpower development, up-gradation of technology, equipment design, improvement in manufacturing procedures and quality assurance. An agency can be established for the monitoring of technological development in the Indian cement industry. R&D establishments can assist this agency in the evaluation of technology. Computerized kiln and mill simulators should be set up by all the concerned cement plants. This will help in gaining of knowledge at a lower cost and lesser time duration. Use of these simulators can be taken up on a centralized basis. A full scale simulator facility is already available at the Hyderabad centre of National Council for Cement and Building Materials (NCCB) and should be utilized by cement plants. Machinery and cement manufacturers should develop a well conceived human resources development plan which should include areas of training and level of personnel to be trained as well as duration of training. Keeping in view the erection and commissioning problems faced in a number of units using advanced technology, all license agreements should stipulate for rendering training to licensees’ personnel for undertaking such operations on an independent basis.
Price hikes, drop in input costs help cement industry to post positive margins: Care Ratings
Region-wise,the southern region comprises 35% of the total cement capacity, followed by thenorthern, eastern, western and central region comprising 20%, 18%, 14% and 13%of the capacity, respectively.
The cement industry is expected to post positive margins on decent price hikes over the months, falling raw material prices and marked drop in overall production costs, said an analysis of Care Ratings.
Wholesale and retail prices of cement have increased 11.9% and 12.4%, respectively, in the current financial year. As whole prices have remained elevated in most of the markets in the months of FY20, against the corresponding period of the previous year.
Similarly, electricity and fuel cost have declined 11.9% during 9M FY20 due to drop in crude oil prices. Logistics costs, the biggest cost for cement industry, has also dropped 7.7% (selling and distribution) as the Railways extended the benefit of exemption from busy season surcharge. Moreover, the cost of raw materials, too, declined 5.1% given the price of limestone had fallen 11.3% in the same aforementioned period, the analysis said.
According to Care Ratings, though the overall sales revenue has increased only 1.3%, against 16% growth in the year-ago period, the overall expenditure has declined 3.2% which has benefited the industry largely given the moderation in sales.
Even though FY20 has been subdued in terms of production and demand, the fall in cost of production has still supported the cement industry by clocking in positive margins, the rating agency said.
Cement demand is closely linked to the overall economic growth, particularly the housing and infrastructure sector. The cement sector will be seeing a sharp growth in volumes mainly due to increasing demand from affordable housing and other government infrastructure projects like roads, metros, airports, irrigation.
The government’s newly introduced National Infrastructure Pipeline (NIP), with its target of becoming a $5-trillion economy by 2025, is a detailed road map focused on economic revival through infrastructure development.
The NIP covers a gamut of sectors; rural and urban infrastructure and entails investments of Rs.102 lakh crore to be undertaken by the central government, state governments and the private sector. Of the total projects of the NIP, 42% are under implementation while 19% are under development, 31% are at the conceptual stage and 8% are yet to be classified.
The sectors that will be of focus will be roads, railways, power (renewable and conventional), irrigation and urban infrastructure. These sectors together account for 79% of the proposed investments in six years to 2025. Given the government’s thrust on infrastructure creation, it is likely to benefit the cement industry going forward.
Similarly, the Pradhan Mantri Awaas Yojana, aimed at providing affordable housing, will be a strong driver to lift cement demand. Prices have started correcting Q4 FY20 onwards due to revival in demand of the commodity, the agency said in its analysis.
Industry’s sales revenue has grown at a CAGR of 7.3% during FY15-19 but has grown only 1.3% in the current financial year. Tepid demand throughout the country in the first half of the year has led to the contraction of sales revenue. Fall in the total expenditure of cement firms had aided in improving the operating profit and net profit margins of the industry (OPM was 15.2 during 9M FY19 and NPM was 3.1 during 9M FY19). Interest coverage ratio, too, has improved on an overall basis (ICR was 3.3 during 9M FY19).
According to Cement Manufacturers Association, India accounts for over 8% of the overall global installed capacity. Region-wise, the southern region comprises 35% of the total cement capacity, followed by the northern, eastern, western and central region comprising 20%, 18%, 14% and 13% of the capacity, respectively.
Installed capacity of domestic cement makers has increased at a CAGR of 4.9% during FY16-20. Manufacturers have been able to maintain a capacity utilisation rate above 65% in the past quinquennium. In the current financial year due to the prolonged rains in many parts of the country, the capacity utilisation rate has fallen from 70% during FY19 to 66% currently (YTD).
Wonder Cement shows journey of cement with new campaign
The campaign also marks Wonder Cement being the first ever cement brand to enter the world of IGTV…
Cement manufacturing company Wonder Cement, has announced the launch of a digital campaign ‘Har Raah Mein Wonder Hai’. The campaign has been designed specifically to run on platforms such as Instagram, Facebook and YouTube.
#HarRaahMeinWonderHai is a one-minute video, designed and conceptualised by its digital media partner Triature Digital Marketing and Technologies Pvt Ltd. The entire journey of the cement brand from leaving the factory, going through various weather conditions and witnessing the beauty of nature and wonders through the way until it reaches the destination i.e., to the consumer is very intriguing and the brand has tried to showcase the same with the film.
Sanjay Joshi, executive director, Wonder Cement, said, "Cement as a product poses a unique marketing challenge. Most consumers will build their homes once and therefore buy cement once in a lifetime. It is critical for a cement company to connect with their consumers emotionally. As a part of our communication strategy, it is our endeavor to reach out to a large audience of this country through digital. Wonder Cement always a pioneer in digital, with the launch of our IGTV campaign #HarRahMeinWonderHai, is the first brand in the cement category to venture into this space. Through this campaign, we have captured the emotional journey of a cement bag through its own perspective and depicted what it takes to lay the foundation of one’s dreams and turn them into reality."
The story begins with a family performing the bhoomi poojan of their new plot. It is the place where they are investing their life-long earnings; and planning to build a dream house for the family and children. The family believes in the tradition of having a ‘perfect shuruaat’ (perfect beginning) for their future dream house. The video later highlights the process of construction and in sequence it is emphasising the value of ‘Perfect Shuruaat’ through the eyes of a cement bag.
Tarun Singh Chauhan, management advisor and brand consultant, Wonder Cement, said, "Our objective with this campaign was to show that the cement produced at the Wonder Cement plant speaks for itself, its quality, trust and most of all perfection. The only way this was possible was to take the perspective of a cement bag and showing its journey of perfection from beginning till the end."
According to the company, the campaign also marks Wonder Cement being the first ever cement brand to enter the world of IGTV. No other brand in this category has created content specific to the platform.
In spite of company’s optimism, demand weakness in cement is seen in the 4% y-o-y drop in sales volume. (Reuters)
Cost cuts and better realizations save? the ?day ?for ?UltraTech Cement, Updated: 27 Jan 2020, Vatsala Kamat from Live Mint
Lower cost of energy and logistics helped Ebitda per tonne rise by about 29% in Q3
Premiumization of acquired brands, synergistic?operations hold promise for future profit growth Topics
India’s largest cement producer UltraTech Cement Ltd turned out a bittersweet show in the December quarter. A sharp drop in fuel costs and higher realizations helped drive profit growth. But the inherent demand weakness was evident in the sales volumes drop during the quarter.
Better realizations during the December quarter, in spite of the 4% year-on-year volume decline, minimized the pain. Net stand-alone revenue fell by 2.6% to ?9,981.8 crore.
But as pointed out earlier, lower costs on most fronts helped profitability. The chart alongside shows the sharp drop in energy costs led by lower petcoke prices, lower fuel consumption and higher use of green power. Logistics costs, too, fell due to lower railway freight charges and synergies from the acquired assets. These savings helped offset the increase in raw material costs.
The upshot: Q3 Ebitda (earnings before interest, tax, depreciation and amortization) of about ?990 per tonne was 29% higher from a year ago. The jump in profit on a per tonne basis was more or less along expected lines, given the increase in realizations. "Besides, the reduction in net debt by about ?2,000 crore is a key positive," said Binod Modi, analyst at Reliance Securities Ltd.
Graphic by Santosh Sharma/Mint
What also impressed analysts is the nimble-footed integration of the recently merged cement assets of Nathdwara and Century, which was a concern on the Street.
Kunal Shah, analyst (institutional equities) at Yes Securities (India) Ltd, said: "The company has proved its ability of asset integration. Century’s cement assets were ramped up to 79% capacity utilization in December, even as they operated Nathdwara generating an Ebitda of ?1,500 per tonne."
Looks like the demand weakness mirrored in weak sales during the quarter was masked by the deft integration and synergies derived from these acquired assets. This drove UltraTech’s stock up by 2.6% to ?4,643 after the Q3 results were declared on Friday.
Brand transition from Century to UltraTech, which is 55% complete, is likely to touch 80% by September 2020. A report by Jefferies India Pvt. Ltd highlights that the Ebitda per tonne for premium brands is about ?5-10 higher per bag than the average (A cement bag weighs 50kg). Of course, with competition increasing in the arena, it remains to be seen how brand premiumization in the cement industry will pan out. UltraTech Cement scores well among peers here.
However, there are road bumps ahead for the cement sector and for UltraTech. Falling gross domestic product growth, fiscal slippages and lower budgetary allocation to infrastructure sector are making industry houses jittery on growth. Although UltraTech’s management is confident that cement demand is looking up, sustainability and pricing power remains a worry for the near term.