Dalmia Cement to go extra mile to save costs

Dalmia Cement to go extra mile to save costs
Published: 01 September 2009

Dalmia Cement (Bharat) Ltd (DCBL) is looking at saving on production costs by setting up warehouses nearer to markets and is eyeing new rural markets to retain margins.

Also, Dalmia Cement Ventures Ltd (DCVL), its wholly owned subsidiary, will start setting up plants in Himachal Pradesh and Meghalaya during this fiscal, R Gurumoorthy, executive director, corporate communications, DCBL, said.

"We have tied up requirements such as power and mines. We are also processing clearances for our plants in Rajasthan and Madhya Pradesh which are in the final stages," Gurumoorthy said.

DCVL will cater to the north-east region through the plant in Meghalaya, where the limestone quality is better. The MoU clearances and mining leases have been acquired swiftly in that state.

The company does not want the cement from its DCVL plant to travel more than 300-350km as it can raise freight costs. Production from Madhya Pradesh and Rajasthan may cater to the Mumbai market apart from Gujarat.

In South, DCBL is looking at a first-mover advantage and has been also able to cut costs as coal prices have fallen to $120 per tonne from their peak of $200 per tonne.

Cement prices in the region have fallen by Rs10-15 per 50 kg bag and are now in the range of Rs265-270 per 50kg bag.

"We don’t expect prices to fall steeply. A drop of Rs 10 might be there but we don’t expect it to fall more than 5-6%. The important factor is how we save production costs and keep our margins high. This fiscal is all about de-bottlenecking."

On cutting costs by getting closer to consumers, Gurumoorthy said, "What we have initiated is forward blocking. To reduce our fuel costs we are building warehouses or depots closer to the market, which is maximum 100 km away, for stocking cement. These feeder points, in turn, help in transferring in bulk quantity to the dealer. It reduces dealer inventory and helps in managing costs."

Source: DNA - Daily News & Analysis