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Hoping for revival

Published

6 years ago

September 30, 2018

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After positive judicial interventions in mining activity, things are getting back to normal for mining equipment industry, even as greenfield projects are hard to come by.

Limestone segment comes next only to coal segment in machinery consumption. Mining machines like hydraulic excavators, dump trucks, tipper trucks, crawler dozers, wheel loaders, motor graders, surface miners etc., are used in these mining activities.

"Currently, the capacity utilisation in the cement industry ranges from 65 to 75 per cent depending upon geographical locations; but we see a continuous appetite for our customers in both brownfield and greenfield expansions," says Partha Mookherjee, Head – Mining Equipment Business, Larsen & Toubro Limited, which also offers complete mining solutions for limestone segment right from application engineering, optimum fleet requirement, cost per tonne analysis, lifecycle costing and crushing solutions.

About a few decades back, least capital cost (or ‘L1’) was considered to be the best option while procuring mining assets. But it has given way to lifecycle costing as a major procurement decision criterion. "The industry now appreciates that initial capital cost contributes only 15 to 20 per cent of the lifecycle cost whereas fuel and spare parts form over 60 per cent of the lifecycle costing," says Mookherjee.

There has been a disruption in mining activities starting with Supreme Court judgement in the coal and mining sector coupled with adoption of stringent norms in mining lease awards and resettlement and rehabilitation (R&R), which had slowed down the overall process of new projects coming up. "We are, however, hopeful that with the overall positive business scenario and growth prospects, the industry shall revive sooner than later. The slowing down of the industry has impacted the offtake of mining machinery but things have started looking up of late with enquiries and overall buoyancy," says Mookherjee. In the limestone industry, the impact was minimal for two reasons: the industry was operating at 70 to 75 per cent of their capacity and the brownfield expansion kept the clock ticking along with debottlenecking. However, the greenfield projects took a backseat for a while. The mining sector is currently sluggish due to judicial intervention, which has impacted the mining equipment business. However, construction sector in India is doing good due to increased demand from real estate, roads and infrastructure projects. "Due to high priority of the Government of India, infrastructure segment has created big market for these equipment," Mookherjee adds.

Building sustainable communities
The rising public sensitivities towards global warming and environmental protection, even the manufacturers have started paying attention to technologies that adhere to these norms. However, building sustainable communities around mines has become imminent and the Government of India had set up ‘District Mineral Foundation’ in 2015 with a view to accelerate the pace of development of mining districts, which figure among some of India’s poorest and most underdeveloped districts. In about two years’ since the District Mineral Foundation (DMF) came into existence, a total of about Rs 5,800 crore has been collected under DMF Trusts in various mining districts. However, the potential corpus is still higher, as in certain states such as Tamil Nadu and Uttar Pradesh, DMFs are yet to be roll out, according to the ‘District Mineral Foundation (DMF): Status Report 2017’ prepared by a team lead by Chandra Bhushan of the Centre for Science and Environment (CSE), an environmental and sustainability think tank.

Besides fund inflows to DMF Trusts, two determining factors related to DMF implementation are the institutional arrangements of DMFs and planning and allocations for DMF funds. On both these fronts, the progress in most districts is still in the inception stages, according to the report released on July 31, 2018.

The following are the edited excerpts of the report:

Institutional mechanism
In case of the institutional set-up, while most districts have identified the DMF body – members of the Governing Council and Managing Committees – the administration is dominated by government officials with poor representation of people. DMFs are functioning without a fixed administrative set-up. However, the encouraging part is that some key mining districts and states do recognise the need for this, and are working on it; at the time of the report, 20 districts were in the process of doing this. The least progress so far has happened with respect to developing DMF plans. Except for a few key mining districts in Chhattisgarh, Odisha, Jharkhand and Madhya Pradesh, planning has not happened in most. Some districts have identified certain areas to sanction specific works depending on the urgency to address the issue.
Ad hoc priorities
What comes out is that while most of the districts have made allocations for certain "high priority" issues as identified under the respective state DMF Rules, the allocations at various instances are ad hoc and short-sighted. In many districts, the DMF plans mechanically list the number and types of works to be undertaken, without any elaboration on the rationale of planning. Among the issues that have been prioritised in the first year of allocations by a majority of the districts, drinking water is a common one, followed by education and health care. In the first year of planning, the districts are also inclined to allocate significant parts of the sectoral allocation for various construction purposes. For instance, on the education front, with few exceptions, a big focus is on construction of school buildings, auditoriums, classrooms etc., with very little focus on providing supporting resources that can improve access and quality of education.
Suggested areas of focus
The key areas of intervention that DMFs should focus on can be broadly categorized under the following heads:

Invest in human capital and provide supporting infrastructure and resources.

Nutrition and food security: Improvement of nutrition status and food security can be ensured

Healthcare: Support for and access to better healthcare can be ensured:

Providing health insurance to people in affected areas.

Education: The quality of primary and secondary education can be improved

Clean water: Supply of clean water for health and hygiene can be ensured

Improve livelihood opportunities and make people employable.

Livelihood and employment opportunities can be improved by developing and incentivising livelihood opportunities around local resources and those relevant to the knowledge and skills of the local people.

Invest in and secure the future.

A part of the DMF money should be kept aside to ensure future security after mining activity is completed.

B.S. Srinivasalu Reddy

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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…

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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.