Description
It explains about Industry Trends of cement industry, PEST Analysis of cement Industry, Competitor Analysis, SWOT analysis, Company Description, General Information about Ambuja cements, it's Finance performance, SWOT analysis and Various Strategies employed.
Ambuja Cements – Company Analysis
The Indian Cement Industry
An overview
The Indian cement industry is the 2nd biggest cement industry in the world, behind China. . It accounts for nearly 6% of the world production. There are 124 large plants and around 365 mini plants. It had a total capacity of about 119 million metric tons per annum. The Indian cement industry is about 90 years old and its main sources of energy are thermal and electrical energy. Our cement industry has the unique distinction of operating very large to very small capacity and very modern to very old technology plants. The Indian cement industry is a mixture of mini and large capacity cement plants, ranging in unit capacity per kiln as low as 10 tpd to as high as 7500 tpd Indian cement industry has been very proactive in adopting various technological advancements taking place all over the world. This was particularly triggered by the partial decontrol of cement industry in 1982 followed by full decontrol in 1989 giving the resultant free market competition an opportunity for growth in production and productivity. Ownership is mostly private (85% of installed capacity) and centralized for the large plants with four production houses controlling most units. The top players comprises of UltraTech, ACC, Ambuja Cements, Jaiprakash Associates, India Cements Cement, being a bulk commodity, is a freight intensive industry and transporting it over long distances can prove to be uneconomical. This has resulted in cement being largely a regional play with the industry divided into five main regions viz. north, south, west, east and the central region. Thus the cement industry runs in a lot of co-relation with transport industry, affected by several factors.
Recent trends and happenings in the industry:
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The 330 MT industry grew by 6.4 per cent in 2011-12 as against less than 5 per cent in 2010-11. The industry sold 223.02 MT of the building material, compared with 209.5 MT in FY11. The cement production increased from 137.16 million tonnes (MT) in April 2010 January 2011 to 145.00 in April 2011 - January 2012 Cement output continued to post double-digit growth for the fourth consecutive month at 10.8 per cent.
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. While cement despatches increased from 136.18 MT in April 2010 - January 2011 to 143.96 MT in April 2011 - January 2012, according to data provided by the Cement Manufacturers' Association (CMA). Cement prices have strengthened in most parts of India, up 14 per cent year-on-year and eight per cent sequentially in the March quarter. However, most of the increases have come as a measure to meet the rise in input costs. On a global perspective, world demand for cement is forecast to grow 4.7 percent per year to 3.5 billion metric tons in 2012. Gains will be driven by strong increases in cement consumption in the developing countries of the world, fueled by rising income levels and a focus on infrastructure development The latest Global Cement Volume Forecast analysis by the CW Group shows global cement consumption growth will trend around six percent in 2012, reaching 3.78 billion tons. The chief driver of global consumption growth will continue to be China, which will consume 2.22 billion tons of cement by 2012. On a regional basis, Western European consumption remained virtually stalled while North American managed two percent growth in 2011. Generally, Africa and parts of Asia and Latin America are seeing the biggest capacity additions in the next few years. In 2012, the regions of Asia, Latin America, and the Middle East will keep pace with the global cement consumption average of six percent. . 100 % FDI is allowed in the cement industry. This has brought in several players of the global market into the Indian market. One of the biggest JV in the industry was the association of Holcim with Ambuja Cement in 2006, when its acquired controlling stake in the company in 2006. Holcim is the world’s 2nd largest cement manufacturer. Lafarge, the third biggest producer of cement in the world, has opened its unit in India, Lafarge India. Lafarge India plans integrated cement plant at DPF Ghanger in Karsog Tehsil in Mandi district of Madhya Pradesh. The project involves setting up of a cement unit with capacity of 3.0 mtpa. The project will entail an investment of Rs.9080 million. Shriram Group, a Rs 50,000 crore (US$ 8.96 billion) diversified Chennaiheadquartered conglomerate, is firming up a strategic plan to consolidate its presence in the cement sector. Shriram EPC, a publicly held company of Shriram Group, has recently entered the cement sector by acquiring majority stake in Andhra Pradeshbased cement manufacturer, Sree Jayajothi Cements Ltd.
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Swiss cement major, Holcim's India arm has beaten domestic giant UltraTech, during 2011-12. Holcim's reported a growth of 8.3 per cent in 2011-12, while UltraTech Cement showed a growth of 3.5 per cent in its sales With capacity addition taking place at a faster rate as compared to demand, prices have remained southbound, especially in the last one year. Nevertheless, considering the government’s thrust on infrastructure, long term demand remains intact. The recent economic turmoil has its effect on the cement industry too. The credit crunch resulting from the monetary tightening impacted real estate, infrastructure and other construction projects. Prolonged monsoons and logistical constraints further dampened the construction work. On the cost front, rising input and fuel costs severely hurt the margins of cement players. Export markets also remained sluggish due to the slowdown in the global economy, and particularly the sagging construction activity in the Gulf region. In the Union Budget 2011-12, the government restructured the excise duty on cement in a way that would effectively increase the tax incidence on the cement industry. The Competition Commission of India (CCI) has imposed penalty on cement companies finding them guilty of cartelization under section 3 of the competition act. The penalty is imposed @ 50% of net profit for FY10 & FY11 and is 1.7-2X of what we had expected it to be. Penalty works out to an average ~13% of last 3 years average turnover, Technologically speaking too, the cement industry has undergone many changes throughout the years. Over the last 30 years, the more energy-intensive wet process of cement production has been virtually phased out. Other process specific measures that have increasingly found application in the Indian cement industry include multi-stage suspension preheaters, precalciners, cyclone designs of kilns, and improved burners. Also there has been a lot of focus on clean and green production with a lot of corporate indulging inactivates and initiating steps to have minimum effect on the environment. In relation to other energy-intensive industries, such as iron and steel where energy savings potentials of 50% were identified (Schumacher and Sathaye, 1998), the gap in the cement sector turns out to be much lower. This supports our findings that Indian dry process cement plants today are already quite modern and energy efficient. Several technologies have come up and are being used to reduce energy consumptions of the cement plants.
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PEST Analysis of the cement industry
Political: 1. The price of cement is primarily controlled by following rates which are predominantly controlled by government; Coal rates, oil rates, taxes like GST, Royalties, Limestone mining charges etc. 2. The government is trying a lot to invest in infrastructure, to the tune of 1 trillion $, so cement industries have a lot to look forward to.
3. Govt. programs like NREGS, Indira Awaas Yojana, rising minimum support prices
enhance rural income which boosts cement demand in rural areas
4. The total Government levies and taxes which include Royalty on Limestone, Royalty
on Coal,Electricity Duty, VAT/Sales Tax etc., on cement constitute about 60% or more of the ex-factoryprice of cement. Economical: 1. With government looking to boost the economy and increase development, the infrastructure sector will ensure topline growth of the sector.
2. The per capita consumption of cement in India (about 155 kg) is much less
compared to average per capita consumption (about 380 kg) for the rest of the world. Hence Indian cement industry has large potential to grow.
3. Growth in tourism sector is fuelling the increase in the construction of hotels in the
country. 4. The government’s decision to allow 100 % FDI in the sector has also been very instrumental in allowing cement industries to reach the level they are at today.
5. Upcoming industrial clusters and infrastructure development in emerging tier-II
and tier IIIcities
6. Looking at the growth rate of Indian cement industry and capacity expansions, it is
expected thatcement industry will create good number of jobs in the next 4-5 years. Social: 1. The cement industry’s growth is directly related to growth of the country and increased income of people. 2. It has been able to provide employment to a lot of people. 3. Cement industry firms have been very actively indulging in CSR activities, promoting education for unprivileged, supporting clean and green tech etc. 4. Since cement industry is an energy intensive industry with high emissions, latest technologies have to be used to have energy efficiency and to meet the environmental standards. Technological: 1. The wet process is now being replaced by the dry process. It reflects need for energy conservation.
2. Changes are being made in the design of cement kiln and blowing furnaces which promote use of kiln for utilization of wastes. 3. Renewable sources of fuel, unlike coal are being researched to be used in the plants. 4. Transport systems for transport of cement are being updated. 5. Effectively and accurately finding limestone reserves and better mining techniques can reduce per unit cost of limestone.
SWOT analysis of the cement industry Strengths: • Cement is, literally, the building block of the construction industry. Almost every building constructed relies on cement for its foundation. The cement business is a $10 billion industry, measured by annual cement shipments. • Cement is a solid material and consumers rarely have complaints about the product. • Also the distribution channels of cement manufacturers have been very efficient ensuring timely and economic cement supply. • Cement companies have established themselves as brand names. • High selling prices and profitability levels due to supply shortage. • FDI investments have bolstered the cause of cement industries. • Natural hedge from outside competition arising from high transportation costs • Capital-intensive industry with long construction periods, creating natural barrier to new entrants Weaknesses: • Cement industry is affected by prices of commodities like oil, coal etc. • Continuously increasing transportation costs, shipping cement costs more than the profit from selling it. • Proximity to lower cost export markets in Indian subcontinent, Egypt and Turkey, increasing competition in both local and export markets • The cement industry heavily relies on weather. About two-thirds of cement production takes place between May and October. • The cement industry relies on construction jobs to create a profit. Opportunities: • Emerging economies will keep on spending on infrastructure and thus the cement industry will keep prospering. • The government of India has made special investments in the sector. • The cement industry's efficiency: The cement industry has recently streamlined its production efforts, using dry manufacturing instead of wet, which is heavier and more time-consuming. • The cement industry has also invested about $6 billion in expansion efforts to meet unmet cement needs.
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A number of M&A transactions might take place in the near Future
Threats: • The nature of the economy has uncovered a number of threats to the cement industry. It relies heavily on the economic scenario. • The cement industry greatly relies on construction. The current economy has lessened the number of construction jobs, which in turn hurts the cement industry. • Further hikes in oil prices could negatively affect companies’ profitability if they cannot pass increase in production costs on to customers. • Taxes and other royalties levied on the industry may increase.
Ambuja Cements Ltd.
Introduction: Ambuja Cements Ltd. (ACL) is one of the leading cement manufacturing companies in India. The Company, initially called Gujarat Ambuja Cements Ltd., was founded by Narotam Sekhsaria in 1983 with a partner, Suresh Neotia. It is counted in the top four of the industry in India Ambuja is the 3rd largest cement company in India, with an annual plant capacity of 16 million tonnes including Ambuja Cement Eastern Ltd. and revenue in excess of Rs.3298 crores. The Company commenced cement production in 1986. The 43 grade OPC is the most popular general-purpose cement in the country today. The production of 43 grade OPC is nearly 50% of the total production of cement in the country General Information about the company Gujarat Ambuja Cements, now called as Ambuja Cements Ltd, has set up its own township near its primary manufacturing plant, called Ambujanagar, in Junagadh. Its corporate office is located in Kodinar taluka, Junagad, Gujarat. The company was founded in 1983 and commenced production in 1986. Holcim took controlling stake in 2006. ACL enjoys a reputation of being one of the most efficient cement manufacturers in the world. Its environment protection measures are on par with the finest in the country. It is one of the most profitable and innovative cement companies in India. ACL is the first Indian cement manufacturers to build a captive port with three terminals along the country’s western coastline to facilitate timely, cost effective and environmentally cleaner shipments of bulk cement to its customers. The Company has its own fleet of ships. Top Management:
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N. S. Sekhsaria, Chairman
An industrialist reputed for his business acumen, Mr. Sekhsaria is the main promoter of Ambuja Cements Limited. He has created new benchmarks in the cement industry with pathbreaking and innovative thinking and turned cement from a commodity into a brand. He is Chairman of ACC Ltd. and also of Ambuja Cements Limited.
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Paul Hugentobler, Vice Chairman
Mr, Hugentobler, a Swiss national, joined Holcim Group Support Limited in 1980 as Project Manager and in 1994 was appointed Area Manager. He has been a member of the Executive Committee of Holcim since January 2002 with responsibility for South Asia and ASEAN
excluding Philippines. He joined the Board in May 2006 and in September 2009 was made Non-executive Vice Chairman.
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Bernard Fontana, Director
Bernard Fontana, a French national, began his career with Groupe SNPE in France. Since then, he's moved on to become the Head of US operations and thereafter, a member of the Executive committee at Groupe SNPE; HR, IT and Business Development Head at Flat Carbon, a member of the Executive Committee at ArcelorMittal and the CEO of Aperam; before joining Holcim Ltd. on February 1, 2012 as CEO.
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M L Bhakta, Director
Mr. Bhakta is a senior partner of Messrs Kanga & Company, a leading firm of advocates and solicitors in Mumbai. He has vast experience in the legal field, especially in matters relating to corporate law, banking and taxation. He was Chairman of the Taxation Law Standing Committee of LAW ASIA. He joined the board in 1985.
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Nasser Munjee, Director
A Master’s degree holder from the London School of Economics, Mr. Munjee is a board member of a number of companies. He has a deep interest in rural development, housing finance and urban issues, specially the development of modern cities and humanitarian causes. He has been awarded the “Best Non-Executive Independent Director 2009’ award by The Asian Centre for Corporate Governance. He joined the board in 2001.
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Rajendra P Chitale, Director
An eminent Chartered Accountant, Mr. Chitale is the managing partner of M/s M.P. Chitale & Associates. He has served as a member of the Insurance Advisory Committee, the Company Law Advisory Committee and other committees of the Government of Maharashtra and the Government of India. He is on the board of several large corporations. He joined the board in July 2002.
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Shailesh Haribhakti, Director
Mr. Haribhakti Is the Executive Chairman of BDO Consulting Private Ltd and the Managing Partner of Haribhakti & Co – Chartered Accountants. He is on the Board of Directors of several private and listed companies. He has been awarded the ‘Best Non-Executive Independent Director 2007’ award by The Asian Centre for Corporate Governance. He joined the Board in May 2006.
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Omkar Goswami, Director
A professional economist, Dr. Goswami has taught and researched economics for nearly two decades. In 1997, he moved away from formal academics to become the editor of Business India, one of India’s prestigious business magazines. He has served as the Chief Economist of the Confederation of Indian Industry and is on the Board of several large companies. He joined the Board in July 2006.
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Naresh Chandra, Director
A Padma Vibhushan awardee in 2007, Mr. Naresh Chandra is a postgraduate from the Allahabad University. He has held several important positions within the Government of India, including Governor of the State of Gujarat and India’s ambassador to the United States. He is a Director on the Board of ACC and several other reputed companies. He joined the board in July 2008.
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Onne van der Weijde, Managing Director
A Dutch national, Mr. Onne joined Holcim in the year 1996 and after holding various positions, he was appointed Director and General Manager for Holcim (India) Pvt. Ltd. in March 2005. He was the CFO of ACC between 2006 and 2008. He has a lot of experience of the cement industry. He joined the Board in January 2009.
Ajay Kapur- CEO, Ambuja Cements
Sanjay Churiwala- CFO, Ambuja Cements A Chartered Accountant by profession and an alumnus of the London Business School. 17 years of experience in operational & Finance leadership roles as a CFO,General Manager(Commerical) & Dy.General Manager(Projects).
Shareholding Pattern: Jun-2012 Promoter and Promoter Group Indian Foreign Public Mar-2012 Dec-2011 Sep-2011
50.17 %
50.27 %
50.29 %
50.35 %
50.39 %
-50.17 % 47.20 %
-50.27 % 47.09 %
-50.29 % 47.38 %
0.79 % 49.56 % 47.51 %
0.79 % 49.60 % 47.83 %
Institutions FII DII Non Institutions Bodies Corporate Custodians Total
38.65 % 26.24 % 12.41 % 8.55 % 0.51 % 2.63 %
38.34 % 25.79 % 12.55 % 8.75 % 0.60 % 2.64 %
38.62 % 25.01 % 13.61 % 8.76 % 0.50 % 2.33 %
38.43 % 23.97 % 14.46 % 9.08 % 0.61 % 2.14 %
38.38 % 23.74 % 14.64 % 9.45 % 0.58 % 1.78 %
1,53,81,48,711 1,53,50,54,961 1,53,43,69,261 1,53,26,27,161 1,53,16,74,911
Financial Performance of the company in the last year: Net Sales 8,515 Operating EBITDA 1,994 Net Worth 8,069 Profit Before Tax 1,703 Profit After Tax 1,229 Operating EBITDA / Net Sales 23% Price Earning Ratio # 19.37 Debt Equity Ratio (Debt/ (Debt+NW)) 0.01 Looking at a quarterly performance
HEADS Revenue Other Income Total Income Expenditure Interest PBDT Depreciation PBT Tax Net Profit Equity EPS
Mar-12 2,660.93 87.08 2,748.01 -2,167.97 -16.80 563.24 -120.89 442.35 -130.13 312.22 307.01 2.03
Dec-11 2,357.68 65.11 2,422.79 -1,932.31 -9.86 480.62 -123.80 356.82 -54.42 302.40 306.87 1.97
Sept-11 1,833.67 57.10 1,890.77 -1,514.27 -13.79 362.71 -107.87 254.84 -83.36 171.48 306.53 1.12
Jun-11 2,189.07 56.15 2,245.22 -1,590.64 -15.19 639.39 -107.37 532.02 -184.52 347.50 306.33 2.27
Mar-11 2,222.47 52.09 2,274.56 -1,595.47 -13.79 665.30 -106.11 559.19 -151.71 407.48 306.04 2.66
CEPS OPM % NPM %
2.82 21.80 11.73
2.78 20.80 12.83
1.82 20.53 9.35
2.97 29.90 15.87
3.36 30.56 18.33
Other important financial news about the company: • • •
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Last traded price – Rs 168.75 52-week high- Rs 182 It had surplus cash of Rs 7,700 crore as of December last year. Ambuja, which follows a January-December accounting year, saw net profit drop 2.8% at Rs. 12.29 billion for 2011. Net sales for the year rose 15.2% to Rs.85.15 billion. In June, despatches of Ambuja's stood at 1.79 MT over 1.66 MT last year. Ambuja derives 38 per cent of its sales from western India and 40 per cent from the northern region. . In case of Ambuja, production for the first six months grew to 11.67 MT against 10.79 MT in the same period last year, while its despatches for the period stood at 11.67 MT from 10.77 MT in the corresponding period last year.
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Special milestones achieved by Ambuja Cement: 1. In 1993, Ambuja Cement set up a complete system of transporting bulk cement via the sea route. Making it the first company in India to introduce bulk cement movement by sea. Others followed and today, about 10% cement travels by this new route. The facility comprises: A dedicated port at the Gujarat plants, capable of berthing 40,000 DWT vessels, three bagging terminals at Mumbai, Surat and Sri Lanka, and seven special bulk cement vessels. 2. Cement is a commodity, sold largely on price. Ambuja Cement was the first company to create a brand out of cement and command a premium. 3. It was also the first to introduce a special cell, providing technical services to consumers and masons. Today, this has become the norm in cement marketing. The trick of course was to provide a consistently high quality of cement, backed by excellent service. This was reinforced by a strong dealer network.
Various strategies, decisions employed, Joint Ventures by Ambuja cement Joint Ventures and Acquistions: 1. Ambuja Cements plans to invest Rs 1,800 crore by December 2013 to expand its production capacity. The company proposes to fund the project through internal accruals. It had surplus cash of Rs 7,700 crore as of December last year. 2. The company will set up a 2.2-million-tonne clinkerisation unit at Nagaur in Rajasthan. The feasibility study for the project is completed and environmental clearance has been obtained. This clinkerisation unit will be a major boost to the production capacity of Ambuja, as it plans to raise its capacity by a phenomenal amount. 3. The company, along with IST Steel and Lafarge India, was allotted a coal block in Maharashtra by the Ministry of Coal for captive use. Ambuja Cements holds a 27.27 per cent stake in the joint venture which is in the process of obtaining statutory clearances such as mining lease, and environmental and forest clearances. 4. Ambuja Cements Ltd has Company has acquired 60% equity shares from the existing promoters of Dirk India Pvt. Ltd. for a consideration of Rs. 16.51 crores. Dirk India Pvt. Ltd. is a Company incorporated in Maharashtra and is the first processed fly ash manufacturing and marketing company in India with a capacity of 2500 TPD. 5. Ambuja Cements Ltd, which is controlled by Swedish cement maker Holcim, has expanded in the South Asia region with acquisition of an 85% stake in Nepal's Dang Cement Industries Pvt. Ltd. Ambuja Cement will pay Rs 19.13 crore. As Ambuja looks for aglobal footprint, these acquisitions will helpthe cement major in setting a foot in the dooron the global arena. 6. By picking up a controlling stake in DLF Cements and a strategic 7.2 per cent stake in ACC, Gujarat Ambuja has strengthened its hold on the Indian cement industry. 7. The deals come at a time when Lafarge, which has close to 100 million tonnes worldwide, is looking at acquisitions to bolster its Indian capacities. It had earlier acquired Tisco's cement unit for Rs. 550 crores, in the most expensive deal to date. 8. In a restructuring of its core investments in the cement sector, the company transferred its stake in ACC (7.2 per cent) and Ambuja Cement Eastern (93.25 per cent) to a subsidiary _ Ambuja Cement India Ltd. In this exercise, Ambuja Cement has been valued at Rs. 930 crores after the stake transfer.
A The cash flows of Rs. 372 crores from the sale of stake in Ambuja Cement may shore up the balance-sheet of Gujarat Ambuja Cements and relieve the stress on account of the outlays incurred in acquiring a 51 per cent stake in DLF Cement and the 7.2 per c ent stake in ACC at Rs. 370 per share
Internal development strategies: 1. Ambuja Cements is a company of people. The environment brings out the best in people, helps them fulfil their true potential. The strength of the company lies in its ‘people power’. The technology is cutting-edge, the facilities world class, but it’s people who make the difference. Respect for the individual at every level is strong and evident in every Ambuja Cements plant or office. This is a company that truly believes that its people are its most important asset. 2. This unique vision is encapsulated in the company’s home-grown philosophy of giving people the authority to set their own targets, and the freedom to achieve their goals. It’s called ‘I can’’ This simple vision has created an environment where there are no limits to excellence, no limits to efficiency. And has proved to be a powerful engine of growth for the company. As a result, Ambuja has consistently raised the bar in all aspects of the cement industry. Be it transportation, plant efficiency, brand building or human resource development. 3. From the outset, Ambuja has believed that a cement plant cannot flourish at the cost of the environment. That’s why it adheres to the most rigorous international environmental norms.The pollution levels at all its cement plants are even lower than the rigorous Swiss standards of 100 mg/NM. 4. The company has consistently won awards for its pollution free plants. Awards as prestigious as the National Award for Outstanding Pollution Control and The EcoGold Star of Tata Energy Research Institute (TERI). 5. ACL has developed the Stretch Program. This program asks employees and middle level executivesto step out of their comfortzone, stretch theirbilities and try to reach out for something new. There are 2 to 3 weeks intensive training programmes for those who enrol. 6. It has set up the AmbujaCement Foundation which has taken prerogatives in several CSR activitieslike rural empowerment, literacy, woman empowerment etc which has made Ambuja a very reliable and trusted name in the corporate circle.
SWOT Analysis of Ambuja Cements Ltd: Strengths: 1. Ambuja cements being one of the oldest in the business, has a trusted brand value to it and it commands premium on the cement it sells.
2. Large capital backing and already installed multi million tonne capacity productions
units have made Ambuja India’s 3rd biggest cement producer.
3. A very wide and efficient distribution channel to ensure efficient delivery of cement
to every nook and corner of the country. 4. It has dedicated ports and ships for transport. 5. Its recent stake buy in DLF and ACC have made Ambuja a force to reckon with and has given it a very much controlling hand in the sector itself.
6. It sits on a huge cash pile, looking for opportunities to invest and expand. 7. The quality of cement that Ambuja offers is of the best type.
8. Its JV partner, Holcim has also been instrumental in the rise of ACL and is still taking it from strength to strength.
Weaknesses: 1. Its demands depend a lot upon weather. 2. Recent market happenings, especially in the infrastructure have caused its stock to tumble. 3. Although the exports have increased tremendously, local demand hasn’t shown that spark. Opportunities: 1. With the support of its foreign partner, Holcim, ACL is looking for potential acquisition targets and for places to set up its plant. 2. With its smart move of picking up stake in DLF and ACC, ACL has now paved way for it to be the market leader. 3. ACL being situated in the fastest developing state of India, Gujarat, will have plenty of opportunities and contracts to increase its top line and bottom line. 4. Once the economy again booms, the investment in the infrastructure sector will again start which will even out the small problems faced by it. Threats: 1. Its closest competitor, ACC is always at its heel. 2. A gradual slump in cement demand since the last 2 years. 3. The share price of ACL often misleads investors about its true status.
Ambuja Cements Ltd has been one of the pioneers of the cement industry. As numbers show it has been able to clock regular profits, even in difficult times. It has been a true industry veteran and has led the way in many things. Its CSR activities and governance structure has always allowed ACL to command respect and it has been rightly given so. ACL has done its part in putting the Indian Cement Industry on the global map.
Competitor Analysis
ACL ‘s top competitors in terms of market cap and total assets are UltraTech Cement, ACC and Shree Cements.
Name UltraTechCement Ambuja Cements ACC Shree Cements Last Price 1,566.60 168.95 1,259.30 2,934.65 Market Cap.
(Rs. cr.)
42,938.13 26,003.56 23,668.54 10,223.51
Sales Turnover 18,313.13 8,602.89 9,660.30 4,625.22
Net Profit 2,446.19 1,228.86 1,325.26 266.98
Tota
16 8 7 3
The closes competitor to Ambuja Cements is ACC. ACC( Associated Cement Company)
? ACC (ACC Limited) is India's foremost manufacturer of cement and concrete.
? ACC has a unique track record of innovative research, product development and specialized consultancy services ? It is the only cement company that figures in the list of Consumer SuperBrands of India. ? The world’s largest cement maker, Holcim, which has a controlling stake in ACL is also a promoter of ACC. ? Its net sales revenue was Rs 9439 crore with an operating margin of 20%. ? Its profit after tax was Rs 1325crores compared to 1229 crores of Ambuja Cement.
? Acc will invest Rs 3,300 crore over three years to increase its capacity by 16 per cent,
to 35 million tonnes per annum from 30 mtpa. ? Both companies, ACC and ACL posted moderate growth in the last F.Y.
HOW THEY STACK UP
In Rs crore Net sales % change Ebitda % change Ebitda (%) Adjusted net profit % change EPS (Rs) PE (x) ACC AMBUJA CEMENTS Q1CY12 CY2012E Q1CY12 CY2012E 3,015 11,162 2,633 9,679 18.6 10.3 19.0 13.7 618 2,126 745 2,285 14.0 6.0 21.0 16.0 20.5 19.0 28.3 23.6 428 1,278 509 1,412 22.3 -1.6 25.0 11.6 8.1 68.5 2.0 9.1 18.2 17.4
Partnerships, JVs and Acquisitions of ACC o In 2005, Holcim group of Switzerland enters strategic alliance with Ambuja Group by acquiring a majority stake in Ambuja Cements India Ltd. (ACIL) which at the time held 13.8 % of the total equity shares in ACC. Holcim simultaneously makes an open offer to ACC shareholders, through Holdcem Cement Pvt. Limited and ACIL, to acquire a majority shareholding in ACC. Pursuant to the open offer, ACIL’s shareholding in ACC increases to 34.69 % of the Equity share capital of ACC. o In 2006, Subsidiary companies Damodhar Cement & Slag Limited, Bargarh Cement Limited and Tarmac (India) Limited merged with ACC. o In 2010, ACC acquires 100 percent of the financial equity of Encore Cements & Additives Private Limited which is a slag grinding plant in Vishakhapatnam in coastal Andhra Pradesh. This company became a wholly-owned subsidiary of ACC in January 2010. o In 2011, World's largest kiln installed at ACC Cement Plant, Wadi, Karnataka with a capacity of 12,500 tonnes per day creating new landmarks for cement industry
Distribution and procurement 1. ACC has a countrywide spread of 14 modern cement plants. This large network of manufacturing units consumes a wide spectrum of inputs – about 60,000 different items ranging from Coal, Gypsum, Slag, Packaging material (bags), Refractories, Steel etc. 2. ACC has a vendor base of more than 6000 suppliers spread across the country.
Social Responsibility: ? ACC has undertaken social volunteering practices almost from its inception
? The company’s earliest initiatives in community development date back to the 1940's
in a village on the outskirts of Mumbai while the first formal Village Welfare Scheme was launched in 1952.
? The company has CSR programmes for education ,healthcare, HIV/AIDS, Disaster
Relief
As the numbers show, ACL and ACC have always run neck to neck. These two industry veterans have led the cement industry to a new high, along with UltraTech Cement. The top three have shaped the present and laid the path for the future of Indian Cement Industry.
Data Sources: www.google.com www.wikipedia.comhttp://www.emt-india.nethttp://www.ibef.org www.reuters.comhttp://www.cemweek.com The Indian Cement Journal Cement Corporation of India – Annual Report www.MoneyControl.com www.TimesofIndia.com www.economictimes.com www.ambujacements.com www.acclimited.com Ambuja Cements annual report Market Research by several Research firms
doc_431157343.doc
It explains about Industry Trends of cement industry, PEST Analysis of cement Industry, Competitor Analysis, SWOT analysis, Company Description, General Information about Ambuja cements, it's Finance performance, SWOT analysis and Various Strategies employed.
Ambuja Cements – Company Analysis
The Indian Cement Industry
An overview
The Indian cement industry is the 2nd biggest cement industry in the world, behind China. . It accounts for nearly 6% of the world production. There are 124 large plants and around 365 mini plants. It had a total capacity of about 119 million metric tons per annum. The Indian cement industry is about 90 years old and its main sources of energy are thermal and electrical energy. Our cement industry has the unique distinction of operating very large to very small capacity and very modern to very old technology plants. The Indian cement industry is a mixture of mini and large capacity cement plants, ranging in unit capacity per kiln as low as 10 tpd to as high as 7500 tpd Indian cement industry has been very proactive in adopting various technological advancements taking place all over the world. This was particularly triggered by the partial decontrol of cement industry in 1982 followed by full decontrol in 1989 giving the resultant free market competition an opportunity for growth in production and productivity. Ownership is mostly private (85% of installed capacity) and centralized for the large plants with four production houses controlling most units. The top players comprises of UltraTech, ACC, Ambuja Cements, Jaiprakash Associates, India Cements Cement, being a bulk commodity, is a freight intensive industry and transporting it over long distances can prove to be uneconomical. This has resulted in cement being largely a regional play with the industry divided into five main regions viz. north, south, west, east and the central region. Thus the cement industry runs in a lot of co-relation with transport industry, affected by several factors.
Recent trends and happenings in the industry:
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The 330 MT industry grew by 6.4 per cent in 2011-12 as against less than 5 per cent in 2010-11. The industry sold 223.02 MT of the building material, compared with 209.5 MT in FY11. The cement production increased from 137.16 million tonnes (MT) in April 2010 January 2011 to 145.00 in April 2011 - January 2012 Cement output continued to post double-digit growth for the fourth consecutive month at 10.8 per cent.
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. While cement despatches increased from 136.18 MT in April 2010 - January 2011 to 143.96 MT in April 2011 - January 2012, according to data provided by the Cement Manufacturers' Association (CMA). Cement prices have strengthened in most parts of India, up 14 per cent year-on-year and eight per cent sequentially in the March quarter. However, most of the increases have come as a measure to meet the rise in input costs. On a global perspective, world demand for cement is forecast to grow 4.7 percent per year to 3.5 billion metric tons in 2012. Gains will be driven by strong increases in cement consumption in the developing countries of the world, fueled by rising income levels and a focus on infrastructure development The latest Global Cement Volume Forecast analysis by the CW Group shows global cement consumption growth will trend around six percent in 2012, reaching 3.78 billion tons. The chief driver of global consumption growth will continue to be China, which will consume 2.22 billion tons of cement by 2012. On a regional basis, Western European consumption remained virtually stalled while North American managed two percent growth in 2011. Generally, Africa and parts of Asia and Latin America are seeing the biggest capacity additions in the next few years. In 2012, the regions of Asia, Latin America, and the Middle East will keep pace with the global cement consumption average of six percent. . 100 % FDI is allowed in the cement industry. This has brought in several players of the global market into the Indian market. One of the biggest JV in the industry was the association of Holcim with Ambuja Cement in 2006, when its acquired controlling stake in the company in 2006. Holcim is the world’s 2nd largest cement manufacturer. Lafarge, the third biggest producer of cement in the world, has opened its unit in India, Lafarge India. Lafarge India plans integrated cement plant at DPF Ghanger in Karsog Tehsil in Mandi district of Madhya Pradesh. The project involves setting up of a cement unit with capacity of 3.0 mtpa. The project will entail an investment of Rs.9080 million. Shriram Group, a Rs 50,000 crore (US$ 8.96 billion) diversified Chennaiheadquartered conglomerate, is firming up a strategic plan to consolidate its presence in the cement sector. Shriram EPC, a publicly held company of Shriram Group, has recently entered the cement sector by acquiring majority stake in Andhra Pradeshbased cement manufacturer, Sree Jayajothi Cements Ltd.
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Swiss cement major, Holcim's India arm has beaten domestic giant UltraTech, during 2011-12. Holcim's reported a growth of 8.3 per cent in 2011-12, while UltraTech Cement showed a growth of 3.5 per cent in its sales With capacity addition taking place at a faster rate as compared to demand, prices have remained southbound, especially in the last one year. Nevertheless, considering the government’s thrust on infrastructure, long term demand remains intact. The recent economic turmoil has its effect on the cement industry too. The credit crunch resulting from the monetary tightening impacted real estate, infrastructure and other construction projects. Prolonged monsoons and logistical constraints further dampened the construction work. On the cost front, rising input and fuel costs severely hurt the margins of cement players. Export markets also remained sluggish due to the slowdown in the global economy, and particularly the sagging construction activity in the Gulf region. In the Union Budget 2011-12, the government restructured the excise duty on cement in a way that would effectively increase the tax incidence on the cement industry. The Competition Commission of India (CCI) has imposed penalty on cement companies finding them guilty of cartelization under section 3 of the competition act. The penalty is imposed @ 50% of net profit for FY10 & FY11 and is 1.7-2X of what we had expected it to be. Penalty works out to an average ~13% of last 3 years average turnover, Technologically speaking too, the cement industry has undergone many changes throughout the years. Over the last 30 years, the more energy-intensive wet process of cement production has been virtually phased out. Other process specific measures that have increasingly found application in the Indian cement industry include multi-stage suspension preheaters, precalciners, cyclone designs of kilns, and improved burners. Also there has been a lot of focus on clean and green production with a lot of corporate indulging inactivates and initiating steps to have minimum effect on the environment. In relation to other energy-intensive industries, such as iron and steel where energy savings potentials of 50% were identified (Schumacher and Sathaye, 1998), the gap in the cement sector turns out to be much lower. This supports our findings that Indian dry process cement plants today are already quite modern and energy efficient. Several technologies have come up and are being used to reduce energy consumptions of the cement plants.
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PEST Analysis of the cement industry
Political: 1. The price of cement is primarily controlled by following rates which are predominantly controlled by government; Coal rates, oil rates, taxes like GST, Royalties, Limestone mining charges etc. 2. The government is trying a lot to invest in infrastructure, to the tune of 1 trillion $, so cement industries have a lot to look forward to.
3. Govt. programs like NREGS, Indira Awaas Yojana, rising minimum support prices
enhance rural income which boosts cement demand in rural areas
4. The total Government levies and taxes which include Royalty on Limestone, Royalty
on Coal,Electricity Duty, VAT/Sales Tax etc., on cement constitute about 60% or more of the ex-factoryprice of cement. Economical: 1. With government looking to boost the economy and increase development, the infrastructure sector will ensure topline growth of the sector.
2. The per capita consumption of cement in India (about 155 kg) is much less
compared to average per capita consumption (about 380 kg) for the rest of the world. Hence Indian cement industry has large potential to grow.
3. Growth in tourism sector is fuelling the increase in the construction of hotels in the
country. 4. The government’s decision to allow 100 % FDI in the sector has also been very instrumental in allowing cement industries to reach the level they are at today.
5. Upcoming industrial clusters and infrastructure development in emerging tier-II
and tier IIIcities
6. Looking at the growth rate of Indian cement industry and capacity expansions, it is
expected thatcement industry will create good number of jobs in the next 4-5 years. Social: 1. The cement industry’s growth is directly related to growth of the country and increased income of people. 2. It has been able to provide employment to a lot of people. 3. Cement industry firms have been very actively indulging in CSR activities, promoting education for unprivileged, supporting clean and green tech etc. 4. Since cement industry is an energy intensive industry with high emissions, latest technologies have to be used to have energy efficiency and to meet the environmental standards. Technological: 1. The wet process is now being replaced by the dry process. It reflects need for energy conservation.
2. Changes are being made in the design of cement kiln and blowing furnaces which promote use of kiln for utilization of wastes. 3. Renewable sources of fuel, unlike coal are being researched to be used in the plants. 4. Transport systems for transport of cement are being updated. 5. Effectively and accurately finding limestone reserves and better mining techniques can reduce per unit cost of limestone.
SWOT analysis of the cement industry Strengths: • Cement is, literally, the building block of the construction industry. Almost every building constructed relies on cement for its foundation. The cement business is a $10 billion industry, measured by annual cement shipments. • Cement is a solid material and consumers rarely have complaints about the product. • Also the distribution channels of cement manufacturers have been very efficient ensuring timely and economic cement supply. • Cement companies have established themselves as brand names. • High selling prices and profitability levels due to supply shortage. • FDI investments have bolstered the cause of cement industries. • Natural hedge from outside competition arising from high transportation costs • Capital-intensive industry with long construction periods, creating natural barrier to new entrants Weaknesses: • Cement industry is affected by prices of commodities like oil, coal etc. • Continuously increasing transportation costs, shipping cement costs more than the profit from selling it. • Proximity to lower cost export markets in Indian subcontinent, Egypt and Turkey, increasing competition in both local and export markets • The cement industry heavily relies on weather. About two-thirds of cement production takes place between May and October. • The cement industry relies on construction jobs to create a profit. Opportunities: • Emerging economies will keep on spending on infrastructure and thus the cement industry will keep prospering. • The government of India has made special investments in the sector. • The cement industry's efficiency: The cement industry has recently streamlined its production efforts, using dry manufacturing instead of wet, which is heavier and more time-consuming. • The cement industry has also invested about $6 billion in expansion efforts to meet unmet cement needs.
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A number of M&A transactions might take place in the near Future
Threats: • The nature of the economy has uncovered a number of threats to the cement industry. It relies heavily on the economic scenario. • The cement industry greatly relies on construction. The current economy has lessened the number of construction jobs, which in turn hurts the cement industry. • Further hikes in oil prices could negatively affect companies’ profitability if they cannot pass increase in production costs on to customers. • Taxes and other royalties levied on the industry may increase.
Ambuja Cements Ltd.
Introduction: Ambuja Cements Ltd. (ACL) is one of the leading cement manufacturing companies in India. The Company, initially called Gujarat Ambuja Cements Ltd., was founded by Narotam Sekhsaria in 1983 with a partner, Suresh Neotia. It is counted in the top four of the industry in India Ambuja is the 3rd largest cement company in India, with an annual plant capacity of 16 million tonnes including Ambuja Cement Eastern Ltd. and revenue in excess of Rs.3298 crores. The Company commenced cement production in 1986. The 43 grade OPC is the most popular general-purpose cement in the country today. The production of 43 grade OPC is nearly 50% of the total production of cement in the country General Information about the company Gujarat Ambuja Cements, now called as Ambuja Cements Ltd, has set up its own township near its primary manufacturing plant, called Ambujanagar, in Junagadh. Its corporate office is located in Kodinar taluka, Junagad, Gujarat. The company was founded in 1983 and commenced production in 1986. Holcim took controlling stake in 2006. ACL enjoys a reputation of being one of the most efficient cement manufacturers in the world. Its environment protection measures are on par with the finest in the country. It is one of the most profitable and innovative cement companies in India. ACL is the first Indian cement manufacturers to build a captive port with three terminals along the country’s western coastline to facilitate timely, cost effective and environmentally cleaner shipments of bulk cement to its customers. The Company has its own fleet of ships. Top Management:
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N. S. Sekhsaria, Chairman
An industrialist reputed for his business acumen, Mr. Sekhsaria is the main promoter of Ambuja Cements Limited. He has created new benchmarks in the cement industry with pathbreaking and innovative thinking and turned cement from a commodity into a brand. He is Chairman of ACC Ltd. and also of Ambuja Cements Limited.
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Paul Hugentobler, Vice Chairman
Mr, Hugentobler, a Swiss national, joined Holcim Group Support Limited in 1980 as Project Manager and in 1994 was appointed Area Manager. He has been a member of the Executive Committee of Holcim since January 2002 with responsibility for South Asia and ASEAN
excluding Philippines. He joined the Board in May 2006 and in September 2009 was made Non-executive Vice Chairman.
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Bernard Fontana, Director
Bernard Fontana, a French national, began his career with Groupe SNPE in France. Since then, he's moved on to become the Head of US operations and thereafter, a member of the Executive committee at Groupe SNPE; HR, IT and Business Development Head at Flat Carbon, a member of the Executive Committee at ArcelorMittal and the CEO of Aperam; before joining Holcim Ltd. on February 1, 2012 as CEO.
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M L Bhakta, Director
Mr. Bhakta is a senior partner of Messrs Kanga & Company, a leading firm of advocates and solicitors in Mumbai. He has vast experience in the legal field, especially in matters relating to corporate law, banking and taxation. He was Chairman of the Taxation Law Standing Committee of LAW ASIA. He joined the board in 1985.
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Nasser Munjee, Director
A Master’s degree holder from the London School of Economics, Mr. Munjee is a board member of a number of companies. He has a deep interest in rural development, housing finance and urban issues, specially the development of modern cities and humanitarian causes. He has been awarded the “Best Non-Executive Independent Director 2009’ award by The Asian Centre for Corporate Governance. He joined the board in 2001.
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Rajendra P Chitale, Director
An eminent Chartered Accountant, Mr. Chitale is the managing partner of M/s M.P. Chitale & Associates. He has served as a member of the Insurance Advisory Committee, the Company Law Advisory Committee and other committees of the Government of Maharashtra and the Government of India. He is on the board of several large corporations. He joined the board in July 2002.
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Shailesh Haribhakti, Director
Mr. Haribhakti Is the Executive Chairman of BDO Consulting Private Ltd and the Managing Partner of Haribhakti & Co – Chartered Accountants. He is on the Board of Directors of several private and listed companies. He has been awarded the ‘Best Non-Executive Independent Director 2007’ award by The Asian Centre for Corporate Governance. He joined the Board in May 2006.
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Omkar Goswami, Director
A professional economist, Dr. Goswami has taught and researched economics for nearly two decades. In 1997, he moved away from formal academics to become the editor of Business India, one of India’s prestigious business magazines. He has served as the Chief Economist of the Confederation of Indian Industry and is on the Board of several large companies. He joined the Board in July 2006.
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Naresh Chandra, Director
A Padma Vibhushan awardee in 2007, Mr. Naresh Chandra is a postgraduate from the Allahabad University. He has held several important positions within the Government of India, including Governor of the State of Gujarat and India’s ambassador to the United States. He is a Director on the Board of ACC and several other reputed companies. He joined the board in July 2008.
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Onne van der Weijde, Managing Director
A Dutch national, Mr. Onne joined Holcim in the year 1996 and after holding various positions, he was appointed Director and General Manager for Holcim (India) Pvt. Ltd. in March 2005. He was the CFO of ACC between 2006 and 2008. He has a lot of experience of the cement industry. He joined the Board in January 2009.
Ajay Kapur- CEO, Ambuja Cements
Sanjay Churiwala- CFO, Ambuja Cements A Chartered Accountant by profession and an alumnus of the London Business School. 17 years of experience in operational & Finance leadership roles as a CFO,General Manager(Commerical) & Dy.General Manager(Projects).
Shareholding Pattern: Jun-2012 Promoter and Promoter Group Indian Foreign Public Mar-2012 Dec-2011 Sep-2011
50.17 %
50.27 %
50.29 %
50.35 %
50.39 %
-50.17 % 47.20 %
-50.27 % 47.09 %
-50.29 % 47.38 %
0.79 % 49.56 % 47.51 %
0.79 % 49.60 % 47.83 %
Institutions FII DII Non Institutions Bodies Corporate Custodians Total
38.65 % 26.24 % 12.41 % 8.55 % 0.51 % 2.63 %
38.34 % 25.79 % 12.55 % 8.75 % 0.60 % 2.64 %
38.62 % 25.01 % 13.61 % 8.76 % 0.50 % 2.33 %
38.43 % 23.97 % 14.46 % 9.08 % 0.61 % 2.14 %
38.38 % 23.74 % 14.64 % 9.45 % 0.58 % 1.78 %
1,53,81,48,711 1,53,50,54,961 1,53,43,69,261 1,53,26,27,161 1,53,16,74,911
Financial Performance of the company in the last year: Net Sales 8,515 Operating EBITDA 1,994 Net Worth 8,069 Profit Before Tax 1,703 Profit After Tax 1,229 Operating EBITDA / Net Sales 23% Price Earning Ratio # 19.37 Debt Equity Ratio (Debt/ (Debt+NW)) 0.01 Looking at a quarterly performance
HEADS Revenue Other Income Total Income Expenditure Interest PBDT Depreciation PBT Tax Net Profit Equity EPS
Mar-12 2,660.93 87.08 2,748.01 -2,167.97 -16.80 563.24 -120.89 442.35 -130.13 312.22 307.01 2.03
Dec-11 2,357.68 65.11 2,422.79 -1,932.31 -9.86 480.62 -123.80 356.82 -54.42 302.40 306.87 1.97
Sept-11 1,833.67 57.10 1,890.77 -1,514.27 -13.79 362.71 -107.87 254.84 -83.36 171.48 306.53 1.12
Jun-11 2,189.07 56.15 2,245.22 -1,590.64 -15.19 639.39 -107.37 532.02 -184.52 347.50 306.33 2.27
Mar-11 2,222.47 52.09 2,274.56 -1,595.47 -13.79 665.30 -106.11 559.19 -151.71 407.48 306.04 2.66
CEPS OPM % NPM %
2.82 21.80 11.73
2.78 20.80 12.83
1.82 20.53 9.35
2.97 29.90 15.87
3.36 30.56 18.33
Other important financial news about the company: • • •
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Last traded price – Rs 168.75 52-week high- Rs 182 It had surplus cash of Rs 7,700 crore as of December last year. Ambuja, which follows a January-December accounting year, saw net profit drop 2.8% at Rs. 12.29 billion for 2011. Net sales for the year rose 15.2% to Rs.85.15 billion. In June, despatches of Ambuja's stood at 1.79 MT over 1.66 MT last year. Ambuja derives 38 per cent of its sales from western India and 40 per cent from the northern region. . In case of Ambuja, production for the first six months grew to 11.67 MT against 10.79 MT in the same period last year, while its despatches for the period stood at 11.67 MT from 10.77 MT in the corresponding period last year.
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Special milestones achieved by Ambuja Cement: 1. In 1993, Ambuja Cement set up a complete system of transporting bulk cement via the sea route. Making it the first company in India to introduce bulk cement movement by sea. Others followed and today, about 10% cement travels by this new route. The facility comprises: A dedicated port at the Gujarat plants, capable of berthing 40,000 DWT vessels, three bagging terminals at Mumbai, Surat and Sri Lanka, and seven special bulk cement vessels. 2. Cement is a commodity, sold largely on price. Ambuja Cement was the first company to create a brand out of cement and command a premium. 3. It was also the first to introduce a special cell, providing technical services to consumers and masons. Today, this has become the norm in cement marketing. The trick of course was to provide a consistently high quality of cement, backed by excellent service. This was reinforced by a strong dealer network.
Various strategies, decisions employed, Joint Ventures by Ambuja cement Joint Ventures and Acquistions: 1. Ambuja Cements plans to invest Rs 1,800 crore by December 2013 to expand its production capacity. The company proposes to fund the project through internal accruals. It had surplus cash of Rs 7,700 crore as of December last year. 2. The company will set up a 2.2-million-tonne clinkerisation unit at Nagaur in Rajasthan. The feasibility study for the project is completed and environmental clearance has been obtained. This clinkerisation unit will be a major boost to the production capacity of Ambuja, as it plans to raise its capacity by a phenomenal amount. 3. The company, along with IST Steel and Lafarge India, was allotted a coal block in Maharashtra by the Ministry of Coal for captive use. Ambuja Cements holds a 27.27 per cent stake in the joint venture which is in the process of obtaining statutory clearances such as mining lease, and environmental and forest clearances. 4. Ambuja Cements Ltd has Company has acquired 60% equity shares from the existing promoters of Dirk India Pvt. Ltd. for a consideration of Rs. 16.51 crores. Dirk India Pvt. Ltd. is a Company incorporated in Maharashtra and is the first processed fly ash manufacturing and marketing company in India with a capacity of 2500 TPD. 5. Ambuja Cements Ltd, which is controlled by Swedish cement maker Holcim, has expanded in the South Asia region with acquisition of an 85% stake in Nepal's Dang Cement Industries Pvt. Ltd. Ambuja Cement will pay Rs 19.13 crore. As Ambuja looks for aglobal footprint, these acquisitions will helpthe cement major in setting a foot in the dooron the global arena. 6. By picking up a controlling stake in DLF Cements and a strategic 7.2 per cent stake in ACC, Gujarat Ambuja has strengthened its hold on the Indian cement industry. 7. The deals come at a time when Lafarge, which has close to 100 million tonnes worldwide, is looking at acquisitions to bolster its Indian capacities. It had earlier acquired Tisco's cement unit for Rs. 550 crores, in the most expensive deal to date. 8. In a restructuring of its core investments in the cement sector, the company transferred its stake in ACC (7.2 per cent) and Ambuja Cement Eastern (93.25 per cent) to a subsidiary _ Ambuja Cement India Ltd. In this exercise, Ambuja Cement has been valued at Rs. 930 crores after the stake transfer.
A The cash flows of Rs. 372 crores from the sale of stake in Ambuja Cement may shore up the balance-sheet of Gujarat Ambuja Cements and relieve the stress on account of the outlays incurred in acquiring a 51 per cent stake in DLF Cement and the 7.2 per c ent stake in ACC at Rs. 370 per share
Internal development strategies: 1. Ambuja Cements is a company of people. The environment brings out the best in people, helps them fulfil their true potential. The strength of the company lies in its ‘people power’. The technology is cutting-edge, the facilities world class, but it’s people who make the difference. Respect for the individual at every level is strong and evident in every Ambuja Cements plant or office. This is a company that truly believes that its people are its most important asset. 2. This unique vision is encapsulated in the company’s home-grown philosophy of giving people the authority to set their own targets, and the freedom to achieve their goals. It’s called ‘I can’’ This simple vision has created an environment where there are no limits to excellence, no limits to efficiency. And has proved to be a powerful engine of growth for the company. As a result, Ambuja has consistently raised the bar in all aspects of the cement industry. Be it transportation, plant efficiency, brand building or human resource development. 3. From the outset, Ambuja has believed that a cement plant cannot flourish at the cost of the environment. That’s why it adheres to the most rigorous international environmental norms.The pollution levels at all its cement plants are even lower than the rigorous Swiss standards of 100 mg/NM. 4. The company has consistently won awards for its pollution free plants. Awards as prestigious as the National Award for Outstanding Pollution Control and The EcoGold Star of Tata Energy Research Institute (TERI). 5. ACL has developed the Stretch Program. This program asks employees and middle level executivesto step out of their comfortzone, stretch theirbilities and try to reach out for something new. There are 2 to 3 weeks intensive training programmes for those who enrol. 6. It has set up the AmbujaCement Foundation which has taken prerogatives in several CSR activitieslike rural empowerment, literacy, woman empowerment etc which has made Ambuja a very reliable and trusted name in the corporate circle.
SWOT Analysis of Ambuja Cements Ltd: Strengths: 1. Ambuja cements being one of the oldest in the business, has a trusted brand value to it and it commands premium on the cement it sells.
2. Large capital backing and already installed multi million tonne capacity productions
units have made Ambuja India’s 3rd biggest cement producer.
3. A very wide and efficient distribution channel to ensure efficient delivery of cement
to every nook and corner of the country. 4. It has dedicated ports and ships for transport. 5. Its recent stake buy in DLF and ACC have made Ambuja a force to reckon with and has given it a very much controlling hand in the sector itself.
6. It sits on a huge cash pile, looking for opportunities to invest and expand. 7. The quality of cement that Ambuja offers is of the best type.
8. Its JV partner, Holcim has also been instrumental in the rise of ACL and is still taking it from strength to strength.
Weaknesses: 1. Its demands depend a lot upon weather. 2. Recent market happenings, especially in the infrastructure have caused its stock to tumble. 3. Although the exports have increased tremendously, local demand hasn’t shown that spark. Opportunities: 1. With the support of its foreign partner, Holcim, ACL is looking for potential acquisition targets and for places to set up its plant. 2. With its smart move of picking up stake in DLF and ACC, ACL has now paved way for it to be the market leader. 3. ACL being situated in the fastest developing state of India, Gujarat, will have plenty of opportunities and contracts to increase its top line and bottom line. 4. Once the economy again booms, the investment in the infrastructure sector will again start which will even out the small problems faced by it. Threats: 1. Its closest competitor, ACC is always at its heel. 2. A gradual slump in cement demand since the last 2 years. 3. The share price of ACL often misleads investors about its true status.
Ambuja Cements Ltd has been one of the pioneers of the cement industry. As numbers show it has been able to clock regular profits, even in difficult times. It has been a true industry veteran and has led the way in many things. Its CSR activities and governance structure has always allowed ACL to command respect and it has been rightly given so. ACL has done its part in putting the Indian Cement Industry on the global map.
Competitor Analysis
ACL ‘s top competitors in terms of market cap and total assets are UltraTech Cement, ACC and Shree Cements.
Name UltraTechCement Ambuja Cements ACC Shree Cements Last Price 1,566.60 168.95 1,259.30 2,934.65 Market Cap.
(Rs. cr.)
42,938.13 26,003.56 23,668.54 10,223.51
Sales Turnover 18,313.13 8,602.89 9,660.30 4,625.22
Net Profit 2,446.19 1,228.86 1,325.26 266.98
Tota
16 8 7 3
The closes competitor to Ambuja Cements is ACC. ACC( Associated Cement Company)
? ACC (ACC Limited) is India's foremost manufacturer of cement and concrete.
? ACC has a unique track record of innovative research, product development and specialized consultancy services ? It is the only cement company that figures in the list of Consumer SuperBrands of India. ? The world’s largest cement maker, Holcim, which has a controlling stake in ACL is also a promoter of ACC. ? Its net sales revenue was Rs 9439 crore with an operating margin of 20%. ? Its profit after tax was Rs 1325crores compared to 1229 crores of Ambuja Cement.
? Acc will invest Rs 3,300 crore over three years to increase its capacity by 16 per cent,
to 35 million tonnes per annum from 30 mtpa. ? Both companies, ACC and ACL posted moderate growth in the last F.Y.
HOW THEY STACK UP
In Rs crore Net sales % change Ebitda % change Ebitda (%) Adjusted net profit % change EPS (Rs) PE (x) ACC AMBUJA CEMENTS Q1CY12 CY2012E Q1CY12 CY2012E 3,015 11,162 2,633 9,679 18.6 10.3 19.0 13.7 618 2,126 745 2,285 14.0 6.0 21.0 16.0 20.5 19.0 28.3 23.6 428 1,278 509 1,412 22.3 -1.6 25.0 11.6 8.1 68.5 2.0 9.1 18.2 17.4
Partnerships, JVs and Acquisitions of ACC o In 2005, Holcim group of Switzerland enters strategic alliance with Ambuja Group by acquiring a majority stake in Ambuja Cements India Ltd. (ACIL) which at the time held 13.8 % of the total equity shares in ACC. Holcim simultaneously makes an open offer to ACC shareholders, through Holdcem Cement Pvt. Limited and ACIL, to acquire a majority shareholding in ACC. Pursuant to the open offer, ACIL’s shareholding in ACC increases to 34.69 % of the Equity share capital of ACC. o In 2006, Subsidiary companies Damodhar Cement & Slag Limited, Bargarh Cement Limited and Tarmac (India) Limited merged with ACC. o In 2010, ACC acquires 100 percent of the financial equity of Encore Cements & Additives Private Limited which is a slag grinding plant in Vishakhapatnam in coastal Andhra Pradesh. This company became a wholly-owned subsidiary of ACC in January 2010. o In 2011, World's largest kiln installed at ACC Cement Plant, Wadi, Karnataka with a capacity of 12,500 tonnes per day creating new landmarks for cement industry
Distribution and procurement 1. ACC has a countrywide spread of 14 modern cement plants. This large network of manufacturing units consumes a wide spectrum of inputs – about 60,000 different items ranging from Coal, Gypsum, Slag, Packaging material (bags), Refractories, Steel etc. 2. ACC has a vendor base of more than 6000 suppliers spread across the country.
Social Responsibility: ? ACC has undertaken social volunteering practices almost from its inception
? The company’s earliest initiatives in community development date back to the 1940's
in a village on the outskirts of Mumbai while the first formal Village Welfare Scheme was launched in 1952.
? The company has CSR programmes for education ,healthcare, HIV/AIDS, Disaster
Relief
As the numbers show, ACL and ACC have always run neck to neck. These two industry veterans have led the cement industry to a new high, along with UltraTech Cement. The top three have shaped the present and laid the path for the future of Indian Cement Industry.
Data Sources: www.google.com www.wikipedia.comhttp://www.emt-india.nethttp://www.ibef.org www.reuters.comhttp://www.cemweek.com The Indian Cement Journal Cement Corporation of India – Annual Report www.MoneyControl.com www.TimesofIndia.com www.economictimes.com www.ambujacements.com www.acclimited.com Ambuja Cements annual report Market Research by several Research firms
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