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QIMS in Reliance Cement

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Increase in production and quality demands in the cement industry have resulted in a need for improvement in speed and accuracy of quality control parameters of cement. This need has been addressed by many technological advances in quality control and process automation in the recent years. The article highlights the philosophy of QIMS system implemented/under implementation at the various operating plants of Reliance cement.

QIMS reinforces the confidence level of customers and stakeholders in a highly competitive market. The other important reason for emphasis on QIMS is the subsequent improvement in efficiency and productivity. In business organisations, a well-designed information system can be the real difference between profit and loss. QIMS also helps companies and organisations to gain strategic competitive advantages over their competitors.

Objectives of QIMS project

  • To manage the quality information at laboratories serving manufacturing processes; covering tasks from routine control and quality assurance to final product tests and compliance certificate.
  • To support manufacturing labs in complying with industry standards and regulations, like ISO 9001, 14001 and BIS etc. This includes providing advanced means to document quality related information, making it assessable and transparent. This would in-turn seek to provide near real-time inputs as well as comprehensive historical knowledge of the incumbent quality process, to the plant personnel and support them in their day-to-day decision-making.

Main deliverables expected from QIMS project

  • Enforce information fidelity and consistency.
  • Bring about unique and seamless integration between quality and production information systems.
  • Increase manpower efficiency.
  • Boost productivity.
  • Enable drill-down statistical analysis of semi-finished and finished products.
  • Help auto generation of weekly test certificates of products as well as other statutory documents.

Scope the work.
The overall scope of the implementation of a QIMS system at Reliance cement was to provide a comprehensive and near real-time dashboard, integrated with data from various stand alone automatic quality parameter measuring equipment at the plants. This dashboard information assists the quality/production personnel and sales team to meet the quality, production and sales targets of the organisation.

The application has been designed in a manner to effectively manage the quality information in accordance to best-in-class laboratory practices. This includes all the tasks of plant, right from the routine quality controls to the final product quality controls including the compliance and weekly test certificates that need to be issued to customers. Other cement suited functions of the QIMS include automatic and near real time data acquisition, data validation, data consolidation, long-term storage, calculations, sample logging procedures, sample status reports, work lists, standard and compliance reporting features, intuitive charts and graphics, as well as interoperability options for MS Excel and other industry standard statistical analysis applications. In case of erroneous reading by the equipment/poor sampling, the near real time data can be altered only by the approval of the designated authority.

Features of QIMS

  • Lab automation and integration
  • Automatic alerts based on thresholds and authorisation
  • Instrument management
  • Customised reporting
  • Integration with third party systems (SAP, BIW, CRM, etc.)
  • Integration of quality data tapping in various BIS forms (to be maintained on regular basis as statutory requirements.)
  • Data Analysis (QA / QC)
  • Electronic Document Management

Validation and Authorisation
If the automatic data captured is sub-standard with respect to the norms defined by the organisation, the system generates automatic alert messages and escalates them to the respective quality manager, plant manager and corporate quality functional head.

If there is a genuine need to change this substandard data, the system is designed to follow a pre-defined approval workflow, which allows authorised personnel to empower the respective production manager to change the data.

System Architecture
The configuration shown in schematics above is similar at all the plants (i.e. Integrated Grinding Units). The Centralised Quality server is also designed to integrate with the ERP system (SAP ECC) as well as the Reports servers (SAP BI/BO).

Conclusion
Implementation of QIMS has helped Reliance Cement achieve comprehensive quality excellence at par or at levels higher than the competition. Also, since all the results are transmitted directly from the respective equipment, there is virtually zero human intervention in the results reporting. This has also meaningfully contributed in reinforcing customer and stakeholder confidence.

Acknowledgement
Authors are grateful to Arvind N. Pathak, Chief Executive Officer of Reliance Cement Company Private Limited, Mumbai for his consent to publish this paper. Input from Durgamadhab Mohanty and Sumantra Naik is also thankfully acknowledged.

Reference
Ravindra Antin, S.B.Hegde and Y.V.Satyamurthy (2013).
Lab automation and advanced process control in cement industry with particular reference to India. 13 NCB International seminar on cement and building materials, New Delhi.

Anand Budholia,
Vice President & CIO Cement & Power businesses Reliance Cement
Anand Budholia is responsible for the strategic planning, implementation and overall IT operations of these businesses. An alumnus of NIT Allahabad (formerly MNREC). Anand has an overall work experience of over 25 years in the manufacturing and utility industry.

Dr.S.B.Hegde
Vice President and Functional Head of Quality and Material Development
Reliance Cement
Dr.S.B.Hegde has obtained his PhD degree in Applied Geology from Karnatak University, Dharwad of Karnataka State. Dr.Hegde is responsible for creating quality assurance domain for all green field integrated and grinding/blending units and also taking care for achieving quality excellence in manufacturing various products and value addition in the product development of the plants which are already commenced production.

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

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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

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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)

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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.

Continue Reading

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Process

QIMS in Reliance Cement

Published

on

Shares

Increase in production and quality demands in the cement industry have resulted in a need for improvement in speed and accuracy of quality control parameters of cement. This need has been addressed by many technological advances in quality control and process automation in the recent years. The article highlights the philosophy of QIMS system implemented/under implementation at the various operating plants of Reliance cement.

QIMS reinforces the confidence level of customers and stakeholders in a highly competitive market. The other important reason for emphasis on QIMS is the subsequent improvement in efficiency and productivity. In business organisations, a well-designed information system can be the real difference between profit and loss. QIMS also helps companies and organisations to gain strategic competitive advantages over their competitors.

Objectives of QIMS project

  • To manage the quality information at laboratories serving manufacturing processes; covering tasks from routine control and quality assurance to final product tests and compliance certificate.
  • To support manufacturing labs in complying with industry standards and regulations, like ISO 9001, 14001 and BIS etc. This includes providing advanced means to document quality related information, making it assessable and transparent. This would in-turn seek to provide near real-time inputs as well as comprehensive historical knowledge of the incumbent quality process, to the plant personnel and support them in their day-to-day decision-making.

Main deliverables expected from QIMS project

  • Enforce information fidelity and consistency.
  • Bring about unique and seamless integration between quality and production information systems.
  • Increase manpower efficiency.
  • Boost productivity.
  • Enable drill-down statistical analysis of semi-finished and finished products.
  • Help auto generation of weekly test certificates of products as well as other statutory documents.

Scope the work.
The overall scope of the implementation of a QIMS system at Reliance cement was to provide a comprehensive and near real-time dashboard, integrated with data from various stand alone automatic quality parameter measuring equipment at the plants. This dashboard information assists the quality/production personnel and sales team to meet the quality, production and sales targets of the organisation.

The application has been designed in a manner to effectively manage the quality information in accordance to best-in-class laboratory practices. This includes all the tasks of plant, right from the routine quality controls to the final product quality controls including the compliance and weekly test certificates that need to be issued to customers. Other cement suited functions of the QIMS include automatic and near real time data acquisition, data validation, data consolidation, long-term storage, calculations, sample logging procedures, sample status reports, work lists, standard and compliance reporting features, intuitive charts and graphics, as well as interoperability options for MS Excel and other industry standard statistical analysis applications. In case of erroneous reading by the equipment/poor sampling, the near real time data can be altered only by the approval of the designated authority.

Features of QIMS

  • Lab automation and integration
  • Automatic alerts based on thresholds and authorisation
  • Instrument management
  • Customised reporting
  • Integration with third party systems (SAP, BIW, CRM, etc.)
  • Integration of quality data tapping in various BIS forms (to be maintained on regular basis as statutory requirements.)
  • Data Analysis (QA / QC)
  • Electronic Document Management

Validation and Authorisation
If the automatic data captured is sub-standard with respect to the norms defined by the organisation, the system generates automatic alert messages and escalates them to the respective quality manager, plant manager and corporate quality functional head.

If there is a genuine need to change this substandard data, the system is designed to follow a pre-defined approval workflow, which allows authorised personnel to empower the respective production manager to change the data.

System Architecture
The configuration shown in schematics above is similar at all the plants (i.e. Integrated Grinding Units). The Centralised Quality server is also designed to integrate with the ERP system (SAP ECC) as well as the Reports servers (SAP BI/BO).

Conclusion
Implementation of QIMS has helped Reliance Cement achieve comprehensive quality excellence at par or at levels higher than the competition. Also, since all the results are transmitted directly from the respective equipment, there is virtually zero human intervention in the results reporting. This has also meaningfully contributed in reinforcing customer and stakeholder confidence.

Acknowledgement
Authors are grateful to Arvind N. Pathak, Chief Executive Officer of Reliance Cement Company Private Limited, Mumbai for his consent to publish this paper. Input from Durgamadhab Mohanty and Sumantra Naik is also thankfully acknowledged.

Reference
Ravindra Antin, S.B.Hegde and Y.V.Satyamurthy (2013).
Lab automation and advanced process control in cement industry with particular reference to India. 13 NCB International seminar on cement and building materials, New Delhi.

Anand Budholia,
Vice President & CIO Cement & Power businesses Reliance Cement
Anand Budholia is responsible for the strategic planning, implementation and overall IT operations of these businesses. An alumnus of NIT Allahabad (formerly MNREC). Anand has an overall work experience of over 25 years in the manufacturing and utility industry.

Dr.S.B.Hegde
Vice President and Functional Head of Quality and Material Development
Reliance Cement
Dr.S.B.Hegde has obtained his PhD degree in Applied Geology from Karnatak University, Dharwad of Karnataka State. Dr.Hegde is responsible for creating quality assurance domain for all green field integrated and grinding/blending units and also taking care for achieving quality excellence in manufacturing various products and value addition in the product development of the plants which are already commenced production.

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Process

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

Published

on

By

Shares

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

Continue Reading

Process

Wonder Cement shows journey of cement with new campaign

Published

on

By

Shares

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.

Continue Reading

Process

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

Published

on

By

Shares

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.

Continue Reading

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