The domestic cement industry has grown beyond expectations since the second half of the last financial year. Cement makers, which had added capacities during this period, benefitted as prices strengthened, too. ACC, a leading player and part of Swiss major Holcim, however, could not grow as much. SUMIT BANERJEE, managing director, admits the company missed an opportunity to benefit from the strong demand scenario. However, he tells Chandan Kishore Kant, traditional calculations to ascertain demand growth will not work and ACC’s turn will come. Excerpts:
How was the September quarter for ACC?
Our growth in the market has been much less compared to the industry. The other players that added capacities during this period benefitted from the demand growth. It has been good for the industry, but ACC has grown only by 2.5 and 3 per cent. We did not have additional capacities.
ACC has not added significant capacities for the past several quarters. What’s the status of your plans?
Our current capacity is about 23 million tonnes and we will be close to 30 million tonnes by mid-2010. It is true we did not add enough capacities in the past few years. Our Wadi expansion project is delayed by two-three months and we expect it to commence production by this year’s end. Besides, there are two satellite grinding plants coming up along with Wadi, one at Kolar near Bangalore and one at Bellary. These two will be commissioned by October-end or November.
Did ACC miss the opportunity of cashing on the surge in cement demand since November last year?
Yes, we have. There have been delays in the projects. It’s a question of right timing of investment. In hindsight, we should have initiated these projects a little earlier, so that we could have got the opportunity of servicing this demand. Some of our peers have grown by 15 per cent. And it always happen that some players in the industry in a particular upturn grow more than others. Our turn will come.
We will continue to have a good demand scenario. Earlier, we had expected the infrastructure segment to grow by 14-15 per cent, but we now guess this segment will grow above 24 per cent. Whatever demand was projected for 2010-2011 was based on the traditional mindset of GDP growth which defines the cement demand. However, those traditional calculations will not work and demand will sustain.
You foresee change in the connector between GDP and the cement sector’s growth.
Once 2009 is over, one will see that the connector, which normally is 1.2 or 1.3, will go on the upside. I think the time has come to re-write it. In 2009, the growth of cement will clearly show that the connector will be more, as the industry will grow by over 10 per cent.
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Once you reach 30 million tonnes, what will be the next phase of expansion?
At any point, we have a set of expansion plans at different stages of evaluation, approval and executions. We will have projects which are being checked, designed, evaluated and financial calculations being done and board approvals being discussed. But we are not in a game to remain number one. Our goal is to improve our competitiveness and retain our rightful market share. We need to move down the cost ladder. ACC is not the most cost-competitive company in the industry because of a number of legacy issues and older plants.
In 2009, ACC held back its ready made concrete (RMC) expansion. Are you re-looking strategy in 2010?
Growth in RMC business is coming today only from infrastructure projects. The location of these projects are not necessarily in the big cities. We have to think of different footprints to service the demand. We took a pause and decided not to expand further in 2009. We will consolidate and study the market and then we will re-evaluate. So, first we should get better utilisation of our 39 plants and then take a re-look in 2010, where we can expect some more additions. We are finding that cities like Raipur, Coimbatore and Lucknow are now maturing into RMC markets, which was not the case earlier.