Abstract
Synopsis
Indian Cement Industry: Break-even Cushion to anchor fall in cement prices .....
The Indian cement industry has witnessed a phenomenal capacity addition to the
tune of about 52 mn tonnes in the last two financial years which accounted for
about 24% of the industry' s capacity of 218 mn tonnes at the end of FY09. In
the last two financial years, the cement industry has registered a
double-digit growth in capacity addition compared to moderate growth of 3-7%
registered during period FY 03-07. As a result, industry' s capacity
utilisation rate which showed a rising trend upto FY07, has dropped to a level
of 83% in FY09.
In FY09, the GDP growth slowed down to 6.7% compared to the 9% growth reported
in FY08. However, cement consumption growth in FY09 at 8.4% has been able to
maintain its multiplier factor with GDP growth at 1.25 times.
In FY09, all the regions except the Western and the Northern region have
outperformed the industry in consumption growth. The Eastern region continued
its buoyant performance and registered the highest cement consumption growth
of 11.3% on yoy basis. The Southern and Central regions also reported
impressive double-digit growth of 10.4% in cement consumption. But, the
Northern region has registered the lowest growth in the cement demand on yoy
basis. Comparatively, poor demand growth registered by the Western region was
on account of high base of the last year and also slightly subdued demand.
With focus on capacity addition, many small/medium players have been able to
capture more market share and consolidate their position in the industry in
the last two years. Market share of top five individual companies taken
together show a decline to a level of 44.3% in FY09 from 46.3% in FY08.
Eventhough the utilisation rate dropped, average cement prices in FY09 rose by
about 5% on yoy basis. But, the growth in cement prices remained slightly
subdued compared to 21% and 14%, registered in FY07 and FY08, respectively.
On the regional front, prices in the Southern region were firm and ruling
consistently at the highest level amongst all the regions in FY09. However,
due to slowdown in the cement offtake and relatively low operating rate,
prices in the Northern region remained at the lowest levels compared to other
regions.
In FY09, the cement industry witnessed a fall in profitability. Eventhough,
average realisation for the industry increased by about 4% on yoy basis, cost
of production has increased by 18.5% on yoy basis. Power and fuel cost for
many cement companies increased in FY09 mainly on account of substantial
increase in coal prices. As a result, the operating profit margin of the
industry dropped by about 8- 9% in FY09. Also, higher interest rates and
depreciation provided on expanded capacities took its toll on the net profit
margin of the industry which witnessed a decline by about 5% in FY09.
Going forward, cement companies would be benefited by their focus on captive
power generation which would help them to reduce power & fuel cost. With
reduction in coal prices, CARE Research has estimated that per tonne power &
fuel cost of the industry will decline by about 12% in FY10 on yoy basis.
CARE Research has estimated that break-even cushion (defined as the ratio of
overall capacity utilisation rate of the industry to the utilisation rate at
the breakeven point in a particular year) of the industry has notably
increased to 2.4 times in FY09 compared to an average level of 1.1 times in
the period FY 02-05. With comfortable break-even cushion value, the cement
industry is in better position to operate at lower utilisation rate and avoid
substantial price cuts. CARE Research does not foresee a notable drop in
average realisation of the industry in FY10.
CARE Research has estimated the domestic cement demand to grow at a CAGR of
about 8.8% in the next two years. Cement demand in the next year would largely
be driven by low-cost housing segment in rural & semi-urban regions and
government' s focus on infrastructure development in the country.
The level of consolidation in the cement industry had slowed down in the last
couple of years. However, one analysis suggests that the Net Present Value
(NPV) of a Greenfield plant is still higher than the NPV of an acquired unit,
leading us to the conclusion that further consolidation in the industry is
still away.
The subscription to this report includes 12 monthly updates on the
industry for the period October 2009 - September 2010.
Table of Contents
Section A
1. Introduction
2. Demand - Supply Analysis
- 2.1 Overall Demand - Supply scenario
- 2.2 Region-wise Demand - Supply scenario
- 2.3 Detailed Regional Analysis
- 2.4 Region-wise Capacity Utilisation Rate
- 2.5 Inter-regional cement movement in FY 08
3. Demand Drivers
- 3.1 Real Estate
- 3.2 Infrastructure
- 3.3 Industrial Expansion projects
- 3.4 Region-wise demand drivers
4. Supply Dynamics
- 4.1 Past supply Statistics
- 4.2 Blending dominates
- 4.3 Region-wise Projected Planned Capacity addition
5. Cost Analysis
- 5.1 Power & fuel cost
- 5.2 Freight & Forwarding expense
- 5.3 Raw Material (RM) cost
6. Cement Prices
7. Market Competition & Consolidation
- 7.1 Market Share of major players
- 7.2 Industry Aggregates
8. Outlook
- 8.1 Overall projected Demand-Supply situation
- 8.2 Regionwise projected Demand- Supply situation
- 8.3 Margins & Prices
- 8.4 Consolidation still a mile away....
9. SWOT Analysis
10. Company Profiles
- 10.1 Associated Cement Company Ltd. (ACC)
- 10.2 Ambuja Cements Ltd.
- 10.3 Grasim Industries Ltd.
- 10.4 UltraTech Cement Ltd.
- 10.5 India Cements Ltd.
Section B (Annexures)
1. Cement Industry Basics
- 1.1 Types of Cement
- 1.2 Cement Manufacturing Process
- 1.3 Industry Characteristics
2. Key Statistics - Financial Performance
3. Key Statistics - Operational Performance
4. Capacity Expansion Projects by Major Companies
5. Raw material costs & consumption
6. Industry Developments
Section I
LIST OF FIGURES
- A-1. Trends of Capacity, Production and Capacity utilisation
- A-2. Trend of Conversion Ratio
- A-3. Regionwise price trend in FY 09
- A-4. Major cement producing & consuming states in FY 09
- A-5. Trend of capacity addition
- A-6. Regional statistics FY 09
- A-7. Regional scenario in FY 09
- A-8. North - Overall scenario
- A-9. North - State-wise scenario at the end of FY 09
- A-10. North - Position of top players at the end of FY 09
- A-11. Price trend in Delhi
- A-12. South - Overall Scenario
- A-13. South - State-wise scenario at the end of FY 09
- A-14. South - Position of top players at the end of FY 09
- A-15. Price trend in Chennai
- A-16. West - Overall scenario
- A-17. West - State-wise scenario as at the end of FY 09
- A-18. West - Position of top players at the end of FY 09
- A-19. Price trend in Mumbai
- A-20. East - Overall scenario
- A-21. East - State-wise scenario as at the end of FY 09
- A-22. East - Position of top players at the end of FY 09
- A-23. Price trend in Kolkata
- A-24. Central - Overall scenario
- A-25. Central - State-wise scenario at the end of FY 09
- A-26. Central - Position of top players at the end of FY 09
- A-27. Trend of capacity utilisation rate
- A-28. Sector-wise cement demand
- A-29. Bifurcation of investments in infrastructure sector
- A-30. Product Mix
- A-31. Cost per unit - Industry Average
- A-32. Trend of bifurcation of captive power capacity of the industry
- A-33. Consumption and import of coal by cement industry
- A-34. Change in industry-wide dispatch mix
- A-35. Trend of Cement dispatch mix
- A-36. Distribution of proven reserves of limestone at the end of FY 07
- A-37. Average yearly cement price trend
- A-38. Market Share of Major Players in FY 09
- A-39. Regional scenario - Market share of top five players
- A-40. Trend of industry averages
- A-41. Comparison of operating margin - Q4 FY 09 Vs Q2 FY 09
- A-42. Projected Capacity Utilisation trend
- A-43. Trend of international coal prices
- A-44. Trend of diesel prices
- A-45. Break-even Cushion
- A-46. NPV of acquisition Vs Greenfield plant
LIST OF TABLES
- A-1. Growth trend in Past 5 years
- A-2. Regional scenario in FY09
- A-3. Status of top 10 players (capacity-wise)
- A-4. Capacity addition by small/ medium players
- A-5. Cement demand statistics
- A-6. Companywise Exports
- A-7. North - Inter-regional cement movement
- A-8. South - Inter-regional cement movement
- A-9. West - Inter-regional cement movement
- A-10. East - Inter-regional cement movement
- A-11. Central - Inter-regional cement movement
- A-12. Inter - regional cement movement in FY 08
- A-13. Estimated cement demand from the infrastructure sector
- A-14. Regionwise demand drivers
- A-15. Regionwise capacity addition
- A-16. Projected capacity additions
- A-17. State-wise power tariff
- A-18. Cost comparison of grid and captive power
- A-19. Company-wise Captive power capacity addition announced
- A-20. Trend of government linkage of coal
- A-21. Alternate fuel consumption
- A-22. Dispatch mix for cement companies
- A-23. Per tonne freight cost
- A-24. India' s Limestone position
- A-25. Limestone cost
- A-26. Change in market share of some cement companies
- A-27. Industry averages
- A-28. Overall projected demand-supply situation
- A-29. Region-wise projected demand-supply situation
Section II
LIST OF FIGURES
- B-1. Types of Cement
- B-2. Cement Manufacturing Process
- B-1. Per capita consumption
- B-2. Duty structure
- B-3. Net Sales
- B-4. Operating profit
- B-5. Net profit
- B-6. Operating profit margin
- B-7. APAT margin
- B-8. Interest coverage ratio
- B-9. Region-wise/state-wise production & capacity
- B-10. Region-wise/state-wise cement consumption
- B-11. State-wise surplus/deficit scenario
- B-12. Company-wise capacity
- B-13. Company-wise production
- B-14. Company-wise dispatch
- B-15. Total export scenario
- B-16. Company-wise exports
- B-17. Region-wise product mix
- B-18. Company-wise product mix
- B-19. Overall product mix
- B-20. Cement dispatch mode
- B-21. Company-wise dispatch mix
- B-22. Average cement prices
- B-23. Changes in Duty structure
- B-24. Company-wise dispatch
- B-25. Capacity Expansion projects
- B-26. Limestone cost
- B-27. Gypsum cost
- B-28. Fly Ash cost
- B-29. Limestone consumption
- B-30. Coal consumption
- B-31. Power consumption
- B-32. Power consumption pattern
- B-33. Cost per tonne of cement produced
- B-34. Industry developments
| 
