ACC to exit non-core businesses

By Ramnath Subbu

MUMBAI, OCT. 7. Associated Cement Companies (ACC) is a leading player in the Indian cement industry and successfully rode the downturn in the industry and is focusing on its core business now. The company is today the largest cement producer in India with a capacity of 15 million tonnes following the expansion of its plant at Wadi by two million tonnes in April this year. It has a strategic alliance with Gujarat Ambuja Cements which holds a 14.4 per cent stake in the company.

In fact, ACC also boasts of being the largest producer of blended cement with about 80 per cent of its production and sales coming from blended cement. The Wadi plant is for blended cement.

With a revival in cement prices since last year, things have looked up. ``What you saw happening last year was an overdue correction in prices. They had been flat for almost five years and costs have been rising. Last year financially was the worst for the industry as a whole and ACC made the highest ever loss in its history. It was a desperate situation which needed a correction,'' said Mr. A. K. Jain, president, marketing, ACC.

For the first quarter of the current year (2001-02) the company posted a net profit of Rs. 44 crores against a loss of Rs. 9.50 crores in the corresponding period of the previous year following better realisation and cost savings.

Savings for ACC have come from its ability to refocus its business and also to reduce its employee strength. Mr. T. M. M. Nambiar, managing director, ACC, said ACC's manpower per tonne of cement was much higher as compared to the newer players. ``Over the last few years, we have been reducing staff strength, a continuous process. In 1999, we were able to reduce by 2,200 people and in the cement business we have less than 10,000 employees now."

In fact, the company's employee strength was 26,000 in 1989-90. ``We have avoided the high profile VRS and ours has been a steady effort to gradually reduce and annually about 1,000-2,000 people have been going out of the system," said Mr. Jain.

``There is still a lot of surplus in our system and we feel in two years, we will be able to bring down the staff even further. Our new blended cement plant at Wadi of 2.5 million tonnes per annum has only 170 people. Whereas for our 12 million tpa capacity, after all these reductions, we have close to 9,000 people. That is the difference between a modern plant and an old plant. So we still have a long way to go," said Mr. Nambiar.

The board of directors of the company undertook a review of the business strategies in view of the scenario and the need to concentrate on the core businesses. It was therefore decided to exit the non-cement businesses which contribute less than 7 per cent of the company's turnover.

``We would like to come out of most of the non-core businesses but it is not an easy task given the economic circumstances. Also we would like to divest at a proper price so we will wait for such an opportunity as and when we will get a good price,'' according to Mr. Nambiar.

Accordingly, ACC has divested its minority stake in Float Glass India where it had tied up with Asahi Glass Company. Asahi had bought ACC's share and sold its entire holding to another company Asahi India Safety Glass which is making an open offer for the remaining 20 per cent.

ACC is also present in mining exploration through a 50:50 joint venture, ACC Rio Tinto. The company has decided not to invest any more in the JV and will therefore reduce its equity holding depending on how much the partner brings in. ``We will not be able to divest that as there is nothing much in terms of asset value," said Mr. Nambiar.

ACC also operated a plant in West Bengal to make ferric oxide but is in the process of getting out. It was unable to sell it as a going concern and so it is selling the assets. It is also keen to divest its interest in Bridgestone ACC.

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