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The growth rates of PPC & PSC have been pretty steady

Published

6 years ago

January 9, 2019

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Do you still see a preference for OPC in certain segments of the cement market such as institutional or in certain geographies? How do you deal with these national preferences?
Ordinary Portland Cement (OPC) is generally preferred by Institutional customers across regions. The reason being that these customers have their own batching plants in most cases and prefer to do blending at their end. Also, compatibility of admixtures is another reason for Institutional customers still buying OPC. The other major reason is that many institutional projects have OPC mentioned in their specifications and therefore we as manufacturers have to conform to the same. In the trade segment, there are only certain few pockets in the country where the end consumer still prefers OPC and therefore the channel network has to sell the same. However, efforts over the past many years in educating the customer has resulted in some amount of shift to blended cement even in these pockets.

What is your company’s overall product mix – OPC, PPC and PSC? To what extent is this mix is influenced by market preferences and to what extent by availability of fly ash?
As mentioned before, OPC is mainly preferred in the Institutional segment. PPC and PSC is in the Trade segment reaching our customers through the channel network. Therefore, we as manufacturers produce all these type of cements. The product mix is certainly influenced by market preferences as our efforts have always been to cater to customer preferences. However, availability of fly ash and slag is not only an important factor for us but most of the manufacturers. E.g. PSC is sold predominantly in the East because steel plants are located in this part of the country which makes it easier for cement companies to source slag. Similarly, PPC is sold in South and North East because slag is almost not available which makes fly ash the natural choice. So to put it in a nutshell, apart from OPC – the other two types of cement viz. PPC and PSC are mainly driven by availability of the two commodities i.e. fly ash and slag.

How do you view the historical growth rates of PSC & PPC in your markets? How do you project this growth in the coming five years?
The growth rates of PPC and PSC have been pretty steady in our markets. Infact from the time the usage of blended cement has increased, it has been a steady growth. This has been possible through education of customers on the merits of blended cement which has led to higher awareness and increased usage. As the cement sector grows, we expect both these types of cement to grow as well.

What are the applications or regions where you would recommend use of PPC/PSC to your customers and why?
Both PPC and PSC cement types have their advantages, varying on applications. More than geographic regions impacting its use, it is preferable to give the application importance. Both Portland Slag Cement, commonly known as PSC, and Portland Pozzolana Cement, also known as PPC are blended cements.

PSC’s chemical composition gives it several advantages over ordinary cement. Apart from being eco-friendly, it has high compressive strength and offers excellent resistance to chloride and sulphate attacks. It boasts a superior finish and minimize shrinkage cracks. PSC cement can be used for all types of residential and commercial projects. It complements work on dams and other water retaining structure due it is high resistance alkali-silica reactions and fewer shrinkage cracks. For this reason, it is mostly used for marine constructions.

PPC’s hydration process is slower than PSC cement, therefore, making it suitable for mass concreting. It shows greater resistance to aggressive weather and is cheaper than PSC. PPC cement has an amazing pore refinement leading to an improved density of concrete.

We have heard a lot about peculiar customer perceptions about color and smell of cement in some markets? Have you experienced this phenomenon? Are these related to presence of slag/fly ash in cement? How do you deal with such idiosyncratic ideas?
We have not heard about any customer perceptions about smell, but colour is perceived by customers across regions. E.g. in East, where PSC has been predominantly used in the past, people prefer light colour of the cement. Whereas in the South, PPC has been mainly used by customers and therefore people have a perception that dark colour of cement is good. So, colour is one of the reasons PSC sellers in the South have not met with much success.

As you can see from the above that colour is indeed related to the presence of slag or fly ash in cement. It is also how the market is shaped up by big players in the industry which influence customer perceptions through education and awareness.

Recently BIS have permitted composite cements to be manufactured and sold in India. What is your strategy for introducing this product in the market and what are the manufacturing and marketing challenges?
We have already introduced composite cement in the East over a year back. As the name indicates, composite cement is a blend of slag and fly ash. This means that composite cement is being typically manufactured by companies where both these commodities are readily available. East region is where most of the players have introduced composite cement. Some of the manufacturing challenges are:

Achieving the right mix of fly ash and slag from different sources to arrive at the required Refractive Index (RI) as per market needs.
Constant availability of the right quality of fly ash and slag at the right price. Different sources of fly ash and slag pose challenges at times.
Some of the marketing challenges related to composite cement are: It is still a new product and for any new product there are always challenges of establishing it in the market. Lot of efforts are required for making the product acceptable across end consumers, influencers and the channel network.
Colour measured by Refractive Index is a perceived barrier in many markets.
Therefore, overcoming this is a challenge in some markets.
Composite cement is still not accepted in RCC (Reinforced Cement Concrete) by BIS and this is another major challenge at the marketplace.

How do you see the current demand and supply scenarios of these two commodities – Fly ash and slag? What are the price movements of these two commodities?
In terms of availability of slag, we as cement manufacturers can state that overall there is ample availability of this commodity except for certain pockets. Also over the past few months, slag prices have softened mostly due Nepal’s exit from slag purchase. Also, slight impact has been there due to introduction of composite cement.

Similarly is the case for fly ash where ample availability is there but again there are pockets where demand-supply scenario gets disrupted at times because of operational periods of power plants. To give some examples, prices of fly ash within clusters in Tamil Nadu are different because of power plant operations. In some places fly ash prices have crashed whereas it has increased in couple of clusters. This is also the case in certain parts of Maharashtra.

In Bengal, fly ash availability is an issue at times and prices are a bit on the higher side because it is going to Bangladesh to service their requirement.

In NE, typically fly ash sourcing is a problem:

Fly ash collection from source is a problem due to far off sources.
Transportation is a challenge due to long distances and again local transporters preference.
Most of the times, local issues (like local communities, local musclemen, etc.) also pose a challenge.

Due to the above, prices of fly ash have been steadily rising for cement cos. in the North East almost for more than a year now. Representation have been made by cement cos. towards this but we feel that it should be taken up more seriously with appropriate higher authorities.

– BS 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…

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

admin

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.