In the background of the continuing economic slowdown, Ambuja Cements, India's third-largest cement maker, has deferred its 1.5-million-tonne clinker grinding unit at Sanand near Ahmedabad till 2010. The decision comes within a year of the company's decision to postpone work on its 1-million-tonne grinding project at Barh in Bihar.
The move comes despite the fact that the demand for cement has been going up since November last with an average growth of over 8 per cent in despatches. Industry analysts said since the current demand was an aberration as the next couple of months were likely to be tough for the cement sector, the company might have taken the decision by sensing the adverse market scenario due to newer capacity additions.
The investment earmarked for the Sanand unit was around Rs 275 crore and the plant was scheduled to go onstream in 2009. It was among the four grinding units which the company had planned to commission in 2009 and 2010 at an overall investment of Rs 1,000 crore. Out of these, now two projects stand deferred.
In its annual report for 2008, Ambuja Cements, part of the Swiss cement giant Holcim, said, "It has been decided to proceed more slowly with the project at Sanand, which will now be deferred till 2010."
When contacted, Amrit Lal Kapur, managing director, Ambuja Cements, told Business Standard, "The main purpose of the Sanand project was to reduce our logistics cost, but now we will take a call on it in 2010 after doing our budgetary allocations."
Meanwhile, the project cost of Ambuja's two clinker capacity has escalated by 10 per cent from the earlier projection of Rs 1,600 crore to around Rs 1,750 crore due to the rise in steel prices and escalating cost of civil contracts during last year. The two projects are coming up in Himachal Pradesh and Chhattisgarh with a capacity of 2.2 million tonnes each.
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The Chhattisgarh clinker unit is expected to be commissioned by mid-2009, whereas the Himachal unit will go onstream by year-end. For its capacity expansion and upgradation, Ambuja had planned a capital expenditure of Rs 3,500 crore. However, Kapur indicated that it might increase.
In 2008, the company's consolidated net profit dipped to Rs 1,389.71 crore from Rs 1,846.11 crore in 2007, a fall of close to 25 per cent. Net sales had increased by 9.5 per cent in 2008 to Rs 6,261.79 crore from Rs 5,718.6 crore in the previous year.