Cement demand is up and the trend is likely to continue

Cement demand is up and the trend is likely to continue

says HM Bangur, Managing Director, Shree Cement. In an interview with Indian Cement Review, he spoke on the various aspects of the cement industry and the company's diversification plans. Read on...

Shree Cement has posted a 10-per cent drop in top line and an 80-per cent fall in bottom line, but your employee and fuel costs have increased by 30 per cent. Can you explain this anomaly? What will be your future strategy?
There is no anomaly in our results. The major contributory for sharp decline in bottom line are:

  • drop in cement realisation by 9-10 per cent
  • increase in power & fuel cost by 32 per cent led by increase in fuel prices, and
  • increase of depreciation by 39 per cent due to commissioning of new projects.

The cement demand has picked up in the months of January and February 2011 and the rising trend is likely to continue. The cement dispatches and realisation are expected to improve and consequently the top line and bottom line will also improve. However, the high fuel prices may impact the bottom line.

Recently, Shree Cement has signed a memorandum of understanding with the Karnataka Government. Why has the company chosen Karnataka? Tell us more about the mining lease agreement with Karnataka Government.
The major input for cement is limestone and plenty of good quality limestone is available in Gulbarga. Further, Gulbarga is also closer to Maharashtra and hence there is dual advantage of marketing cement in southern as well as western region markets.

We have been allotted mining lease by the Goverment of Karnataka in over 1,362 acre in Kodla and Benkanahalli villages of Gulbarga district and the land acquisition has almost completed.

Power and fuels are the main drain on the company's exchequer. What are the steps you have taken to minimise the impact?
We have started using imported coal apart from petcoke and are looking for long-term fuel supply agreements. We are also exploring the possibilities for allotment of coal linkages and for the purpose, we have filed applications for coal linkages for our cement and power plants.

Is the company planning any diversification? Please elaborate.
Apart from cement, we have undertaken power as another sector for growth. The total power generation capacity of the company is 260 MW including 46-MW waste heat recovery plant (green project), the largest green power capacity in the world cement industry excluding China. The company is setting up another 300- MW capacity thermal power plant at Beawar (Rajasthan), which will be operational in next six months.

Which are the new markets the company is planning to tap?
The company is stepping up its volume growth in traditional markets viz, Rajasthan, Delhi, Haryana, Uttarakhand and western Uttar Pradesh. The company has also made foray into new markets like Gujarat, Madhya Pradesh, Bihar, etc.

RMC in India is in its nascent stage. Is there any plan to bolster the RMC business? How does RMC fare in comparison with site cement?
As of now, there is no plan to diversify into RMC business. RMC has no comparison with the site cement as there is a huge difference in the quality of concrete produced by the two. The quality and durability of RMC is far better.

Cement demand is driven 70 per cent by housing and the balance by infrastructure, etc. Given the pace of investment in infrastructure, do you foresee a shift in ratio of the demand drivers?
Infrastructure development and housing are the key demand drivers for cement in India. A strong demand pull is expected from infrastructure and rural/individual housing. Currently, the housing market is approximately 60-65 per cent of the total cement demand. Looking at the infrastructure spend, a gradual shift is expected from housing sector to infrastructure segment.

Cement being a cyclic business, which are the areas the company is focusing to extenuate the impact of uncertainties in cement sector?
We believe that the goverment's continuous thrust on infrastructure development and housing sectors will keep the cement demand growing. We do not foresee any uncertainty in cement business in the near future.

Can you tell us about the company's CSR initiatives?
The company considers corporate social responsibility (CSR) a business responsibility to ensure inclusive growth. To increase the level and sphere of its welfare activities, the company has formed "Shree Rural Foundation", a platform to carry out all social welfare activities.

Imparting sustainable livelihood, generating education, providing infrastructure support, relief work and other welfare activities are few of the various community development programmes that have been taken up by the company. It also aims to satisfy larger goals like creating infrastructure. The company has joined hands with the state government to build new roads of around 60-km stretch to shorten the distance between its plants as well as to serve the civic requirement of local community.
Towards its health and safety initiatives, the company has sponsored setting up of a neurological centre at the Jawaharlal Nehru Hospital in Ajmer. Shree Cement was ranked among the top 20 best employers of India in a survey conducted by "Business Today" in 2008-09. Shree Cement was the only cement company to be figured in this list.

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