Cement industry analysis

An Overview

• Cement is one of the core industries which plays a vital role in the growth and expansion of a nation.

• The demand for cement, depends primarily on

the pace of activities in the business, financial, real estate and infrastructure sectors of the economy.

Product Variants

Ordinary Portland

Cement (OPC)

Portland Pozzolana

Cement (PPC)

Portland Blast Furnace Slag

Cement (PBFS)

Oil Well Cement

Rapid Hardening Portland Cement

White Cement

Sulphate Resisting Portland Cement

Statistics - Large cement plants

Companies (Members) (Nos.) 46

Cement Plants (Nos.) 148

Installed Capacity (Mn. t.) 219.20

Cement Production (Mn. t.) 2008-09 181.61

Plants with Capacity of Million tonnes and above (Nos.) 95

Manpower Employed (Nos.) Approx. (One Mn.T cement generates downstream employment to 50,000 persons) 1,40,000

Turnover in 2009 (Mn. US$) around 18,500

India in Globe

- Largest cement producing country in the world, only after China

- Produces about 7 percent of the world production.

- Per capita cement consumption is 156 kg (2008) as against world average of 396 kg. (2006).

- Cement technology and production cost comparable with the best in the world.

Exports

- To over 30 countries

- High Govt. levies and inadequate infrastructure facilities at ports and border points make Indian cement uncompetitive in the global market.

Statistics - Mini & White Cement Plants

• Cement Plants (Nos.) Approx.- 365

• Installed Capacity (Mn. t.) -219.2

• Cement Production (Mn. t.)-181.61

Major Players in industry

Rural housing demand key ingredient to ‐cement demand

Lower per capita cement consumption… chances of acceleration in cement demand

Higher Infrastructure investment to fuel the cement demand……..

Mergers and Acquisitions in Cement Industry in India

• UltraTech Cement is going to absorb its sister concern Samruddhi Cement to become biggest cement company in India.

• World's leading foreign funds like HSBC, ABN Amro, Fidelity, Emerging Market Fund and Asset Management Fund have together bought 7.5% of India Cements (ICL) at a cost of US$ 124.91 million.

• Cimpor, a Cement company of Portugal, has bought 53.63% stake that Grasim Industries had in Shree Digvijay Cement.

• French cement company Vicat SA bought 6.67% share of Sagar Cement at a cost of US$ 14.35 million.

• Holcim now holds 56% stake of Ambuja Cement. Previously it held 22% of stake. The company utilized various open market transactions to increase its stakes. It invested US$ 1.8 billion for that.

Recent Investments in the Indian Cement Industry

• In a recent announcement, the second largest cement company in South India, Dalmia Cement declared that it's going to invest more than US$ 652.6 million in the next 2-3 years to add 10 MT capacity.

• Anil Ambani-led Reliance Infrastructure is going to build up cement plants with a total capacity of yearly 20 MT in the next 5 years. For this, the company will invest US$ 2.1 billion.

• India Cements is going to set up 2 thermal power plants in Andhra Pradesh and Tamil Nadu at a cost of US$ 104 billion.

• Anil Ambani-led Reliance Cementation is also going to set up a 5 MT integrated cement plant in Maharashtra. It will invest US$ 463.2 million for that.

• Jaiprakash Associates Ltd has signed a MoU with Assam Mineral Development Corporation Limited to set up a 2 MT cement plant. The estimated project cost is US$ 221.36 million.

• Rungta Mines (RML) is also planning to invest US$ 123 million for setting up a 1 MT cement plant in Orissa.

Investments• Total FDI in the cement sector between 2000 and

October 2009 stood at US$ 1.69 billion.

Company ProjectInvestment (US$ mn)

Grasim IndustriesLtd Clinker and cement project in Kotputli, Rajasthan 265.62Ambuja Cements Ltd

Cement plant in Dadri, Uttar Pradesh and Panipat, Haryana 93.75

Jaiprakash Associates Ltd Cement plant in Solan, Himachal Pradesh 416.66

ACC Ltd Cement plant in Wadi, Karnataka 312.5

Impact Analysis: Union budget 2010-11

• The specific rates of duty applicable to Portland cement and cement clinker to be adjusted upwards proportionate to the across-the-board increase in the excise duty from 8% to 10%.

• Levy of Rs 50 per ton cess on imported coal.

• Consequent to enhancement in the standard rate of duty from 8% to 10%, the specific rates of duty on cement and cement clinker is also being revised

Company Name Price52 wk High 52 wk Low Market Cap(Rs. Cr) P/E Ratio

UltraTechCement 1,089.15 1,172.20 789.8 29,845.05 32.5

Ambuja Cements 141.95 150.25 85.9 21,643.40 15.31

ACC 1,000.00 1,036.95 700 18,794.00 12.7

Shree Cements 2,074.20 2,542.20 1,475.00 7,225.94 14.72

Binani Cement 82.45 92.4 62.8 1,674.57 7.68

JK Cement 169.9 201.5 118.95 1,188.06 6.41

HeidelbergCemen 48.95 64.95 36.25 1,109.27 10.41

JK LakshmiCemen 66.1 84.85 51.15 808.79 4.51

Mangalam Cement 160.25 218 115.9 427.77 4.05

Industry P/E Ratio : 13.37

”South India” story of 2009 is “nationwide” story of 2010

• New capacity back-ended, utilization could reach a 7-year low of 79% in FY11E

• 100mn tonnes of new capacity will be commissioned from FY09-FY11E vs. Incremental demand of 45mn tonnes (11% FY10-FY12E CAGR growth)

• Even before entering the phase of seasonally weak demand growth of June-September, the excess capacity in the system has started exerting downward pressure on prices nationwide

All-India Capacity Utilization

Demand And Supply

Regional Analysis

• South Region

• West Region

• East Region

• West Region

Southern Region

Eastern Region

Northern Region

Regional wise cement capacity additions

Margin squeeze from declining realizations and higher costs

Raw Material

Conclusion

• Prices declined by rs.7/bag of 50 kg• Further dip of rs.10 is likely• Month-on-growth down by 7.74%• Due to low selling price and increased cost

High profit margin time is over• Share prices are under-pressure