Associated Cement Companies, India's second-largest cement maker, expects its sales to grow at twice the industry average in the second half due to strong demand and firm prices, said a senior company executive. "We sold 8% more in the first half compared to the same period last year. This is almost double the industry growth of 4.3%. We will post a similar performance in the second half as well," Nash Italia, president of ACC's finance division, told Dow Jones Newswires in a recent interview. ACC sold 7.58Mt of cement in the first half ended September compared with 7.02Mt in the same period a year ago. Its revenue for the period was 18.59 billion rupees ($1=INR45.32) compared with INR16.72 billion last year.
"The drivers for demand in the second half will be housing and infrastructure," said Italia. He expects consumption to increase once the government starts work on meeting its estimated deficit of 40 million housing units. Italia said the low interest rates would also help construction. "We also estimate an additional consumption of 3-4Mt from the government's highway projects," said Italia.
India's cement consumption is currently 118 million tons a year while the annual capacity is 125 million tons. Grasim Industries, which is in the process of acquiring Larsen & Toubro's cement division, is India's largest cement maker with an annual capacity of 29Mt. ACC's annual capacity is at 17Mt.
In September, ACC submitted a bid to buy the 1Mta Idcol Ltd cement plant in the eastern state of Orissa. "We want to have a presence in Orissa and the Idcol plant looks good to us," said Italia. Lafarge and Orissa Cements are the other bidders.
Italia said the 65-year old ACC is currently modernizing itself to compete with new players. "We have reduced our units from 18 to 11 by disposing off old ones. We have also brought down our manpower to less than 9000 employees from 29,000," he said. The restructuring program, which also included the setting up of captive power units, cost ACC INR25 billion.
Italia said having its own power units has saved the company about INR150-INR200 per ton of cement in electricity costs.