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RMC Sector: Gearing up for growth

Published

11 years ago

May 31, 2014

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Rashid Merchant elaborates on the special products and services provided by RMC Readymix (India), challenges faced by the RMC industry and the thought process involved in the selection of the right system from a plethora of contemporary RMC equipment available.

RMC Readymix (India), a division of Prism Cement, is one of the largest ready-mixed concrete manufacturers in India. Set-up way back in 1996 (coinciding with the inception of the RMC industry), RMC Readymix expanded its business rapidly and today it is operating 90 ready-mixed concrete plants in 37 cities and towns across the nation. The three business verticals of the company are as below:

RMC Commercial Concrete
The Commercial Concrete vertical is RMC India?s core business, which caters to the needs of metro cities and semi-urban areas. The company caters to a gamut of concrete requirements encompassing everything from lofty buildings to a cherished individual house, solutions for mild exposure to the harshest of off shore works, from soft and aesthetic requirements to prestigious infra and industrial projects.

RMC Aggregates
Aggregates occupy 70 per cent of the volume in concrete. Understanding the importance of good quality aggregates, RMC India ventured into the aggregates business in the year 2000. RMC India manages high-tech aggregate manufacturing units in Mumbai, Bengaluru, Hyderabad, Mangaluru and Sawantwadi.

The Aggregates vertical maintains product quality by selecting the right quarry, employing the best techniques in quarrying industry to extract good quality rock with proper fragmentation.

The company relies on machinery and plants of internationally proven standards. The skilled workforce is trained to maintain these crushers in an immaculate working condition and get the best of their performance in line with international norms.

RMC Mega Projects
In 2008, the company decided to extend its core business activity of ready-mixed concrete to meet the growing demand for high quality RMC in key infrastructure sectors such as highways, power, petroleum refineries, ports and jetties. The company has set up and is operating RMC plants in remote locations that are far flung from the comforts of civilisation. This vertical of RMC India has successfully executed more than 25 mega projects.

Challenges for the RMC sector
Shortage of quality raw material:
Aggregates and natural sand are rapidly becoming scarce. So far, there are no strong legislations imposed to enforce the use of alternatives/by products in concrete production. At the same time, cartelisation by cement and aggregate suppliers is endangering the business dynamics of demand and supply. The aggregates market is traditionally known to be highly unorganised and dominated by muscle power. As such, the RMC players have to face the brunt of problems such as inconsistent quality, erratic availability, frequent price hikes, etc. Inconsistency of physical properties of aggregate, viz., shape, size, grading, etc., has also been a perennial issue and a bane for the Indian RMC industry at large. I had got an opportunity to work in one of the Gulf countries for a couple of years I was genuinely spellbound by the consistency of the properties of aggregates available there.

Absence of strong regulations:
Absence of any quality recommendations from the government allows new entrants lacking any technical know-how to operate plants and sell sub-standard concrete. So also, lack of tough health and environ?mental regulations make it easy for fly by night operators to set up plants and carry out seasonal business.

Taxation:
High levies and taxes make RMC costlier than the site mixed concrete. The most important aspect here is the current tax structure. The purchaser has to pay excise duty and applicable VAT in the state to buy RMC from the market. High taxation on sale of commercial concrete has driven many purchasers to make concrete at project sites. A good percentage of the construction industry is still served by unorganised companies who forge invoices and quantities to save taxes. Probably the introduction of GST can help.

Lack of expertise:
The general lack of understanding among most concrete users about the requisite care and precautions to be taken during the handling of concrete in its nascent stages becomes detrimental for the structures cast. Lack of awareness about the advancements in the field of concrete technology often leads to designing of heavy and obsolete member sections.

RMC special concrete
Concrete in today?s world can fully or partially replace steel or other construction materials and it is no more considered as an option in most architectural works. Since mid 1990s, advances in concrete technology and rheology have been quite significant. This combined with development of new chemical admixtures and supplementary cementitious materials have enhanced the performance and sustainability of concrete. Concrete has come a long way and has reached a stage where it is no longer referred to as mere concrete. It now has to be mentioned with its characteristic attributes like ?high strength,? ?high performance? or ?self-compacting? concrete.

In line with such improvements
in the spheres of durability and performance, RMC Readymix (India) has evolved a whole new series of RMC Specials. These products are custom designed to meet home and project requirements. They have been used extensively in the America, Japan and European countries in a plethora of engineering applications.

Selection of RMC Equipment
It is extremely vital to have a deft selection from a plethora of contemporary RMC equipment available. Aspects to be mulled over are quality of machinery, capital investment involved, past performances (if any), operations and maintenance costs, after sales service and spare parts support (JIT preferred), warranties/guarantees to be provided, and finally the delivery schedule.

We have been satisfied with the post sales services provided by some reputed companies having their own pan India service network; but companies having a smaller network or ones who operate through dealers have always been sluggish in responding to our needs.

Chinese equipment are comparable to those provided by their European counterparts as far as the equipment performance is concerned. However, for efficient after-sales services, a pan India network is mandatory for both. An important revelation is that in the case of equipment, the Europeans strictly follow the process of standardisation whereas; the Chinese are quite flexible, which is an added advantage to the Indian buyer.

Finally, it has been noticed that in today?s cutthroat competition, customers are aspiring to possess mobile batching plants with minimal involvement of civil foundation works, and which can be easily relocated and erected in shorter time frames.

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Price hikes, drop in input costs help cement industry to post positive margins: Care Ratings

Published

3 years ago

October 21, 2021

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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).

Source:moneycontrol.com

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Wonder Cement shows journey of cement with new campaign

Published

3 years ago

October 21, 2021

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The campaign also marks Wonder Cement being the first ever cement brand to enter the world of IGTV…

ETBrandEquity

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.

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In spite of company’s optimism, demand weakness in cement is seen in the 4% y-o-y drop in sales volume. (Reuters)

Published

3 years ago

October 21, 2021

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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

UltraTech Cement
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.