Kripa Raman

`Gujarat Ambuja working with Holcim to cut production cost'

MR ANIL SINGHVI

Mumbai , July 20

Mr Anil Singhvi, Managing Director, Gujarat Ambuja Cements Ltd, spoke to Business Line after the announcement of the company's fourth quarter results.

The cement companies have done well in the last quarter, with your company reporting a doubling of net profit. What has been distinctive about the quarter?

Our story is different. Other cement majors have reported volume growth of 4-5 per cent. Our volume growth is 15 per cent against an industry average of 9.5 per cent. With this, we have improved our market share too which has gone up to 11.5 per cent from 10.7 per cent.

One reason for our growth was the increase of our PPC (Portland Pozzolana Cement) in proportion to our OPC (Ordinary Portland Cement) output. Our PPC:OPC ratio was 1.15, less than industry average of 1.30 which we have now reached with better blending. We feel that there is still more room for improvement.

Our Gujarat plants have been made almost fully PPC while those in Maharashtra will soon follow, after the monsoons.

How well have you done on the export front?

Export realisations are up 20 per cent from last year, and set to rise even higher. We had contracted at $47-48 per tonne last October/November, whereas the current contracts, which will be valid for the period starting October this year, are being done at $55 per tonne.

What are your capex plans?

The progress of our existing capex (since this is an 18-month fiscal as we move to a January-December year) will see Rs 600 crore being spent; Rs 250 crore on a 60-MW coal-based captive power plant which will replace the furnace oil-based plant in Gujarat. Two more, of 35 MW each, are coming up in Maharashtra and Rajasthan.

We will be running on 100 per cent captive power very soon. In fact, at our Ropar rice-husk plant, we are even ready to sell power to the grid.

Over two years, 2007 and 2008, we will spend Rs 1,200 crore. This would include capex for Ambuja Cement Eastern whose merger with the company is under way.

What are the changes at GACL after Holcim bought into the company?

We are working with Holcim on bringing down the cost of production. We are looking at alternative fuels such as municipal, industrial and chemical wastes that can be burned in the kilns or in the boilers. There will be changes in processes and so on. We will implement SAP throughout the company 18 months from now.

Is there a possibility of eventual merger with ACC in which too Holcim is the single largest shareholder?

ACC and GACL have two very independent strong brands with two complete market channels. There will be commonality of management practices and so on, but unless there are large substantial benefits from a merger, it is not likely to happen.

The industry has had problems with the Government over rise in cement prices. Is this likely to happen every time there is a price rise?

Over the last five years, cement prices have risen only 4 per cent, less than the rate of inflation. One cannot compare cement prices against that of a couple of weak quarters and say that increases have been enormous.

Yes, there was some problem with shortages and we agreed to provide assured supplies at a discount of 5 per cent to government projects. The emphasis was on assured supplies.

The industry demand growth will be 10-11 per cent this year with the demand at 150 million tonnes. We think prices will remain stable, which is good for both the buyer and the seller. May be, with cost increases, corrective steps might occasionally be taken. If you look at it, between the January-March and April-June quarters, prices have been more or less stable and they will be stable, going ahead.

© Copyright 2000 - 2009 The Hindu Business Line