UltraTech Cement continued its aggressive expansion in 2Q18. The largest cement producer in India is pursuing both organic growth and acquisitions, as it aims to establish itself and one of the leading cement producers globally.
In 2Q18, the company agreed to buy the cement business of Century Textiles and Industries. Century operates three integrated cement units in Madhya Pradesh, Chhattisgarrh, and Mahashtra, as well as a grinding plant in West Bengal.
The company also continued work to expand existing facilities, commissioning a second cement mill at its Manavar plant. The mill has a capacity of 1.75 million tpy of cement and was completed in less than a year. The plant is already operations at a stable rate and utilisation of 60%.
Meanwhile, work on a 4 million tpy grinding unit at Bara in Uttar Pradesh continued with commissioning anticipated to occur in March 2019.
On completion of the Century acquisition and the ongoing capacity expansions, UltraTech’s production capacity will stand a 111.1 million t – making it the third largest cement producer in terms of installed capacity outside of China.
UltraTech is pushing to take advantage of a upswing in Indian cement demand, driven by additional government spending on infrastructure and rural development. The additional capacity means the company is “very well placed to participate in the growth of the economy.”
There are however some concerns: the Indian cement industry has been hit by rising freight and energy costs, while prices are weak – despite the uptick in demand. The “inability of cement producers to pass on the [cost] burden remain a worry,” wrote Harsha Jethmalani in an article for LiveMint, an Indian business news website.
UltraTech’s acquisition spree – which includes assets from Jaiprakash Associates and an ongoing battle for Binani Cement, as well as the Century purchase – is likely to push up UltraTech’s finance costs, adding another burden on the company’s margins.
Finance costs saw a sharp increase of 161% year-on-year in the June quarter.
Read the article online at: https://www.worldcement.com/indian-subcontinent/19072018/ultratech-continues-aggressive-capacity-expansion/