Concrete

Cement Distribution: Objective functions and alignment

Published

4 years ago

March 14, 2022

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Underscoring the vital role a robust distribution network plays in the cement sector, Indian Cement Review looks at the different parameters that affect the performance of a channel and it’s ultimate litmus test for efficiency and sustainability.

Conventional metrics in cement distribution would lead us from the factory gates to the final consumption point and to the role of efficiency in distribution with a range of intra-firm channel partners embedded in the chain from exclusivity to inclusivity, but that does not answer many questions that must be asked if a number of objective functions have to be met. The performance of a channel can be measured across multiple dimensions. The parameters that are measured usually are effectiveness, efficiency, productivity, equity and profitability of the channel.

The indispensable element

Distribution data among industry firms is not readily available as transparently nor are they used for benchmarking. But indirectly the data shows that in most firms as high as 25 per cent of the capital employed is in the working capital for servicing inventory and receivables alone.

Capital and costs

The focus on logistics cost leads the industry to use inventory buffers that can effectively reduce this cost through shipment bundles, utilisation of logistics capacity and scale densities as well, with warehousing capacity as an important piece of the puzzle. The channel partners also play a role in ensuring that the logistics cost remains the primary focus at all times and thus demand aggregation must fulfill logistics cost minimisation.

Cement supply chains starting from factory to the consumption point (almost a majority of the cases) work on the push-mode with the decoupling points as warehousing facilities or large exclusive dealerships who work as distributors to the final retail outlets in dealer shops. Vertical integration as attempted in Ready Mix Concrete supply chains (who also become decoupling points) work much better in smoothening the demand supply equation and thus closer to Just-in-Time methods as visible signs that take out a sizeable chunk of inventory holding waiting for demand aggregation. This is still a minuscule component of the overall pie, thus pull systems remain low in penetration.

The end-to-end supply chain of cement must on the other hand streamline product concepts to market, rationalizing product portfolio and drive smart assortment plans and allocation strategies across the distribution chain. For this, a prediction of the market demand (almost on a daily basis) for each product in the portfolio while optimising inventory in a multi-echelon distribution channel comes as the most challenging task as cost effective throughput would mean logistics cost minimisation while that could raise the cost of working capital in the entire channel.

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Related Topics:Capital and costs cement distribution Hub & Spoke Logistics Procyon Mukherjee ROCE

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Adani Cement and Coolbrook have announced a landmark agreement to install the world’s first commercial RotoDynamic Heater (RDH) system at Adani’s Boyareddypalli Integrated Cement Plant in Andhra Pradesh. The initiative aims to sharply reduce carbon emissions associated with cement production.

This marks the first industrial-scale deployment of Coolbrook’s RDH technology, which will decarbonise the calcination phase — the most fossil fuel-intensive stage of cement manufacturing. The RDH system will generate clean, electrified heat to dry and improve the efficiency of alternative fuels, reducing dependence on conventional fossil sources.

According to Adani, the installation is expected to eliminate around 60,000 tonnes of carbon emissions annually, with the potential to scale up tenfold as the technology is expanded. The system will be powered entirely by renewable energy sourced from Adani Cement’s own portfolio, demonstrating the feasibility of producing industrial heat without emissions and strengthening India’s position as a hub for clean cement technologies.

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Birla Corporation Q2 EBITDA Surges 71%, Net Profit at Rs 90 Crore

Stronger margins and premium cement sales boost quarterly performance.

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Birla Corporation Limited reported a consolidated EBITDA of Rs 3320 million for the September quarter of FY26, a 71 per cent increase over the same period last year, driven by improved profitability in both its Cement and Jute divisions. The company posted a consolidated net profit of Rs 900 million, reversing a loss of Rs 250 million in the corresponding quarter last year.

Consolidated revenue stood at Rs 22330 million, marking a 13 per cent year-on-year growth as cement sales volumes rose 7 per cent to 4.2 million tonnes. Despite subdued cement demand, weak pricing, and rainfall disruptions, Birla Jute Mills staged a turnaround during the quarter.

Premium cement continued to drive performance, accounting for 60 per cent of total trade sales. The flagship brand Perfect Plus recorded 20 per cent growth, while Unique Plus rose 28 per cent year-on-year. Sales through the trade channel reached 79 per cent, up from 71 per cent a year earlier, while blended cement sales grew 14 per cent, forming 89 per cent of total cement sales. Madhya Pradesh and Rajasthan remained key growth markets with 7–11 per cent volume gains.

EBITDA per tonne improved 54 per cent to Rs 712, with operating margins expanding to 14.7 per cent from 9.8 per cent last year, supported by efficiency gains and cost reduction measures.

Sandip Ghose, Managing Director and CEO, said, “The Company was able to overcome headwinds from multiple directions to deliver a resilient performance, which boosts confidence in the robustness of our strategies.”

The company expects cement demand to strengthen in the December quarter, supported by government infrastructure spending and rural housing demand. Growth is anticipated mainly from northern and western India, while southern and eastern regions are expected to face continued supply pressures.

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Ambuja Cements, part of the diversified Adani Portfolio and the world’s ninth-largest building materials solutions company, has reported a robust performance for Q2 FY26. The company’s strong results were driven by market share gains, R&D-led premium cement products, and continued efficiency improvements.

Vinod Bahety, Whole-Time Director and CEO, Ambuja Cements, said, “This quarter has been noteworthy for the cement industry. Despite headwinds from prolonged monsoons, the sector stands to benefit from several favourable developments, including GST 2.0 reforms, the Carbon Credit Trading Scheme (CCTS), and the withdrawal of coal cess. Our capacity expansion is well timed to capitalise on this positive momentum.”

Ambuja has increased its FY28 capacity target by 15 MTPA — from 140 MTPA to 155 MTPA — through debottlenecking initiatives that will come at a lower capital expenditure of USD 48 per metric tonne. The company also plans to enhance utilisation of its existing 107 MTPA capacity by 3 per cent through logistics infrastructure improvements.

To strengthen its product mix, Ambuja will install 13 blenders across its plants over the next 12 months to optimise production and increase the share of premium cement, improving realisations. These operational enhancements have already contributed to a 5 per cent reduction in cost of sales year-on-year, resulting in an EBITDA of Rs 1,060 per metric tonne and a PMT EBITDA of approximately Rs 1,189.

Looking ahead, the company remains optimistic about achieving double-digit revenue growth and maintaining four-digit PMT EBITDA through FY26. Ambuja aims to reduce total cost to Rs 4,000 per metric tonne by the end of FY26 and further by 5 per cent annually to reach Rs 3,650 per metric tonne by FY28.

Bahety added, “Our Cement Intelligent Network Operations Centre (CiNOC) will bring a paradigm shift to our business operations. Artificial Intelligence will run deep within our enterprise, driving efficiency, productivity, and enhanced stakeholder engagement across the value chain.”