Connect with us

Process

Paucity of coal is the biggest challenge

Published

on

Shares

M Ravinder Reddy, Head Marketing, India, Vicat Group and Director Marketing Bharathi Cement
Announcing their first line of commercial despatch from Gulbarga plant, under the name Bharathi cement, M Ravinder Reddy, Head Marketing India, Vicat Group and Director Marketing Bharathi Cement talks to ICR about, logistics, latest technologies and his forecast for the year 2013.
What are your views on the current scenario of the Indian cement industry?
We have reached 370 mt installed capacity as far as demand is concerned probably 2012 our final total estimate was 250 mt. We are expecting an average of 8 per cent and if government decides to spend more money on the coming election it may even go more and that is the forecast we have. Coming to our company, Vicat group has a couple of joint ventures now in India. First one started in 2010 April with Bharathi Cement and had a capacity of 2.5 million tonne. Adding 2.5 million tonne, our total capacity now is 5 million tonne, in Andhra Pradesh. The plant in AP caters to southern states and also some parts of Maharashtra. Second joint venture which is green field plant originally it is done with Sagar cement and it is a minority shareholder and majority is Vicat Group. Here the Gulbarga in North Karnataka we have shared another 2.5 mt plant and this Vicat group capacity has gone up to 7.75 mt. These two are in strategic locations; one is at the border of AP, Maharashtra and North Karnataka. Other plant in Kadappa is the border of South Karnataka and Tamil Nadu and AP. How do you keep in pace with the latest technologies in cement industry?We have introduced polypepelene laminated bags for cement in 2009 which is our USP and we were the first to start in India, which is not followed by everyone in India. Also we have installed a robotic control system in our laboratory and each material comes to this robotic lab and every hour the robot analyses everything i.e. raw materials to finished products. There are times when the quality of limestone differs, thus right mixture is necessary from the first step itself. This brings consistency in quality and the customer in Tamil Nadu and Hyderabad will get the same quality. Our objective is Uniformity in quality is what we aim to the customers from all the are promise i.e.both quantity and quality. Quantity is improved packing and quality we are ensuring through our plants. These are two major successes for us. We also take precautionary measures. We have gone to vertical roller mills which are imported from Germany and are energy efficient and we have the largest first cement mill in the world. It can grind 360 tonne per hour. Hence our advertising campaign assures three times better cement quality, German technology, robotic quality control and tamper proof packing. Normally, the cement bags are stitched which can be opened and restitch but the heat fill technology that we use, the pack cannot be opened once sealed. All this is our USP and that is how we were able to get good improvement in our sales and market share and market zone. We are operating in AP, Tamil Nadu, Karnataka, Kerala and part of Maharashtra. And also some small quantity exported to Sri Lanka.The prices of cement in Andhra Pradesh by the end of 2012 dropped by Rs 40-50 per bag. How did this affect the financials and your production?We are not depending on one state. My distribution is there in five largest states and I give about 20 per cent everywhere. It has affected in AP definitely. But not in Tamil Nadu, Kerala, Karnataka. Another problem in AP is power holidays. So now power holidays government would like to increase it to 16 days from next month. Today it is 12 days power holiday. They want to extend it to 16. What happens is cement normally January to June is the best demand period and if the power holidays are more than availability will come down and production too will come down. Your predictions for the year 2013?I am a little bullish because of the election in 2014. I am expecting 8 per cent growth. Except AP which is not doing very well, AP shows some positive improvement then it will cross 8 per cent otherwise 6-7 per cent in south also.
The last year had been pretty sluggish, how did this affect the financials of your company?
Yes particularly in southern Indian the demand was sluggish. The overall industry growth was 5-6 per cent and my growth was 23 per cent. Earlier year 2011 we have sold 2.06 mt and last year we sold 2.53 mt. We are on a positive growth and brand makes the difference.Kindly highlight the sustainability initiatives towards the environment?Vicat being an international group does not compromise on environment. The plant is fully complied of international and Indian environmental standards. If you come and see our cement plant you cannot see dust and you cannot see that the factory is running or not. Yes and everywhere. Also, Gulbarga plant the agencies IFC is there. They do not compromise. it has to be of international standard. All precautions have been taken. We ourselves do not have deviation in our concept. We are doing 100 per cent environment friendly processes.How important is the location while setting up a cement plant?Cement plants is using limestone. One thing is if limestone is available and close to the market area you are lucky. If limestone is not available in closed area then you have to travel. Our plant in Khadappa and Gulbarga is next to the limestone mine. Both plants are connected that way. It is most essential for transportation for the market. Also we have seen a cluster. The Khadappa plant is in southern part of AP and this is in Northern part of Karnataka. It is in proximity of north AP, north Karnataka and Maharashtra. We have an advantage as well. Suppose if I am in one corner I cannot cater to all markets because of the logistics. Is the company planning to expand its market in northern India?As of now we do not have any immediate plans to expand in the nothern markets. Right now the strategy is to establish in the Southern market. We are having in second line project in a couple of years’ time. Then again is a provision of third line in Gulbarga which will take another two to three years. We will take another four to five years to establish a leadership in the Southern market.What are the greatest challenges that the cement industry face today?Paucity of coal is one big challenge. Earlier a lot of used to supply too many cement plants now they are not able to supply coal so now we are dependent on imports. Either we have to get Indonesia, or Africa. But we are getting coal from other countries apart from the domestic coal. Domestic we do not get 100 per cent. Sometimes 20 or 40 per cent depending on availability. Balance we get through imports. Cost is another important factor which is going high in India. Logistic cost is going high because of diesel. Alot of cement companies off late have been blamed for malpractices in the industry, what is your take on that?If malpractice is done by some company it is their scenario we do not take such things in our company. We do not believe in it. We believe in straight and legal things. It will have a long life for the brand.How do you combat the logistic cost?For combating the logistic cost we have two plants now and thus we are allocating quantities from nearest plant. Earlier one cement plant fed all the states. For example earlier we used to supply from our cement plant in Kadappa, the supplies went to the regions of Mumbai and Pune. Now Gulbarg will be close to Pune and Mumbai, thus the needs of Mumbai will be catered by the new plant saving Rs.300. When it comes to railways we generally face a scarcity of railway wagons perticulaarly the regions of Arawa, Purvass, shortage is there. However we do not face a paucity of wagons in Kadappa. The route taken by the railway in South starts is via Kundawal. Though we might face logistical issues in Gulbarga plant in future. Thus being proactive we are not depending entirely on railways. We depend 60 per cent on rail and 40 per cent by road. All close by markets we want by road and far away markets by rail.
What is your take on consolidation being the key for the cement industry?
In India whatever consolidation happens still lot of entrepreneurs are coming up every year. I cannot say that 100 per cent consolidation will happen in India. We are seeing a lot of large groups are having 50 per cent capacity and another 50 producers are available.Kindly highlight the companies dealers network?We have 2100 dealers and also have attached another 5000 sub dealers. Within a short period of three years we have reached almost 50 per cent in the retail segment side which is an achievement for us and we are improving year by year.

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

Trending News

SUBSCRIBE TO THE NEWSLETTER

 

Don't miss out on valuable insights and opportunities to connect with like minded professionals.

 


    This will close in 0 seconds