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Ready Mix Concreate: Gaining Pace

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Ready Mix Concrete (RMC) is increasingly being used in infrastructure and real estate projects in metro cities in India. Prakash Patil delves into the RMC industry to understand why it is currently on the growth path and its future potential in IndiaReady mix concrete (RMC) is fast gaining ground in India and it is the scientific method to ensure high quality in construction. RMC is the scientific formula that ensures the right quality of cement, appropriate dosage and the right proportion of ingredients go into making of the right quality of concrete. Since quality of concrete is crucial in the construction of bridges, flyovers, high-rise towers, concrete roads and large commercial and industrial establishments such as malls, factories and office complexes, it is imperative that only concrete conforming to stringent norms and scientific parameters is used in their construction. The emphasis laid by the India government on infrastructure development in the country has seen increasing usage of RMC in infrastructure projects and the usage is expected to grow exponentially in times to comeSMC & RMCConcrete is a simple mixture of cement, water and aggregates such as sand and bits of rocks. Concrete is most vital and essential material in modern construction. It has versatile properties such as easy mouldability, high compressive strength and durability. These properties of concrete have made it most popular construction material for all types of civil engineering works. The latest developments in concrete technology have made it possible to use it in intricate and architecturally complex structures, requiring high degree of performance and aesthetic appearance. In addition to normal concrete, other varieties in use are, high strength and high performance concrete, self compacting, light weight, high density, fibre reinforced, polymer, coloured concrete etc.The ingredients of good and bad concrete are the same. The difference lies in the technology used for production, transportation and placement. While site mix concrete (SMC) is lacking in the technological aspect, the RMC conforms to all the prescribed norms and standards of concrete manufacture. Hence, it is said that the making of concrete is an art as well as science. It is science because all the ingredients are proportioned as per the standard codes of practice to get the targeted strength and durability, and an art because in addition to accurate proportioning, quality of concrete depends on the way it is mixed, placed, compacted, finished, cured and protected. RMC technology can be said to be a perfect blend of the art and science.The quality of cement and the chemical and physical characteristics of aggregates have a direct bearing on the durability, aesthetics and mechanical properties of concrete. Hence, it is imperative that the quality and proportion of cement and the aggregates are scientifically determined to ensure the requisite quality of concrete.The raw materials used for RMC, viz. cement, sand, coarse/fine aggregates and water are mixed at a centrally located batching plant that monitors weigh-batching, water-cement ratio, dosage of admixture, moisture content, etc. with precision to produce the RMC. Since the plant is computer-controlled, it is capable of programming different types of mixes for producing different grades of concrete both automatically and manually. After preparing the RMC at the plant, it is then transported to the site in transit mixers fitted with rotating drums in plastic condition, without affecting the composition and without any further treatment.In all the developed as well as most of the developing nations, use of RMC for construction has made it possible to achieve speed and quality. The advent of commercial RMC in India is about a decade old, but in recent years it has become the preferred choice of architects, engineers and consumers.The industryThe RMC industry has grown in Europe and the US in a big way ever since it started in 1940s, where it currently consumes more than 60 per cent of the cement produced, whereas in India the industry is still in its early stages with cement consumption of just 2-3 per cent of total production. However, the RMC industry is raring to grow at a scorching pace since the demand for RMC is expected to grow exponentially going forward. No wonder, some of the major cement manufacturers in India viz. Ultratech, ACC, Madras Cements, India Cements, Ambuja Cements, among others, have ventured into RMC.Since the RMC user base is very low in India, it is expected to see excellent growth in next few years. RMC will close the gap between organised and unorgainsed side of the business. Being a low entry barrier many small players have ventured into RMC but gradually it will be a question of how much value can they can add to customer’s business. One major differentiation between organized and unorganized players would be conformity to BS norms as third party audits will become prevalent to testify for the high standards of products and services that RMC manufacturers will offer. As the industry grows, it would also bring along a technological package for change that will make aggregate distribution and production more organised. Going forward, ready mix and commercial aggregates may grow simultaneously as larger players are likely to venture into aggregates themselves which will bring about synergies in their business. Or the large players may have a long-term relationship with commercial aggregate companies.It is obvious that cement companies will be able to leverage the RMC market in a better way since cement is one of the essential commodities in RMC. But in order to grow the market at a faster pace, these companies may have to control the unstructured supply of aggregates. Global trends are very clear and one can cite the example of CEMEX acquiring RMC Readymix of UK. Of course, acquiring and operating suitable aggregate quarries in India is a difficult but not an impossible task. Production of aggregates will not be an impossible mission for cement companies having technical competency of running such captive operations as they also possess sufficient experience in limestone quarrying.In India, the acceptability of RMC is high in large cities and metros and as many as around 40 cities are currently using RMC for several infrastructure projects. The Brihanmumbai Municipal Corporation (BMC) has been specifying use of RMC in its tenders and most of the major infrastructure projects taken up by BMC and government bodies such as Mumbai Metropolitan Region Development Authority specify use of RMC. Such specifications by municipal corporations, public works and other government bodies will play a big role in growth of RMC.RMC vs SMCThere are several advantages of RMC over site mix concrete (SMC). The quality of RMC is much better, while the time required for making RMC is lesser as compared to SMC. Besides, the labour and space requirements on site for SMC add to the cost. For example, a 1,500 sq ft of area takes around 6-8 hours for concreting if SMC is used, while it will take only 2-3 hours for RMC. Ready mix is also environment friendly and any grade of concrete is available at a given point of time.Materials used for making RMC conform to the requirements laid won by the relevant code of manufacture and the RMC manufacturer has to guarantee the quality of concrete since the manufacturer is responsible for carrying out the concrete mix approved by the purchaser. A wide range of computer-controlled concrete batching plants, transit mixers for transporting the RMC to the construction sites, pumps and concrete placing are manufactured in India.Why RMC is lagging in IndiaIn early 70s since both pricing and distribution of cement was controlled due to shortage of supply, RMC technology could not be implemented as investors felt that ready mix concrete plant will starve due to non-availability of cement. The levy of additional taxes and duties on RMC, entry tax, excise duty also contributed to the slow development of RMC.Also, there are other hurdles in setting up RMC plants in India. Plants need to be located in an area where concrete is consumed since transporting RMC to long distances adds to the cost. There has to be good water source at the plant site, which more often than not, is hard to find. In case of non-availability of water in and around the location of plant and if water has to be transported from a distant location, it adds to the RMC cost further.RMC cost vs SMC cost:Currently, RMC is marginally expensive compared to SMC because of transportation cost of concrete. However, on considering the advantages of RMC, the cost factor becomes negligible. Also, one can easily reduce costs further if local manufacturers of plant and machinery come up with Indian manufactured equipments for RMC operation and if the taxes and duties on RMC are rationalized. Besides, the scope for utilization of fly ash in RMC is very high, which will further reduce the cost of RMC, but the concept of fly ash as an additive to concrete is still at very initial stage and it is not popular among majority of actual users of concrete in India.How government can helpGovernment bodies, private builders, architects/engineers, contractors, and individuals are to be made fully aware about the advantages of using ready mix concrete. Government bodies/consultants to include ready mix concrete as mandatory in their specification for execution. The government can encourage use of RMC and promote the development of RMC industry through the following measures:??Government specifications for CPWD and PWD jobs should include RMC as a mandatory item.??Tax breaks should be given for the growth of RMC??Developers/contractors to be discouraged from piling up materials like metal, sand etc. on roads/foot paths.Advantages of RMC over SMC:??Better quality concrete is produced. ??Elimination of storage space for basic materials at site. ??Elimination of procurement/hiring of plant and machinery ??Wastage of basic materials is avoided. ??Labour associated with production of concrete is eliminated. ??Time required is greatly reduced. ??Noise and dust pollution at site is reduced.??Organisation at site is more streamlined.

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Price hikes, drop in input costs help cement industry to post positive margins: Care Ratings

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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

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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)

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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.

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