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A Step towards Sustainability

Published

8 years ago

December 30, 2016

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The revision of the ISO 2015 standards will help in business improvement and bridge the gap between business strategy and management systems, say RD SHAHA and Mukund BELSARE.

India is the second largest cement producing country in the world with installed capacity at around 370 million tonnes per annum (MTA). The Indian cement industry is dominated at the national level by 11 or 12 companies among the more than 100 companies which corner around 70 per cent of the domestic market for the commodity.

The cement industry can be divided into five different regions, north, west, central, east, and south, due to the nature of cement production and use of limestone as raw material. These factors mean that the commodity is hard to transport over long distances. Traversing these distances also come with their attendant share of high freight costs involved in transportation of these commodities.

Hence, cement plants are generally located near limestone deposits, and cement produced in a particular area is consumed in the same region. The industry also suffers from some lacunae unique to the Indian scenario (see box below).

Sustainability
Sustainable development includes socioeconomic development and environmental protection. By its very nature, the cement manufacturing operation has a major impact on Earth systems, like destruction of biophysical resources, which harm ecosystems. In particular, careful resource management needs to be applied in order to balance the demand of the cement industry. To maintain sustainability, benchmarks, audits, sustainability standards and certification systems need to be qualitatively measured.

ISO 9001:2015 standards
The standard ISO 9001 quality management system (QMS) was revised and released in the last quarter of 2015. The standard is pertinent to the cement industry also, and will have a tremendous impact on organisations if established, implemented, maintained and continually improved. Let us examine the implications of how these changes can help cement industries.

The revised ISO 9001:2015 standard has two major changes – the context and need of interested parties have been added, and risk management has been formally introduced.

A few other changes are a better focus on improvements, flexibility on documentation, and common requirement standards.

Requirements related to context
The ISO 9001:2015 standard has graduated from conventional quality control to quality assurance and quality management. All these years, the emphasis was more on understanding and improving processes and documentation. The standard earlier was clause-based, and the Plan-Do-Check-Act (PDCA) concept was adopted later. Now the standard is moving towards sustenance. The concept is derived from business excellence requirements. External issues – legal, political, regulatory, financial, technological, economical and natural, coupled with internal issues like product, strategic direction and organisational capabilities can affect the ability to achieve the intended outcomes of a quality management system. Though there is no clear requirement regarding the extent of documentation, the standard will help in documenting factors affecting various issues.

These issues would include economic factors (availability of fuel, water, infrastructure, etc.), financial issues, the competitive scenario, supply chain management, social factors (ethnic values, gender issues, corruption, availability and education of the workforce, education and medical facilities) cultural, market and public demand (current and future market trends), technological (availability and access to technology relevant to the organisation), legislative (statutory, regulatory and other forms of legal requirements), natural (climatic and other conditions, ecosystems, resource availability and energy).

Technology is an external issue. The organisation needs to define tech parameters in brief, without giving out any details about conventional or state-of-the-art technology for processes like mining, crushing, grinding, homogenising and calcinations, etc., for manufacturing cement.

Similarly, all the identified internal and external issues related to organisations should be addressed. In this manner, it is expected that an organisation can introduce an overall conducive business environment.

In the same clause, another requirement is ?understanding the needs and expectations of interested parties?. The standard expects to identify interested parties and subsequently their needs pertaining to the management system. This consideration gives a clear picture to the management and helps to set processes accordingly.

For example, interested parties can be management, employees, customers, suppliers (clear specifications, consistent schedule and payment), contractors, neighbours, citizens, NGOs dealers and financial institutes, etc.

Though documentation is not mandatory under the standard, the exercise can prove to be beneficial to top managements.

Risk management
The risk management concept was implicit in the ISO 9001:2008 and ISO 14001:2004 versions. The same was part of preventive action, but was limited to the processes and was not very effectively utilised by organisations. In the revised QMS 2015 versions, the risk and opportunities requirements have been introduced.

Apart from this, risks and opportunities can also be identified from understanding the needs and expectations of interested parties. It is expected that a list of the possible risks arising out of the objectives should be compiled. The consideration is with reference to context, and the needs of interested parties. A simple example can be the objective to achieve customer satisfaction, which is related to internal process variations, or delay in supplies. It is essential to identify and monitor actions to reduce uncertainties.

The standard calls for actions to be taken on the identified risks. The actions and results are required to be monitored, reviewed and honed by the senior management. The benefits of risk management are the systematic action on weak areas, awareness of business opportunities for greater clarity, and flexibility in the approach. Further, the strategy can be deployed to obtain planned results.

These changes are also aimed towards ease of alignment, reduction in documentation, and more focus on improvements. The effective actions will lead to trustworthy and consistent quality of cement through application of modern technology. This customer-centric approach will usher in customer excellence. To summarise, the new standard brings in overall business focus and does away with the perception that ISO just leads to increase in paperwork. The standard is aimed at business improvement, sustenance in the current scenario and bridging the gap between business strategy and management systems.

Benefits can be obtained during business reviews, implementing the improvement programs and preparing for stiff competition.

About the authors:
R D Shaha, a chemistry professional, has extensive experience in the cement industry. He provides consultancy in the field of ISO 9001 QMS, 14001 EMS, 18001 OHSAS, Integrated Management Systems, ISO 17025, 17020, and GMP, for the past 16 years.

Mukund Belsare is an engineer by qualification, worked with Godrej & Boyce in the quality and project domains, spent a decade with TUV SUD SA and six years with TUV India Pvt Ltd as a Head-Quality System Auditor.

Here are the factors unique to the Indian cement industry:

The cost of setting up new plants and the operational costs of existing units are high, effectively restricting the introduction – and closure – of cement plants.
The production cost for cement manufacturers in a particular market is almost similar.
Since cement has no substitute, the cement industry is traditionally a supplier-driven market.
The majority of cement manufacturers are members of the Cement Manufacturers? Association (CMA).
Changes in demand-supply dynamics in a particular region significantly impact prices across other regions.
Cement companies are not utilising their available capacity, impacting their ability to reduce supplies and dictate prices.
There has been little co-relation between demand and prices in different regions due to some unscrupulous practices being followed by a few players.
Prices have collapsed in the past when demand has been high, due to massive market over-supply.

Benefits of the system

The identification brings in clarity in thinking and brings about a wider perspective.
The consideration of context in the review process adds value. The changes in business environment are also part of the review. Often, though processes within an organisation are stable, the external business environment can have a major impact. Hence the management can review the business and understand the changes, and take appropriate decisions.
The system also helps managements to identify areas that will have an impact on business opportunities.

All Systems Go!

A few examples of risks and opportunities in the revised QMS 2015 version:
Mining lease renewal
Cement consumption growth rate
Areas of availability and sourcing of raw materials
Availability of good quality coal
Government policies and strategies
Utilisation of industrial waste
Use of mineralizers
Alternate fuels, including use of pet coke

Low carbon emission technology

Energy efficiency and energy conservation
Best practices in cement manufacturing
Product development and innovative R & D
Logistics

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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.