Growth in AFR business brings cheer to ACC, India

Growth in AFR business brings cheer to ACC, India
Published: 03 January 2009

After reports of continuous de-growth in business, lay-offs, plant shutdown and putting its Rs 600 crore expansion of ready mix concrete business on hold, ACC Ltd, the largest cement manufacturer in India, has finally some good news to share. The company’s alternative fuels and raw materials (AFR) business, which it kicked-off early this year, is growing at more than 20% this year.

The company, which was looking at pet coke and bio-mass as alternative fuel and raw material, had earlier told FE that it expects to add about Rs 50 crore to Rs 100 crore to its bottomline every year in the next 2-3 years for this new initiative.

However, ACC’s plans to include this business into its books have been deferred. Declining to give specifics, Sumit Banerjee, MD of ACC Ltd said, "Due to certain procedural constraints prevailing at this juncture, the decision to separately include the AFR business numbers in the books of accounts of ACC has been deferred."

ACC Ltd’s shares on Friday were down 1.83% to close Rs 457.05 on the Bombay Stock Exchange.

AFR was started by the company as a measure to reduce cost, along with incurring additional sales income by extending waste management services to multinational companies (MNCs) in India. However, analysts feel this move will have a positive impact in the long term.

"The AFR business of ACC is growing at a rate of more than 20% this year. The co-processing services are now being offered to the waste generators from all the ACC plants," said Banerjee.

According to experts, "This move seems to be a way to reduce the impact of the weakening cement cycle by getting into related verticals."

Meanwhile, Enam Research in its report said poor demand and new capacity additions are likely to result in overcapacity in the North in FY10 and it expects ACC to witness margin contraction despite falling imported coal prices.