21975103 cement segment

8/6/2019 21975103 Cement Segment

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CEMENT

SURVEY

ANALYSIS


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INTRODUCTION

The Indian cement industry with a total capacity of about190 m tonnes in financial year-2008 is the

second largest market after China. Despite the fact that the Indian cement industry has clocked

production of more than 100 m tonnes for the last five years, registering an average growth of

nearly 9%, the per capita consumption of around 150 kgs compares poorly with the world average

of over 260 kgs and more than 450 kgs in China. .

Although consolidation has taken place in the Indian cement industry with the top five players controlling

almost 50% of the capacity, the balance capacity still remains pretty fragmented. This has resulted incement 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 always had excess capacity in the past owing to

abundant availability of limestone, the western and northern region are the most lucrative markets on

account of higher income levels. However, with capacity addition taking place at a slower rate as compared

to growth in demand, the demand supply parity has been restored to some extent in the Southern region

for the medium term. Considering the pace at which infrastructural activity is taking place in different

regions, the players have lined up expansion plans accordingly.

The cement industry in India is estimated at rs. 24-25 billion in value terms and 114 million tonnes by

volume. the domestic cement industry is highly fragmented, with over 50 cement players and more than 120

manufacturing plants.


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Cement sector is characterized by the following:

1. Units concentrated near raw material sources or markets

2. High freight costs

3. Small value chain

4. Regional variation and volatility in prices and margins

5. High debt levels

6. Regional distribution of demand

7. Seasonality of demand and cyclicality of the industry

8. High entry barriers


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Historically, the sustainable capacity utilisation in the cement industry has been

80-85%. This implies FY09 and FY10 are unlikely to be years of overcapacity in

the traditional sense

Historical cement demand supply model

Year-end installed capacity FY04 FY05 FY06 FY07 FY08 FY09Actual effective capacity 144 152 158 166 199 222

(-) Mothballed capacity 142 152 158 166 180 207

Effective installed capacity 8.5 8.2 8.5 8.3 5.7 4.9

Domestic consumption 136 143 150 158 174 202

Export (cement + clinker) 114 121 136 149 164 178

Domestic consumption 9 10.1 9.2 8.9 6 6.1Export Surplus / deficit) 123 131 145 158 170 184

% surplus (wrt effective capacity) 13 12 5 0 4 18

Actual utilisation 10% 9% 3% 0% 2% 9%

A verage prices 86% 88%95% 99% 97% 91%

Change in average price 141 153 163 206 231 239

Capacity growth 3% 8% 6% 27% 12% 4%Domestic demand growth 5% 6% 4% 6% 10% 16%

5.80% 6.40% 12.00% 9.90% 10.10% 8.00%


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CEMENT BRANDS :

ACC CEMENT

BIRLAWHITE CEMENT

BIRLASUPER CEMENT

BIRLASUPREME

BIRLACOASTAL

JK LAXSHMI CEMENT

GUJRATAMBUJACEMENT

MANIKGADH CEMENT

KAMDHENU CEMENT

COROMANDEL CEMENT

BIRLA STAR

ULTRATECH CEMENT

BIRLAGOLD

BIRLA EVEREST CEMENT

VIKRAM CEMENT

VASODATTACEMENT

BINANI CEMENT

SPAN CEMENT

ORIENT CEMENT

DALMIACEMENT

CHETTINADCEMENT

DHANDAPANI CEMENT


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Current Price Trend for Grade A Cement

Region State Rate (Rs 50 per kg bag)

North Delhi 250-255Punjab 260-265

Haryana 260-265

West Rajasthan 245-250

Maharashtra (Mumbai) 270-275

Maharashtra (Pune) 265-270

East West Bengal 265-270

Orissa 240-245

Bihar 240-245

South Tamil Nadu 245-250

Andhra Pradesh 220-250

Kerala 255-260Karnataka 255-260

Central Uttar Pradesh 250-255

Madhya Pradesh 235-240

(Prices for Grade B is Rs 10 to Rs 12 less than the Grade A and Prices forGrade C is Rs 20 less than the Grade A)

Grades for cement vary from market to market


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Mechanics of Distribution Channels of Sector

Companies invariably hire C&F agents or transport cements to own or government warehouses

either via roadway or railways.

Incase of exports, cement reaches the nearest port via roadways or railways and is then

transferred to the importing country.

Domestically, from C&F agents or warehouses the cement is transported to the

dealers/distributors and in turn to sub dealers who finally sell it to the end users. There may or

may not be physical ownership of goods.

In the second case, dealers and sub dealers take order from buyers and place it to the

companies, co ordinate and monitor the timely dispatch of said orders, transportation of goods

and final delivery.

Distributor network in cement industryis highly dominating and companies are compelled to

hire as they do not really have that rapport and touch with the end consumer of their product.

Apart, from this, the distributors have storage facilities as well which help control well in the

entire supply chain as they are the ones who bring orders and therefore are directly responsible for

the business that a manufacturer would do.


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MAINDISTRIBUT

ION

CENTRE

RE

IONALDISTRIBUTIO

N CENTRE

WARE HOUSE-PUNE

DHAKKA,KHADKIDHAKKA,LONI

DHAKKA.

DISTRIBUTORS

DEALERS

Primary

distribution Secondarydistribution

End users

End users

Tertiary

distribution

DISTRIBUTION MODEL OFCEMENT :


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OBSERVATIONS

SHOP ANALYSISWeight of one bag: 50 kgs.

cost of one bag: 265 rs

Margin earned by dealers: 3- 4%


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OPERATING COST STRUCTURE OF LTV


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CEMENT GODOWNS


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KEY FINDINGS :

There are three types of players in market: large seller, medium scale seller, small

scale seller.

There are two types of cement category available in the market OPC (ordinary

Portland cement ) and PPC (pozzalana Portland cement ) which is graded as-GRADE A and GRADE B.The main difference is between the concreting hours -

CEMENTCATEGORY

GRADED CONCRETING CAPACITY COMPOSITION

GradeA 53 graded 8 hours Coal + clinker

Grade B 43 graded 24 hours Made from fly ash

Opc category includes - Birla super

Binani

ACC

Vasodatta,etc.

Ppc category includes - Birla shakti,

Birla gold etc


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OWNERS EXPENSE :It includes various shop expenses

(Electricity, Refreshments, tax),

(Drivers salary, Insurance, Vehicles Maintenance cost, Fuel cost, Tyre cost, Emi),

Promotional/advertising cost of shop(optional),Payment to sales manager, Employee.

Distributor Margin earned per bag is 3 4%.

& incase of shortage 7-10 %.

Peak season is from November to June

Off season is from-July to October.

Loading/unloading charges is Rs.1 per bag.

EXPENSES

Electricity Rs.500

Telephone expense Rs. 1000

Refreshment Rs.1000

VAT 12.50%

Supervisor salary Rs.5000

Helper Rs.1000

Total 8500

Note: promotional activity are optional


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CHARGING PATTERN:

Charging patterns km1.5 to 2 ton

truck3w Category

Maximum carried 20 bags 36 BAGS

Free home delivery 5-10 km radius ----

Note : free deliver is given to those who are regular customers or to those who buy in

large bulks.

Charged delivery as

per km3-7 km Rs.100 Rs.160

7-10 km Rs.150 Rs.250

Above 15 km Rs.200 Rs.400

Charge as per bag For 3 -7 km Rs.4-5 per bag Rs.5 per bag

For 7-10 km Rs.7 per bag Rs.7-8 per bag

15 km and above Rs.10 per bag Rs.12 per bag


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Average inventory:

retailers Standards no. of bags kept

Sales per day Liquidator Reorderpurchase

pattern(In terms of no.of days taken tofinish the stock)

Micro retailer Below 75 50 1 Purchase orderis given to thecompany whenthe stock is at70 % offinishing edge

Small retailer 200 100 1

Medium retailer 400 250 1-2

Large retailer 600 above 300-350 1-2


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THANK YOU

21975103 cement segment

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