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We are targeting 25% TSR by 2020



Milind Murumkar Advisor – AFR, Vicat India Group
Since its inception, Vicat’s focus has been on utilisation of alternative fuels and raw materials (AFR) in its cement plants. Started with a thermal substitution rate (TSR) of around 5 per cent in 2012, Milind Murumkar, Advisor – AFR, Vicat India Group, says that the company has reached to a level of 20 per cent in the last five years.

What are the long-term plans for improving energy efficiency in your plants?
Our long-term plan is to have a TSR of close to 25 per cent by 2020, with more focus on industrial waste supplies and utilisation in the plants.

How do you define the extent of AFR use in the cement industry? By this yardstick, where do you stand as a company and what are your targets for 2020?
In 2010, the TSR in Indian cement industry was only one per cent. But presently, almost all the cement manufacturers are gearing up for utilisation of higher quantities of waste in their plants, and today, it is around four per cent. The cement industry in totality has a plan towards achieving a target of 25 per cent TSR by 2025. We at Vicat, in India, are presently at 20 per cent and are targeting to achieve 25 per cent by 2020, with more focus on industrial waste management.

What goals can India achieve by 2025, and how do you compare it with global initiatives?
As indicated above and in the CII approach paper, India can achieve 25 per cent TSR by 2025. But in comparison to global standards, we are still far behind. In many countries, the TSR is around 60 to 100 per cent. The main differentiators are waste characteristics and lack of support by the required agency for generating a good segregated quality waste. This long-term plan of achieving 25 per cent substitution rate is as it is very challenging.

Do you think that India can adopt the principle of "polluter pays first", especially when it comes to waste generation?
Yes. I think that this newly-emerging concept is making giant strides in India. Many of the waste generating industries understand the concept of zero landfilling and are fully supportive towards "polluter pays first" model of waste disposal. If the cement plant is in a position to manage the generated waste in a sustainable and environmental-friendly manner, the waste generators are ready to pay. This concept can only sustain if it is a ‘win-win’ model to both the parties.

What are the hazardous materials that can be burnt as AFR in a cement kiln?
A cement plant having high temperature profile system can [practically] co-process all types of wastes, without having any impact on product quality and environment. Focus and care is needed by cement plants in selection of wastes and equipment, and deploying trained people for co-processing any type of waste. As you know, cement plants spend huge funds on capex for creating proper blending and processing of coal and raw material in the form of stacker reclaimer, blending and storage silos, etc.

Similarly to achieve a higher TSR rate, it is advisable to have a proper preprocessing facility for blending different types of waste and prepare a recipe that is compatible to raw material and fuel used in the plants.

A cement plant can certainly help the community around its plant to source agricultural waste, sorted municipal solid waste (MSW), etc., which can help creation of employment and earn goodwill of the community. The acceptance by the community is an important aspect for its success. Cement plants can certainly support the community around their plants by forming small groups for agricultural waste collection, MSW collection sorting, shredding and supply to the plant in such a way that this low-cost model should help cement plants in gaining community acceptance and boost CSR initiatives.

In terms of earnings, how beneficial is this for the company as a whole and for the manufactures in general?
It is certainly beneficial in terms of earnings for the company. If managed properly, to have a blend of commodities and industrial waste in terms of TSR and thermi cost reduction, the benefits will be substantial. Unless AFR co-processing has a good economic viability, its long-term sustenance cannot be ascertained. The entire economic model needs to be such that the Rs/thermi is lower than that of fossil fuels.

What are the challenges in terms of safety?
The challenges during utilisation of hazardous waste are enormous as it is necessary to have a proper input from waste generators about the waste characteristics, and have a proper material safety data sheet (MSDS) to understand the precautions needed during transportation and usage of different wastes.

Manpower needs to be trained properly for handling these wastes and they need to be provided with required personal protection equipment, etc. Various hazards should be properly displayed in local language at the work site. Once the waste quality and its hazards are known to the operating person, the safety aspect gets addressed well.

In developed countries, there are various legislations that helps to reach high levels of TSR like 60 to 80 per cent. What is the Indian scenario?
Our legislation is quite well defined and is in line to the developed countries. A lot of work has gone in this field. Regular upgradation in the policy framework and user-friendly rules and guidelines are made available by the Ministry of Environment and Central as well as State Pollution Boards.

The time taken to get the approval from the respective authorities for use of AFR is too long. How will the implementation of online monitoring systems help?
Contrary to the earlier days, now the approval process is quite fast and adequate authorities have been given to the State and local pollution board authorities for addressing the issues and grant timely approvals. Due to this, the time lag gets drastically reduced and the process gets simplified for granting the permit.

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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).

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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.

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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)




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.

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