Abstract
Synopsis
Consolidation, an open opportunity - Foreign players bargain hunting,
domestic players staying away...
The Indian cement industry witnessed a buoyant cement demand growth in FY10 at
11.1% recording a multiplier of 1.4 times with the economic growth rate.
Delayed monsoon, peaked construction activities related to commonwealth games
and also the low base of the previous year led to the double digit growth in
demand during the last fiscal. However, in FY11, cement demand growth has
taken a slight breather. During the first nine months of FY 11, the cement
demand grew at 6% on a yoy basis. Construction activities remained subdued
during this fiscal on account of the prolonged monsoon, heavy winter, delay in
execution of infrastructural projects due to environmental clearance hurdles
etc.
The capacity utilisation rate of the industry has shown a steep decline to a
level of 75% in FY 11 as cement manufacturers have resorted to production cuts
on the back of the slowdown in the cement offtake. Lower utilisation rate can
also be attributed to the substantial capacity addition witnessed by the
industry. In the first ten months of FY 11, the industry has witnessed a
capacity addition of about 25.5 mn tonnes.
On the regional front, the Southern region took the worst hit in FY 11. Due to
notable capacity addition of about 8.4 mn tonnes and subdued demand, the
operating rate of the Southern region declined to the level of about 66%. The
Eastern region operated well above the industry average on account of the
robust demand growth.
During FY11, cement prices have remained under pressure owing to the slowdown
in the cement offtake and an incremental growth in capacity over demand. In
FY11, average cement prices witnessed a decline across regions barring the
Eastern region. Considering first ten months of this fiscal, average cement
prices have dropped by about 2% on a yoy basis to `251 per bag.
Considering the first nine months performance of this fiscal, the cement
industry has registered a substantial drop in PBDIT margin to about 19% mainly
due to input cost rise and lack of pricing power. During this period, the per
tonne power & fuel cost and freight cost have increased by about 21% and 11%
on a yoy basis, respectively.
Going forward, cement companies will lack pricing power given the supply glut
situation in the country. However, the cement industry is in a better position
to operate at a lower utilisation rate and avoid substantial price cuts,
thanks to the comfortable break-even cushion value (defined as the ratio of
overall capacity utilisation rate of the industry to the utilisation rate at
the break-even point in a particular year) at two times. CARE Research does
not foresee a drop in average realisation of the industry in FY12. However,
the per tonne freight cost and power & fuel cost is expected to increase at a
CAGR of 8.3% and 12.6%, respectively during the period of FY10-12. As a
result, PBDIT margin is expected to remain under pressure and drop to a level
of 16% in FY12.
CARE Research estimates that the cement demand is expected to grow at a CAGR
of 9.8% in the period FY11-14. Going forward, cement demand will largely be
driven by the increased focus of the government on the infrastructure
development and promotion of lowcost affordable housing in the country.
Enterprise Values per tonne of some major domestic cement companies are
quoting anywhere from 1 to 2 times the replacement cost. With the fall from
peak valuations reached in FY 07-08, many acquisition opportunities are
available in the domestic market.
Many midsized cement players in the country, which are unable to compete
because of rising input costs, constraints in passing on the incremental cost,
subdued demand etc. would be eager to sell their assets. However, having seen
the deals at extremely higher valuations, none of the cement makers, however
small, are willing to sell below US $140- 150 per tonne and are demanding a
hefty premium over the replacement cost. Domestic cement companies are clearly
unwilling to pay such a huge premium. However, foreign players, who are keen
about strengthening their foothold in the Indian cement market would continue
to hunt for lucrative deals.
Table of Contents
Executive Summary
CARE Research' s Outlook
- Overall projected Demand-Supply situation
- Region-wise projected Demand-Supply situation
- Cement demand drivers
- Capacity addition and operating rate
- Cost structure and Margins
- Valuation & Consolidation
Section A
Overview
- Cement industry expected to miss the growth multiplier in FY11...
- Growth in capacity over striping demand in past three years...
- Cement price growth moderated in FY10 and remained under pressure in FY
11...
- Status of top 10 players (capacity-wise)
- Product mix still dominated by blended cements...
Demand - Supply Analysis
- Overall Demand - Supply scenario
- Region-wise Demand - Supply scenario
- Detailed Regional Analysis
- Inter-regional cement movement
Cost Analysis
- Power & Fuel cost
- Freight cost
- Raw Material (RM) cost
Market Competition & Industry Averages
- Industry Averages
- Market Share of major players
Company Profiles
- Associated Cement Company Ltd. (ACC)
- Ambuja Cements Ltd.
- India Cements Ltd.
- Shree Cement Ltd.
- UltraTech Cement Ltd.
Section B
Cement Industry Basics
- Types of Cement
- Cement Manufacturing Process
- IndustryCharacteristics
Key Statistics - Financial Performance
Key Statistics - Operational Performance
Capacity Expansion Projects by Major Companies
Raw material / Power & Fuel costs and consumption
List of Figures & Graphs
CARE Research' s Outlook
- Planned investments under different infrastructure sub-segments
- Trend of capacity addition
- Projected Capacity Utilisation Trend
- Break-even Cushion
- Trend of International coal prices
- Trend of diesel prices
- Projected Power & fuel and Freight cost
- Trend of realisation
- Trend of PBDIT margin
- Valuations of major cement companies as at the end of December 31, 2010
Section A
Overview
- Growth trend of GDP and consumption (FY06-FY10)
- Trends of Capacity, Production and Capacity utilisation
- Region-wise yearly average cement price trend
- Region wise monthly price trend in FY11
- Change in Product mix
- Trend of Conversion Ratio
Demand - Supply Analysis
- Trend of capacity addition
- Region-wise capacity utilisation rate
- Regional statistics FY 10
- Regional scenario in FY 10
- North - Overall scenario
- North - Position of top players at the end of FY 10 (based on capacity)
- Price trend in Delhi
- South - Overall Scenario
- South - Position of top players at the end of FY 10 (based on capacity)
- Price trend in Chennai
- West - Overall scenario
- West - Position of top players at the end of FY 10 (based on capacity)
- Price trend in Mumbai
- East - Overall scenario
- East - Position of top players at the end of FY 10 (based on capacity)
- Price trend in Kolkata
- Central - Overall scenario
- Central - Position of top players at the end of FY 10 (based on capacity)
Cost Analysis
- Industry Cost Breakup
- Cost per unit - Industry Average
- Trend of bifurcation of captive power capacity of the industry
- Consumption and import of coal by cement industry
- Trend of cement dispatch mode mix
- Distribution of proven reserves of limestone
Market Competition & Industry Averages
- Trend of industry averages
- Market Share of Major Players in FY 10
- Overall market share of top five players
- Regional scenario - Market share of top five players
Section B
Cement Industry Basics
- Types of Cement
- Cement Manufacturing Process
List of Tables
CARE Research' s Outlook
- Overall projected demand-supply situation
- Region-wise projected Demand-Supply situation
- Cost Structure
- List of major deals witnessed by the cement industry in the last decade
Section A
Overview
- Status of top ten players (capacity-wise)
- Capacity addition by small /medium players
Demand - Supply Analysis
- Cement demand statistics
- North - Inter-regional cement movement
- South - Inter-regional cement movement
- West - Inter-regional cement movement
- East - Inter-regional cement movement
- Central - Inter-regional cement movement
- Overall Inter-regional cement movement
Cost Analysis
- State-wise power tariff
- Cost comparison of grid and captive power
- Company-wise Captive Power capacity addition announced
- Trend of government linkage of coal
- Alternate fuel consumption
- Dispatch mix for cement companies
- Per tonne freight cost in FY 10
- India' s Limestone position
- Limestone cost
Market Competition & Industry Averages
- Industry averages
- Change in market share of cement companies
Section B
Cement Industry Basics
- Per capita consumption
- Duty structure
Key Statistics - Financial Performance
- Net Sales
- Operating profit
- Net profit
- Operating profit margin
- APAT margin
- Interest coverage ratio
Key Statistics - Operational Performance
- Region-wise/state-wise production & capacity
- Region-wise/state-wise cement consumption
- State-wise surplus/deficit scenario
- Company-wise capacity
- Company-wise production
- Company-wise dispatch
- Total export scenario
- Company-wise exports
- Region-wise product mix
- Company-wise product mix
- Overall product mix
- Company-wise dispatch mix
- Cement dispatch mode
- Average cement prices
- Changes in Duty structure
- Company-wise dispatch
Capacity Expansion Projects by Major Companies
- Capacity Expansion projects
Raw material / Power & Fuel costs and consumption
- Limestone cost
- Gypsum cost
- Fly Ash cost
- Limestone consumption
- Coal consumption
- Power consumption
- Power consumption pattern
- Cost per tonne of cement produced
