South-India Based Cement Companies Q1 Results

Cement companies based in South-India beat hands-down all other cement companies at an All-India level as well as region based performance with their June quarter results. This was inspite of weak retail cement demand, poor infrastructure off-take and a sluggish real estate market. The key to the south based cement companies performance was pricing and production discipline which led to good realisations boosting their performance despite weak cement sales volumes.

Cement Net Profit Q1 Results

India Cements with a net profit of Rs.40 crore,
Ramco Cements with a net profit of Rs.95 crore,
Dalmia Cements with a net profit of Rs.58 crore,
Chettinad Cements with a net profit of Rs.49 crore,
Sagar Cements with a net profit of Rs.23 crore are a few of South-India based cement companies who have shown pretty good Q1 results.

Smaller cement companies such as NCL Industries, Deccan Cements, and KCP Cements have turned the corner showing profits with better cement prices in the region, an ability to strick a balance between demand and supply, lower raw material cost relative to sales, production discipline, fairly stable demand and limited cement capacity addition in the region.

Cement Industry's Merger and Acquisitions

Indian Cement Industry Consolidation

India's cement industry seems all set to see an increase in merger and acquisitions. Global majors like LafargeHolcim and Heidelberg, among others are looking to increase their cement marketing presence in India by opting for the easier brownfield route. Indian cement are not lagging in their M&A's as seen in the recent Birla-Lafarge deal which will bring the MP Birla Group's Birla Corp among the top 10 cement players in the country with capacity of approx. 15 million tonnes.

The newly formed LafargeHolcim conglomerate with an capacity of around 68 million tonnes per annum (mtpa) in India is No.1, closely followed by Kumar Mangalam Birla's UltraTech Cement, with a installed cement capacity of 65 mtpa. The Aditya Birla Group has a number of cement projects on stream and is likely to touch a capacity of 71 mtpa by 2016.

Some of the major cement M&A deals over the recent past:

2005: Holcim acquires stake in ACC. Later acquires stake in Ambuja Cement in 2006.

2006: Heidelberg Cement's joint venture in Indorama Cement subsequent accqusition of majority stake in Mysore Cement.

2008: Heidelberg Cement acquires remaining stake in Indorama Cement and merges with Mysore Cement creating Heidelberg Cement India. Installed cement capacity of the company increases to 3 mtpa.

2011: Jaypee Group purchases controlling stake in GP Goenka Group's Andhra Cements.

2013: UltraTech Cement bought the 4.8 MPTA Gujarat unit of Jaiprakash Associates for a value of Rs.3,800 crore in its biggest acquisition in recent times.

2014: Ambuja Cements acquires 24 percent stake in Holcim India, then followed by a merger of Holcim India into Ambuja Cements. The net result was Ambuja Cements holding 50 percent stake in ACC, which is in turn a 50 percent subsidiary of Holcim India.

2014: Ultratech Cement acquires two cement plants from Jaiprakash Associates in Bela, Madhya Pradesh.

2015: Dalmia Cement increased its stake-holding in OCL India from 48 % to 74.6 % through an inter-share transfer.

2015: Lafarge-Holcim merger deal estimated at $40 billion to create the world's largest cement group.

2015: Shree Cement completes acquisition of a cement-grinding unit of Jaiprakash Associates at Panipat, Haryan.

Cement Industry sources state that global consolidation in the cement sector is not only taking place globally but also in India as seen by a number of recent deals, as well as plans by a number of cement companies to get themselves at the top 10. 20 MTPA seems to be the benchmark that cement companies are setting up in order to get there.

The Sajjan Jindal-led JSW Group is setting up 10 grinding units in the country to triple its cement and clinker capacities to 20 mtpa in the next three years.

Reliance Cement is looking almost three-fold increase in capacity to 15 million tonnes in the next three years with new plants being planned in Maharashtra and MP.

Cement Industry experts say that the demand growth between 6.5% and 8% would outpace supply addition at 6.7% in FY16 as cement capacity utilization is likely to improve to 73% to 75% in FY16 compared to 71% in FY14.

JK Lakshmi Q1 Results

Cement Business Performance

JK Lakshmi Cement, a member company of the JK Organization, reported its Q1 results as under:

Standalone net loss of Rs 23.48 crore as against a net profit of Rs 40.45 crore in the April-June period of last year.
Total standalone income of the company was at Rs.590.75 crore as against a net profit of Rs 600.42 crore in the April-June period of last year.
Dip in total standalone income was 2% as against the April-June period of last year.
Increase in total expenses was 12% as against the April-June period of last year.

Subdued cement markets particularly in North and West, poor demand for cement, together with higher costs are stated to be the reasons for the Q1 results.

JK Lakshmi Cement has a marketing network of about 3000+ dealers spread in the states of Rajasthan, Gujarat, Delhi, Haryana, Uttar Pradesh, Uttarakhand. Punjab, Jammu & Kashmir, Maharashtra, Madhya Pradesh,Chhattisgarh, Odisha & West Bengal.

JK Lakshmi Cement has an annual turnover of Rs. 2300 crores.The company's Green field plant at Durg, has an installed capacity of nearly 2.7 million tonnes per annum (mtpa). Following commissioning, installed cement making capacity of the company now stands at 9.3 mtpa.

JK Lakshmi's Gujarat second grinding unit is expected to come into stream by the end of the current financial year.

Interview with Shaildendra Chouksey, Wholetime Director, JK Lakshmi Cement ...

JK Lakshmi Cement Business Results...

Orient Cement Posts Q1 Results

Orient Cement Posts 20% Drop In Net Profit at Rs.28 Crore

Orient Cement, a company under the CK Birla group on Tuesday, the 4th of this month reported a 20 per cent fall in their net profit for cement.
The figures in a nutshell:
*** Net Profit at Rs 27.89 crore for the June quarter as against a net profit of Rs 34.87 crore for the corresponding period a year ago.
*** Total Income at Rs 394.39 crore as against Rs 382.65 crore for the corresponding period a year ago a drop of 8.69%.
*** Total Expenses at Rs 301.34 crore as against Rs 327.36 crore for the corresponding period a year ago.

Orient Cements MD and CEO Deepak Khetrapal summed up the cement company's performance thus:
Q1FY16 has been a difficult quarter for the cement industry, with cement markets in west and north struggling to register any demand momentum.
Low cement demand and low cement capacity utilization has put further pressure on cement prices. Orient Cement had lost 10 per cent of their cement sales volume.

He also shared his views on the future:
Orient Cements will continue to focus on cost optimisation and increasing efficiency in power and fuel consumption.
The mining lease on July 31 for Orient Cements' upcoming Greenfield facility in Gulbarga, which is scheduled for commissioning within the next 4-6 weeks has been granted by the Karnataka Government.
As part of the growth plan to reach 15 million tonnes per annum (MTPA) by year 2020, Orient Cement is setting up a cement capacity of 3 MTPA at Chittapur, in Gulbarga, Karnataka at an investment of approx. Rs 2,000 crore.
Cement demand had been very sluggish across the country and there would not be much improvement in July-September quarter.
Post-Diwali, construction activities are expected to pick up and the things would start looking up for the cement industry.

Orient Cement MD and CEO Interview.

Extra Reading on this topic
Orient Cement Results
Cement Business Standard
Cement Economic Times
Cement Money Control