ACC, the country’s largest cement maker, hopes its ready made concrete (RMC) business will turn positive next quarter, as demand from the residential as well as the commercial segment is expected to pick up.
“The outlook (for RMC) is more optimistic. Overall demand improvement will lead to a reduction in the inventory of unsold residential and commercial premises. In addition to this, residential construction from high-end apartments to affordable housing is being announced and expected to come on stream,” said ACC in its annual report.
ACC, in which Swiss cement major Holcim holds 46 per cent, operates its RMC business in India under a separate arm, ACC Concrete. ACC put its RMC expansion on hold in 2009, as economic slowdown hit realty demand, particularly in metros and cities where 90 per cent of the cement maker’s assets are located.
ACC continued to take a hit in its concrete business, but managed to reduce its losses in 2009 to Rs 46.9 crore from Rs 96.8 crore in 2008. During this period, sales volume grew by 6.5 per cent. However, turnover marginally declined by Rs 2 crore. It has 44 RMC operating plants. ACC plans to invest Rs 600 crore to take the number of its RMC units to 200 by 2012.
Most of the cement players, which have RMC operations, are yet to reach a break-even level. “RMC is still a loss-making operation. However, when volumes grow substantially, by the end of 2011 financial year, the segment will be profitable,” opined industry experts.
In India, the growth in RMC business has not kept pace with the growth in the cement industry, because RMC units are not able to compete with the age-old practice of site mixing. Its growth is directly linked to the growth of bulk cement, especially in urban centres.
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Last year, after ACC, Aditya Birla Group’s Grasim too slowed down its expansion in RMC, citing reduced demand from organised realty space. Apart from Grasim, French cement giant Lafarge is another player in the RMC segment.
The construction sector’s RMC consumption is less than 5 per cent of the total cement consumption. On the contrary, in developed markets, it makes up around 60 per cent of the cement demand.
On the Bombay Stock Exchange, ACC shares closed 0.35 per cent down at Rs 950.45.