The Cement industry has continued its growth trajectory over the past seven years.

Domestic cement
demand growth has surpassed the economic growth rate of the country for the past couple of years
The Cement industry has continued its growth trajectory over the past seven years. Domestic cement
demand growth has surpassed the economic growth rate of the country for the past couple of years. Over
the past five years (FY03-07), cement demand has grown at a CAGR of 8.37% higher than the CAGR of
supply at 4.84%. Demand for cement in the country is expected to continue its buoyant ride on the back
of
robust economic growth and infrastructure development in the country.
The key drivers for cement demand are real estate sector, infrastructure projects and industrial expansion
projects. Among these, real estate sector is the key driver and accounted for almost 55% of cement
demand
in FY 07.
During the period FY 03 – 07, capacity additions in the country (30.6 mn tonnes) were at a slower rate
compared to demand growth leading to higher average capacity utilization rates from 81.3% in FY 03 to
93.8% in FY 07. This exerted pressure on average prices which have increased from Rs. 156 per bag in
FY
03 to Rs. 216 per bag in FY 07. In December 2007, prices stood at Rs. 245 - Rs. 250 per bag.
Low capacity addition coupled with higher utilization rate also led to increase in proportion of blended
cements in product mix. Blended cement accounted for 68% of product mix in FY 07 as compared to 49%
in FY 03.
Cement is a bulky commodity and cannot be easily transported over long distances making it a regional
market place, with the nation being divided into five regions. Each region is characterised by its own
demand-supply dynamics. The Southern region dominated the cement consumption at 44.5 mn tonnes in
FY 07, accounting for about 30% of total domestic cement consumption. During FY 03-07, Southern
region
has witnessed highest CAGR of cement demand at 10.4% followed by Northern and Eastern regions at
8.9% and 9%, respectively.
Over the past five years, cost of cement production has grown at a CAGR of 8.4%. The producers have
been able to pass on the hike in cost to consumers on the back of increased demand. Average realizations
have increased from Rs. 1,880 per tonne in FY 03 to Rs. 3,133 per tonne in FY 07, at a CAGR of 13.6%,
which has resulted in higher profit margins of the industry.
To reduce the cost of production, the industry is increasing its focus on captive power generation.
Proportion of cement production through captive power route has increased over the years. Also, cement
movement by
rail has increased over the years.

Industry Outlook:
The Indian cement industry with a total capacity of about 198 Mln Tonnes is the second largest
market
after China. Although consolidation has taken place in the Indian cement industry with the top
five
players controlling almost 45% of the capacity, the balance capacity still remains pretty
fragmented.
Cement, being a bulk commodity, is a freight intensive industry and transporting cement over
long
distances becomes very 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.
While
the southern region is excess in capacity owing to abundant availability of limestone, the western
and
northern region are the most lucrative markets on account of higher income levels.
Despite apprehensions about the impact of inflation and a slowdown in industrial production and
overall
economic scenario, the outlook for the cement sector remains positive in respect of growth in
demand
in the foreseeable future. Infrastructure and housing are still moving apace. However what is of
concern to the industry are staggering rise in input costs and pressures to cap selling prices at
the
same time. Unless the industry is able to recover cost increases, through suitable adjustments in
selling prices through rational economic considerations, the cement industry will be under
pressure.
Buoyed by the strong demand from realty and infrastructure companies in India, cement
companies
have embarked on massive expansion plans for the coming years. India’s cement industry is
expanding
capacity to meet increasing demand. The industry plans to invest around Rs 50,000 crore in order
to
increase production from 198 MTPA to about 275 MTPA over next two to three years.
These capacities, according to such announcements, are expected to be commissioned over
three-year
period and may create an imbalance in demand and supply, resulting in impact on realization.

June Quarterly results show bleak pictur

industry capacity and utilization level

Operating Capacity
Year capacity utilization(%)
2000 113.7 81
2001 129.9 78.8
2002 136.5 81.6
2003 144.1 81.5
2004 153.6 83.6
2005 157.1 90.2
2006 165.6 93.8
2007 171.95 95
2008 190+ 95

Almost all the cement companies underperformed the benchmark indices by a huge margin in
the last
few months.
This happened due to a two way effect:
_ High inflation rate resulting into continuously rising costs.
_ Increase in interest rates which mainly impacted industries like real estate and infrastructure
causing reduction in demand.
Though demand supply economics seems ok up-till now but companies will be facing lowered
demand
in the months to come.
All this was also affected by postponement in price hike after the government requested to not to
increase prices so as to curb the inflation. Other factors affecting the quarterly results were
violence in
the northern region due to Gujjar agitation which disrupted the transportation for many days
(Northern
region). However demand grew at a healthy pace in the southern region and it has also started
improving in the eastern region. Western region witnessed increased supply in the month of April
and
May due to export ban.
The compulsion on cement companies to hold the price line amidst the rising input cost was
clearly
evident from the flat realization reported by frontline companies in the first quarter of fiscal year
2009
compared with the fourth quarter of fiscal 2008
Net realization (In Rs/50 Kg bag)
Company Name Jan-Mar 2008 Apr-Jun 2008 % Change
Ambuja Cement 172 179 4.07%
ACC 166 172 3.61%
Ultratech Cement 165 170 3.03%
Shree Cement 158 160 1.27%
India Cement 172 177 2.91%
Madras Cement 159 186 16.98%
Though the cement companies have reported a flat realization in the quarter, prices
remained stable at the high levels.
The average price realizations in major cities:
Place Price
Mumbai 270-280
Bangalore 250-255
Chennai 245-250
Hyderabad 230-240
The difference between the cement company’s price realization and the retail price covers
incidental cost such as loading and unloading, transportation, storage, levies and dealer
margins.
ACC Limited:
Spurt in government taxes and duties and raw material prices forced country’s biggest cement
maker,
to record a 27% drop in consolidated net profit at Rs 255 crore for the quarter ended June 30,
2008,
compared with Rs 349 crore a year ago. Profit before tax was down 27% at Rs 300 crore, while
net
sales grew 2% to Rs 1,920 crore.
The company’s government taxes and duties went up by 15% in Q2 ended June year-on-year.
Fuel
costs rose by 41% while the cost of raw materials such as coal, power, fly ash and gypsum went
up by
24%. On the other side cement prices were increased by only 4%, affecting the bottom-line of the
company. The company’s sales volume for the quarter was nearly flat at 5.29 million tonne on
account
of lower availability of cement from two plants and constraints in shipments due to Gujjar
agitation in
Rajasthan.
Future plans:
The major projects being implemented by the company include expansion of capacity at Bargarh,
New
Wadi and Chanda plants. These projects together will add 7.2 million tonnes of capacity raising
the
company’s installed capacity to 30.4 million tones per annum (MTPA) by 2010.

The performance of ACC is more sensitive to price than

volumes. Every
1 percent increase in cement realisation results in 11.28
percent higher
EBIT but every percent decline results in lower EBIT by
18.74 percent. In
FY'02, even in peak season, cement prices have been
declining. The
performance of ACC has already been affected in Q2'02
and Q3'02
because of lower prices in South and East respectively. We
believe that
Q4'02 will at best be marginally better than Q3'02 at PBT
level. However,
for the purpose of our projections, we have deliberately
erred on higher
side to clearly reflect the element of overvaluation. With
cement prices
showing no signs of improvement, we rate the stock
Market
Underperformer.

1936 Incorporation of The Associated Cement Companies Limited on August 1, 1936.

1936 First Board Meeting of The Associated Cement Companies Limited held at Esplanade House,
Mumbai on November 10, 1936.

1937 With the transfer of the 10th company to ACC, viz. Dewarkhand Cement Company, the
formation of ACC is complete on October 23, 1937.

1944 ACC’s first community development venture near Bombay

1947 India’s first entirely indigenous cement plant established at Chaibasa in Bihar

1952 Village Welfare Scheme launched

1955 Sindri cement works used the waste product calcium carbonate sludge from fertilizer factory at
Sindri.
1956 Bulk Cement Depot established at Okhla, Delhi

1957 Technical training institute established at Kymore, Madhya Pradesh.

1957 Katni Refractories

1961 Blast furnace slag from TISCO used at the Chaibasa Unit to manufacture Portland Slag Cement
for the first time in India.

1961 Manufacture of Accocid Cement, which resists the corrosive action of acids and chemicals.

1961 Oilwell Cement manufactured at ACC Shahabad Cement Works in Karnataka for cementation
of oilwells upto a depth of 6,000 feet.

1961 Manufacture of Hydrophobic (waterproof) cement at ACC Khalari Cement Works in Bihar.

1962 Manufacture of Accoproof, a waterproofing additive.

1965 ACC’s Central Research Station (CRS) established at Thane

1965 Manufacture of Portland Pozzolana Cement.

1965 Manufacture of Calundum, a High Alumina Binder; Firecrete, Low Density Alumina Castables
and High Alumina Refractory Cement.

1968 Advent of computers in ACC for data processing and designing management information and
control systems.

1968 ACC supplied and commissioned one-million-tonne iron ore pelletising plant ordered by TISCO

1971 Manufacture of Whytheat Castables A, K, C and Cal-Al-75

1973 Take-over of The Cement Marketing Company of India (CMI)

1977 ACC receives ASSOCHAM first national award for the year 1976 instituted for outstanding
performance in promoting rural and agricultural development activities.

1978 Introduction of the energy efficient precalcinator technology for the first time in India. Full
scale commercial production based on MFC technology at Wadi in 1979.

1979 ACC wins international contract for operation and management of a new one million tonne
cement plant at Yanbu-Ras Biridi in Saudi Arabia.

1982 Commissioning of the first 1 MTPA plant in the country at Wadi, Karnataka.

1984 ACC achieves a breakthrough in import substitution by developing and supplying a special G
type of oil well cement to ONGC.

1987 ACC develops a new binder for use at sub-zero temperatures, which is successfully used in the
Indian expedition to Antarctica.

1992 Incorporation of Bulk Cement Corporation of India, a joint venture with the Government of
India.

1993 ACC starts the commercial manufacture of Ready Mixed Concrete at Mumbai.

1998 Commissioning of the 0.6 MTPA cement grinding unit at Tikaria, Uttar Pradesh.
1999 Commissioning of captive power plants at the Jamul and Kymore plants in Madhya Pradesh.

1999 Tata group sells 7.2% of its stake in ACC to Ambuja Cement Holdings Ltd, a subsidiary of
Gujarat Ambuja Cements Ltd. (GACL)

2000 Tata Group sells their remaining stake in ACC to the GACL group, who with 14.45% now
emerge as the single largest shareholder of ACC.

2001 Commissioning of the new plant of 2.6 MTPA capacity at Wadi, Karnataka plant, the largest in
the country, and among the largest sized kilns in the world.

2002 ACC wins PHDCCI Good Corporate Citizen Award

2003 IDCOL Cement Ltd becomes a subsidiary of ACC

2004 IDCOL Cement Limited is renamed as Bargarh Cement Limited (BCL).

2004 ACC raises US $ 100 million abroad through Foreign Currency Convertible Bonds (FCCB’s) for
US$ 60 million and Global Depository Shares (GDS’s) for US $ 40 million. Both offerings are
listed on the London Stock Exchange.

2004 ACC named as a Consumer Superbrand by the Superbrands Council of India, becoming the
only cement company to get this status.

2004 GreenTech Safety Gold and Silver Awards awarded to Madukkarai Cement Works and Katni
Refractory Works by Greentech Foundation for outstanding performance in Safety
Management System.

2005 ACC receives the CFBP Jamnalal Bajaj Uchit Vyavahar Puraskar Certificate of Merit – 2004
from Council For Fair Business Practices.

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.

2005 Commissioning of Modernisation and Expansion project at Chaibasa in Jharkhand, replacing

old wet process technology with a new 1.2 MTPA clinkering unit, together with a captive power
plant of 15 MW.

2005 Financial accounting year of the company changed to calendar year January-December

2006 Subsidiary companies Damodhar Cement & Slag Limited, Bargarh Cement Limited and Tarmac
(India) Limited merged with ACC

2006 ACC announces new Workplace policy for HIV/AIDS

2006 Change of name to ACC Limited with effect from September 1, 2006 from The Associated
Cement Companies Limited.

2006 ACC receives Good Corporate Citizen Award 2005-06 from Bombay Chamber of Commerce and
Industry

2006 New corporate brand identity and logo adopted from October 15, 2006

2006 ACC establishes Anti Retroviral Treatment Centre for HIV/AIDS patients at Wadi in Karnataka–
the first ever such project by a private sector company in India.

2007 ACC partners with Christian Medical College for treatment of HIV/AIDS in Tamil Nadu
2007 Sumant Moolgaokar Technical Institute completes 50 years and reopens with new curriculum

2007 ACC commissions Wind energy farm in Tamilnadu.

2008 Ready mixed concrete business hived off to a new subsidiary called ACC Concrete Limited.

2008 ACC Cement Technology Institute formally inaugurated at Jamul on July 7.

2008 First Sustainable Development Report released on June 5.

2008 ACC wins CNBC-TV18 India Business Leader Award in the category India Corporate Citizen of
the year 2008