Lack of coal availability is a major challenge
Puneet Dalmia, Managing Director, Dalmia Cement
The year 2012, has been a year of consolidation for Dalmia Cement since earlier the company acquired Calcom Cement and now by obtaining a 100 per cent stake in Adhunik Cement for Rs. 560 crore, the company has become one of the largest cement producers in North India. Puneet Dalmia, Managing Director, Dalmia Cement, talks to
about his views on the current scenario of the cement industry, sustainability initiatives and their future plans.
What is your view on the current scenario of the cement industry?
I maintain a positive and optimistic view. Cement has a compelling play and as the industry modernises, adopting efficiencies of scale as well as sustainability practices, it will reinforce its position in context of a growing economy. The past few months have been a mixed bag. Indian cement industry added 30 mt of capacities annually over FY09-12 which also coincided with a period of modest demand growth of 19 mt/year. However, industry utilisation declined from 100 per cent in FY08 to a historic low of 77 per cent in FY12. Currently there is a visibility of moderate capacity addition over FY13-15 and demand is also expected to improve aided by a low base, pre-election investments, steady growth in housing (particularly rural).
Resultant utilisation rates in that case would witness a steady improvement and even in the event of a demand disappointment, utilisation rates are unlikely to go down any further now. Despite capacity surpluses, cement prices remained fairly buoyant in the past few years, mainly due to acute cost pressures and delay in new additions. All India demand has improved to 8 per cent Y-o-Y for the half year ended on 30th September, 2012 whereas demand growth for H1FY12 was just 4 per cent vs H1FY11. All India prices has shown a significant growth of 11 per cent in FY12 as compared to previous year.
The demand for cement in the market is low, then why does the industry depend on consolidation?
In the past decade, the Indian cement industry has witnessed significant mergers and acquisitions. In periods of high growth, large foreign players acquired regional players to increase their market share and establish pan-India presence through the inorganic route of acquiring small and regional players. Consolidation in the cement industry has advantages: it reduces fragmentation of capacities and boosts competitive pressures. Offers better opportunity to create economies of scale which helps in rationalizing prices. After consolidation, companies enjoy a better cost structure. Finally, financial strengths of the acquiring companies could help rescue assets which are loss making at present. The long-term demand for cement would be supported by a rise in demand for residential and commercial space, large investments planned in the infrastructure sector and government expenditure under various schemes. With market demand for cement expected to grow over 9 per cent in the next two years, increase in prices is a huge concern. Thus, consolidation may help in stabilising prices.
A lot of standalone cement companies in South are quitting the region. Any plans to tie up with anyone them?
We do not have specific plans at present.
Any strategic importance of geographical location of the cement plant.
A cement plant has to be located close to mines and markets. Our plants are located close to the sources of raw materials. This offers advantage by keeping freight and logistics costs low, while creating efficiencies of scale.
How does the company keep in pace with the latest technology at the cement manufacturing plant.
For over 75 years we have consistently demonstrated exceptional quality, innovation and best practices. These in turn have fostered strong customer and dealer relationships on the one hand while enabling us to implement and enhance sustainability and operational efficiencies on the other. Some of the operational improvement measures taken by Dalmia Cements units plants are measures to improve run factors, emphasis on condition monitoring and preventive maintenance, focus on quality of products, systems and procedures, proactive thermal and electrical energy management, development of individual skills and team culture and adherence to safety standards and environmental sustainability. The Dalmia Research Centre (DCR) for cement and concrete is a landmark in the industry.
We would also like to know about a few sustainability initiatives taken by the company and how important according to you is it important for a country
We have been working relentlessly towards the goal of reducing emissions of Green House Gases (GHG) and are currently in the process of becoming a member of the Cement Sustainability Initative (CSI) we will achieve full membership at the end of three years. CSI provides thought leadership for cement industry and provides a framework to follow and adopt sustainable initiatives. CSI has provided three bottom line metrics to minimise carbon emissions: economic prosperity, environmental stewardship and social responsibility. Dalmia Cement has adopted technologies to recycle. This technology allows the allow use of alternate fuels by use of industrial and domestic wastes, discarded tyres, plastics, textiles and waste paper and other residues. 2012 saw us initiating work on Alternate Fuel and Raw Materials (AFR) to increase sustainability across our operations. To strengthen operational efficiencies, we also increased the usage of pet coke and adopted high moisture coal to optimise fuel usage at our plants. These measures will have a positive impact on reducing variable cost, making us a leaner and more efficient organisation.
What are the measures taken by the company to maintain the standards of the quality of cement produced?
As a company, Dalmia Cement is committed to maintaining the quality of cement produced. All our plants have state-of-the-art technologies which operate at the benchmarking parameters. We have continuous ambient air monitoring stations in all of our plants. Some of the major systems in place to control air pollution are bag house for raw mill, kiln,cement mills and stacks, localised cyclone dust collector at all transfer points, environment-friendly covered storage systems for all bulk materials, we have robust water management system in place.
What are the greatest challenges faced by the cement industry today?
Lack of coal availability is a major challenge facing the industry. At the same time, expansion is often delayed due to involvement of multiple stakeholders and a series of environmental clearances. Green-field expansion is tough and land acquisition is a big issue for the industry. Also, the rising costs and inadequate supply of key raw materials like limestone, coal, fly ash and slag besides mounting road and rail freights are a few other challenges.