Piyush Ashtekar

CEMENT INDUSTRY BY 10th Aug, 2019 PIYUSH ASHTEKAR NAYAN DABHI TABLE OF CONTENTS INTRODUCTION ..................................................................................................................................... 3 MANUFACTURING PROCESS .............................................................................................................. 4 TYPES OF CEMENT ................................................................................................................................ 7 COST DRIVER .......................................................................................................................................... 8 PRODUCTION & CONSUMPTON IN INDIA ....................................................................................... 9 GROWTH DRIVER AND OPPORTUNITIES ..................................................................................... 10 PORTER FIVE FORCES ON CEMENT INDUSTRY .......................................................................... 11 SHREE CEMENT LIMITED ................................................................................................................. 11 ULTRATECH CEMENT LIMITED ...................................................................................................... 13 JK CEMENT LIMITED ......................................................................................................................... 14 AMBUJA CEMENT LIMITED .............................................................................................................. 15 ACC LIMITED ........................................................................................................................................ 16 2 INTRODUCTION Cement Industry plays a significant role in the rapid growth and development of a country because cement is a fundamental requirement of all construction activities. Cement is used in housing, dams, bridge, industrial construction, roads, etc. , so cement is basic material which is used in all types of construction. In olden days, various types of building material were used for the construction of public historical and religious building sand, stone and in the special case; marbles were used for this purpose. The house of ordinary citizens was usually made of mud and thin bricks. In a few cases, lime and pozzolana were used for getting beautiful finishing for the interior surface. There were very good builders and mesons that have created beautiful & excellent temples, building and bathing ghats thousands of year ago still, they are famous for their work and shape. However, gradually cement and other new types of material had developed. Cement is a powdered material with water forms a paste that hardens slowly. It is made by sintering a mixture of various raw materials. The main row material composed in the mixture is calcium carbonates reaction takes place, produce nodules, called a clinker which consists of calcium silicates and aluminates when the clinker is pulverized with a small amount of gypsum resulting powder is called Portland Cement. India is the second-largest producer in the world with a production capacity of around 502 million tons per annum during 2018. Production capacity expected to increase up to 550-600 million tons per annum by the end of 2025 with a pace of around 20 million per annum. The Indian industry is dominated by a few companies. The top 20 companies have almost 70% production capacity of the country. In India 3 MANUFACTURING PROCESS In the manufacturing of cement, the following three important and distinct process occurs: 1. Mixing of Raw Materials i.e. Calcareous and argillaceous. 2. Burning 3. Grinding The process, by which cement is manufactured, depends upon the technique adopted in the mixing of raw materials. Therefore, the process may be classified as: 1. Wet process 2. Dry process Now, we first begin with the Wet Process of manufacturing of cement: Wet Process for Manufacturing of Cement The raw materials, which used for the manufacturing of cement, contains the following materials: ➢ Calcareous i.e. Chalk consists of Limestone ➢ Argillaceous i.e. clay consists of silicates of alumina When raw materials are soft, then the wet process is preferable to be used. The manufacturing process as below: 4 Mixing of Raw Materials : I. Initially, Calcareous materials are crushed using crusher and argillaceous materials are washed with water in the container. II. After crossing the limestones are stored in silos similarly after washing the clay is stored in basins. III. The crushed materials from different silos and basins are drawn in correct proportion in a channel called wet grinding mills. Both materials are intimately mixed in the presence of water and to form a fine thin paste known as slurry. IV. The Slurry is then stored in another silo may be called as slurry silo where it is constantly stirred. The composition of raw materials is checked again and, if required, corrected by adding clay or chalk materials as desires. Burning : In this operation, the slurry is directly fed into a long inclined steel cylinder called Rotary kiln. In this kiln, there are 3 different zones. Cement Manufacturing Process Flow Chart I. Drying Zones: In the wet process, the drying zone is comparatively larger than the dry process. It is because the raw material in slurry form is directly fed into the kiln which has more amount of water. As shown in the figure it is the upper portion of the kiln. In this zone, water is evaporated at temperature 100-400°C. II. Formations of modules: As the slurry gradually descends in the kiln, the carbon dioxide from slurry evaporates and small lumps formed which may be called as modules. III. Burning Zone:- The modules enter in this zone where temperature is kept about-° C. The modules are converted into dark greenish balls and the product obtained in the kiln, known as clinker, is of varying size 5 to 20 mm. The clinkers are very hot when coming out of this zone. IV. Cooling of Clinkers:- As shown in figure another rotary kiln is provided in an opposite direction which is also inclined. It is used for cool down the clinkers up to about 90°C. Grinding : The cooled clinkers are generally ground in ball mills or tube mills. Also, the gypsum is added during the grinding of about 2-4%. The gypsum acts as a retarder and so allows the cement to mix with sand and aggregate and to be placed in position. i.e. it increases setting time of cement. Storage and Packing : As cement comes out from grinding mills, it is collected in a hopper and taken in bucket elevator for storage in silos. The cement from silos is packed by machines in bags. Each bag of cement contains 50 kg. 5 Now, we begin with Dry Process of manufacturing of cement: Dry Process for Manufacturing of Cement When the raw materials are quite hard, then this process is used. The cement by this process can be prepared by the following operations :Mixing of Raw Materials Crushing : The raw materials, first of all, are broken in crushers to small fragments that vary in size. Drying : The crushed materials are dried by heating at a sufficiently high temperature. It may be done in drying kilns. Reduction of size : The drying materials are then grind by using ball mills and tube mills to reduce the size of materials to find powder. Mixing in correct proportion : The finely dried materials are mixed in exact proportions. The mixing may be done either mechanically or by pneumatic methods(e.g. pumped under pressure). Burning and Grinding : These operations are thesame as for wet process. Except for the mixing of raw materials. In the dry process, the raw materials mixed, fined and then fed into kiln whereas in the wet process, the raw materials are crushed separately and then directly mixed in correct proportion in the presence of water to make a fine thin paste known as Slurry. 6 TYPES OF CEMENT ➢ Ordinary Portland Cement (O.P.C) ➢ Portland Pozzolana Cement (P.P.C) ➢ Special Cement o Hydrophobic Cement o Low Heat Cement o Rapid Hardwearing Cement o Quick Setting Cement o Sulphate Resistance Cement o White Cement Ordinary Portland Cement Low Heat Cement Portland Pozzolana Cement White Portland Cement Sulphate Resisting Cement Rapid Hardwearing Cement 7 COST DRIVER The breakup of major costs in the cement industry is shown in Graph. Among the major costs, change in prices of few raw-materials, feedstock and fuel are expected to drive costs and hence affect the operating margins of cement producers. Cost Break up 20% 30% Raw Materia Power and Fuel Freight 24% Manufacturing and Misc. Exp. 26% • Fuel and Power: Petcoke is used as feedback for production of clinker. India imports around 45% of its petcoke requirement and the remaining demand is met by domestic refineries. o o o Petcoke prices have remained on the higher side around Rs- / per tone and imported coal too has remained $100 and above which has left less scope for manufactures to offset feedstock costs. An upward movement in Dollar vs Rupp has further hiked the price of imported feedstock. Power prices from the spot market too have remained high and non-captive power users had to pay heightened power tariffs as a result of scarcity of coal supply during peak-demand period. Fuel and power prices on an average for the industry have increased by 15-18% during the H1FY19 over the corresponding period in the previous year. 8 • Freight : Rising diesel prices would have a direct impact on the margins of cement manufactures. Freight costs as per our estimates now account for more than 1/4 th the total cost of cement manufactures. Cement manufactures with higher dependence on road freight for transportation of raw materials and supply of finished cement to markets would be impacted in case of a further increase in diesel prices. The overall operating margin for the industry has declined by 3% YoY due to, freight, currency and power cost impact. Additionally, clinker, which is a key raw material for cement, too has witnessed an increase in few regions, which has further impacted the operating margins of some companies. Manufacturers are finding it difficult to pass on the costs due to the heightened competition across some regions. PRODUCTION & CONSUMPTION IN INDIA India is the second largest cement producer in the world with a production capacity of around 502 million tons per annum and expecting to increase 18-20 million tons capacity by 2020. Cement production during 2018-19 around 337 million tons which is around 67% of total capacity and expecting to increase the utilization of capacity around 71% by 2020. India Cement Production in tones Per capita consumption of cement in India is still around 235 kg against a global average of 520kg per capita. 9 GROWTH DRIVER AND OPPORTUNITIES India’s cement industry is a vital part of its economy, providing employment to more than a million people, directly or indirectly. Ever since it was deregulated and permitted 100% FDI in the Indian cement industry has attracted huge investments, both from Indian as well as foreign investors. The flow of investment through FDI has reached around Rs. 29,290 crore till march 2019. India has a lot of potential for development in the infrastructure and construction sector and the cement sector is expected to largely benefit from it. In order to help private sector companies thrive in the industry, the government has been approving their investment schemes. Some such initiatives by the government in the recent past are as follows: In Budget 2019-20, Government of India announced the following Yojanas(Schemes): • • • Setting up of 1.95 crore (19.5 million) Affordable Houses under the Pradhan Mantri Awas Yojana. The move is expected to boost the demand of cement from the housing segment. Government has also announced Pradhan Mantri Gram Sadak Yojana to upgrade of 1,25,000 km of village roads at cost of Rs. 80,250 crore over the next 5 years. Government plans to invest Rs. 2.05 lacs crore to develop 100 smart cities. These all are initiatives by the Government of India helps to create strong demand over the cement industry next five years. India cement industry witnessed a remarkable growth of approx. 13% during 2018-19 due to strong demand which is driven by higher infrastructure spend, affordable housing and pick-up in rural demand while, in 2017-18 growth is just recorded around 6.3%. A total of 210 large cement plants account for a cumulative installed capacity of over 410 million tons, with 350 small plants accounting for the rest of these 210 large cement plants, 77 are located in the states of Andhra Pradesh, Rajasthan and Tamil Nadu. Installed Capacity 15.82 NORTH 33.54 WEST EAST 23.1 NORTH - EAST CENTRAL SOUTH 9.18 5.38 12.97 10 PORTER FIVE FORCES ON CEMENT INDUSTRY Threat of Substitutes Buyer Power There is no substitute for cement. Other building materials such as timber are only suitable for low-rise buildings. On the other hand, although steel can be used for medium to high-rise buildings, building regulations normally require structure steel to be encased in concrete for fire protection purposes. This increase the importance of cement and hence reduces the threat of its substitutes. 3-d printing might be a substitute for cement in the future but, it’s still not viable in India. • • • • Around 65% of cement in India is consumed by the housing sector, with retail customers accounting for the bulk of the customer base. Lack of substitutes also causes no buyer power. Local markets are dominated by a small number of cement firms. Demand is inelastic – exists at all price points. Threat of New Entry Supplier Power • • • Most companies have captive limestone reserves, so no supplier power here. Coal linkages have reduced so companies depend more on alternative fuel sources, where suppliers can dictate prices. Cement manufacturers have argued that price hikes in the industry are due to increase in the price of both transportation and raw materials. This means that suppliers are powerful enough to force new prices in the industry • • • • Entering the industry is expensive given the cost around Rs. 720 crore per million ton which leads to rising costs for new player, means lower IRR. Limited raw-material sources (limestone, gypsum) and tough govt. clearance also restricts new competition. Large player benefits from economies of scale. Wide distribution and marketing channels are important strategic assets that are difficult to replicate by new player, thus restricting entry. Competitive Rivalry • • • Large companies enjoy economies of scale. Competition in regional is nature, as cement cannot be transported across the region. Given over-capacity, slowdown in demand weakens prices, so no real pricing power. 11 SHREE CEMENT LIMITED • • • • • • • • The Company's principal products/services are cement and clinker. The Company operates through two business segments: Cement and Power. The Company's manufacturing operations are spread over North and East India across approximately six states. The Company's brands include Shree JungRodhak, Bangur, Rockstrong, Roofon, and Bangur Power. Its total power generation capacity is approximately 659 megawatts. It operates largest waste heat recovery plants (WHRP). The Company also operates a separate trading division catering to third party buyers and sellers. It produces synthetic gypsum to replace use of natural gypsum in cement manufacturing. Shree Global Pte. Ltd. is the subsidiary of the Company. It has a cement production capacity of approximately 37.9 million tons per annum. The Company has operations in Rajasthan, Uttarakhand, Bihar, Haryana, Chhattisgarh, Karnataka and Uttar Pradesh. It has over 4 integrated cement plants, and approximately 7 grinding units. (Figure in MTPA) Region Industry Capacity North East South -% 33.45% 29.10% 22.96% Shree Cement Capacity-% 24.72% Shree Cement Share 25.7% 9.35% 1.89% 20.73% 20.00% 15.58% 14.08% 15.00% 10.00% 8.11% 6.61% 5.00% 0.00% 2014-15 2015-16 2016-17 2017-18 2018-19 - EBITDA MARGIN PAT MARGIN - - 9833 11722 5514 5000 25.00% 20.47% 20.00% 17.85% 16.83% 15.00% 10.00% 9.82% 7.64% 5.00% 0 0.00%- SALES (IN CRORE) - ROCE (IN %) 12 ULTRATECH CEMENT LIMITED • • • • • • Ultratech Cement Limited manufactures a range of products that cater to construction needs from foundation to finish, including Ordinary Portland Cement, Portland Blast Furnace Slag Cement, Portland Pozzolana Cement, White Cement, and white cement-based products, ready mix concrete including specially concrete, building products, such as aerated autoclaved concrete blocks and joining mortars and a host of others in retail format. The Company's manufacturing operations are spread all over India across and Rest of the World. The company focuses on various areas, including alternatives fuels, waste heat recovery system (WHRS), carbon dioxide emission reduction, waste management, water re-cycling and bio-diversity management. It has a cement production capacity of approximately 102.8 million tons per annum. Ultratech’s growth in grey cement production is 18% YoY. It has over 20 integrated cement plants, 1 clinkerisation plant, approximately 25 grinding units, a white cement unit, 2 wall care putty, 7 bulk terminals and over 100 ready mix concrete plants. • Region North Central East West South Industry Capacity- UTCL Capacity- (Figure in MTPA) UTCL Share 23% 32% 13% 34% 13% *4 overseas Plant 24.00% 22.00% 22.00% 20.00% 2014-15 8.79% 10.00% 7.60% 6.88% 2017-18 2018-19 20.00% 2015-16 2016-17 2017-18 2018-19 2014-15 2015-16 35704 40000 - 23907 2016-17 PAT MARGIN EBITDA MARGIN 30000 11.00% 12.00% 12.40% 13.40% 9.90% 10.40% 2017-18 2018-19 23891 - SALES (IN CRORE) 2014-15 2015-16 2016-17 ROCE (IN %) 13 JK CEMENT LIMITED • • • • • The Company is engaged in manufacturing cement and cement products. Its product portfolio includes grey cement, white cement, and wall putty. It offers a range of grey cement, which include Portland Pozzolana cement (PPC), Ordinary Portland Cement (OPC), and Portland slag cement. Its white cement portfolio includes J.K.White cement, J.K.Wall Putty, J.K. Waterproof, J.K.Primaxx. Its white cement is used for decorative and architectural applications. J.K.Wall Putty is a white cement based fine powder, which provides a base for concrete/cement plastered walls and ceilings. J.K.Water Proof is a water repellant powder, which prevents passage of water through pores and capillaries of the concrete J.K.Primaxx is used for interiors and exteriors. It has a Grey cement production capacity of approximately 11.7 million tons per annum which are located in Rajasthan and Karnataka, White cement capacity is approximately 0.60 million tons per annum and 0.70 million tons per annum for Wall Putty which are located in Rajasthan and Madhya Pradesh. It also has a fully automated plant of White cement based Wall Putty having a production capacity of 0.30 million tons per annum. • Region North Central South Industry Capacity JK Cement Capacity- (Figure in MTPA) JK Cement Share 8.40% 0.32% 1.89% *Fujairah plant capacity is 0.60 mtpa which located in UAE. 18.71% 13.90% 14.72% 16.74% 16.47% 7.53% 8.00% 6.00% 5.69% 4.70% 6.60% 2.93% 4.00% 2.00% 0.00% 2014-15 2015-16 2016-17 2017-18 2018-19 - EBITDA MARGIN - PAT MARGIN - 3531 4919 3706 20.00% 13.11% 15.00% 14.60% 12.59% 10.00% 2000 5.00% 0 3.71% 2.25% 0.00%- SALES (IN CRORE) - ROCE (IN %) 14 AMBUJA CEMENT LIMITED • • • • • • The Company operates through Cement and cement related product and the company has a range of product for the business to business and retail markets. The company’s product, Ambuja Plus Roof Special, is suited for constructing roofs and slabs. It also offers to install rooftop rainwater harvesting technology. Its product also includes Ambuja Powercem, which caters the ready-mix (RMX) sector; Ambuja Railcem which is designed for railways, and Ambuja Buildcem, which serves the requirements of the mass housing segment. The company also owns two brands in micro material category like Alccofine and Dirk Pozzocrete. Alccofine Micro Materials are used in construction projects, such as metro rail, dams, roads, flyovers, bridges and tunnels. It has a cement production capacity of approximately 29.65 million tons per annum. The Company has operations in Gujarat, Rajasthan, Chhattisgarh, Uttarakhand, Punjab, Himachal Pradesh, Maharastra, West Bengal and Uttar Pradesh. It has over 5 integrated cement plants and approximately 8 grinding units. Another 2 limestone screening plants in operation and 3 plants proposed. 19.00% 19.00% 20.00% 19.00% 17.00% 15.09% 15.00% 8.63% 10.00% 16.00% 10.22% 12.20% 13.55% 5.00% 0.00% 2014-15 2015-16 2016-17 2017-18 2018-19 - EBITDA MARGIN PAT MARGIN 15000 20.00% 9911 10000 9368 9117 10250 10977 15.00% 10.00% 5000 18.00% 12.00% 8.00% 8.00% 8.00% 5.00% 0 0.00%- SALES (IN CRORE) - ROCE (IN %) 15 ACC LIMITED • • • • • • The Company is engaged in the manufacturing of cement and ready mixed concrete. The company manufactures cement, which includes Ordinary Portland Cement (OPC), Portland Pozzolana Cement (PPC), Portland Slag Cement (PSC), and Ready Mixed Concrete (RMX). The company’s product products include Portland cement and premium cement, bulk cement. The company’s product also include ACC-Supercrete, ACC-Flowcrete, ACCSpeedcrete, ACC-Imprintcrete, ACC-Jet-sectcrete, ACC-Coolcrete, ACC-Feathercrete and ACC-Fibercrete. The company has 17 modern cement plants and more than 75 ready-mixed concrete plants. ACC-Speedcrete is available in two variants for quick road solutions: UTWT 24 and UTWT 8. UTWT 24 is used to build roads, which can be thrown open to traffic within 24 hours and UTWT 8 is used for road repair works wherein roads can be opened to traffic within 8 hours. It has a cement production capacity of approximately 33.41 million tons per annum. The Company has operations in Rajasthan, Chhattisgarh, Himachal Pradesh, Madhya Pradesh, Maharastra, Jharkhand, Karnataka, Andra Pradesh, Tamil Nadu and Uttar Pradesh. 15.00% 15.36% 15.12% 14.74% 14.04% 10.41% 10.17% 10.00% 13.70% 5.18% 5.92% 7.08% 5.00% 0.00% 2014-15 2015-16 2016-17 2017-18 2018-19 - EBITDA MARGIN PAT MARGIN - 15.00% 11481 11433 10936 12931 13.93% 13.97% 13.14% 14477 10.00% 10000 6.54% 6.44% 5.00% 5000 0 0.00%- SALES (IN CRORE) - ROCE (IN %) 16 REFERENCE https://expertcivil.com/manufacturing-of-cement-by-dry-and-wet-process/ http://pib.nic.in/newsite/PrintRelease.aspx?relid=191212 https://tradingeconomics.com/india/cement-production https://economictimes.indiatimes.com/industry/indl-goods/svs/cement/cement-demandlikely-to-grow-8-in-fy20-report/articleshow/-.cms https://www.jkcement.com/pdf/delux_annual_report2018-19.pdf https://www.ambujacement.com/Upload/PDF/AmbujaCementAnnualReport2018Web.pdf https://www.shreecement.com/pdf/shree-cement-ar-2018-19.pdf https://www.jkcement.com/pdf/delux_annual_report2018-19.pdf https://www.acclimited.com/newsite/annualreport2018/ACC_Annual_Report_2018.pdf https://www.safalniveshak.com/industry-analysis-cement-part1/ http://www.careratings.com/upload/NewsFiles/Studies/Cement%20%20Sector%20Update%20H1%20F Y%202019.pdf 17 REFE 18 THANK YOU