Associated Cement Companies Ltd, the Mumbai-based Rs7,067-crore cement maker, is betting big on the ready-mix business as it lines up aggressive expansion plans over the next 3 years.
Transfers RMC business to a subsidiary to increase focus
MUMBAI: Associated Cement Companies Ltd (ACC), the Mumbai-based Rs7,067-crore cement maker, is betting big on the ready-mix business as it lines up aggressive expansion plans over the next 3 years.
ACC has transferred its RMC (ready mix concrete) business to a wholly-owned subsidiary ACC Concrete Ltd in January to increase focus on the segment.
RMC is a ready-to-use material, with predetermined mixture of cement, sand, aggregates and water. It is delivered to a worksite, often in truck mixers capable of mixing the ingredients of the concrete en route or just before delivery of the batch.
The revenues in the RMC business rose 29% year-on-year (yoy) during the fourth quarter ended December 31, 2007 to Rs99 crore. However, at the EBIT level, there was a loss of Rs27 crore as compared to a marginal loss of Rs4 crore in Q4CY06, mainly due to strong competition in the RMC market and higher input costs.
The world’s second largest cement manufacturer and Swiss major, Holcim, controls both ACC and Ambuja Cement. Holcim, through its subsidiary, ACIL, holds 41% stake in ACC and is at the helm of day-to-day affairs of the company.
In an email reply to DNA Money, the ACC spokesperson said that the RMC business holds huge potential and is poised for significant growth in coming years. “Since this industry functions differently from cement, we thought it fit to spin off this business to a separate subsidiary which has been incorporated in the name of ACC Concrete Ltd.”
The management expects that the new subsidiary will be better equipped to pursue and implement its growth agenda with a greater focus on customer services and efficient logistics, the spokesperson added.
Meanwhile, ACC is increasing capacity at its Chanda plant in Maharashtra by 3 million tones per annum (MTPA), with an investment of Rs1,450 crore. It is scheduled to be completed in 2010-end. With this expansion, ACC’s total capacity would increase to 30 MTPA by 2010, which will give boost to its market presence in Vidarbha.
The capacity expansion at Wadi plant by 3 MTPA is scheduled to be operational in mid-2009. It is also setting up 25 MW captive power plant in Maharashtra, scheduled for completion in 2010-end. ACC’s January cement shipments rose 0.6% to 1.68 million tonnes, from 1.67 million tonnes a year earlier.
The spokesperson said that ACC Board has approved establishment of a new clinker line of capacity and captive power plant to be completed in mid-2010. The company’s other projects are expected to be commissioned on schedule. The Bargarh capacity expansion to 2.24 MTPA along with a 30 MW captive power plant will be commissioned by end of current calendar year.
Analysts Revathi Myneni, Archana Khemka and Navin Sahadeo of Edelweiss Securities said in a note to clients that supply tightness is expected to continue till Q1 of FY09 leading to price increases.
r_mithun@dnaindia.net
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