Companies

They’ve gone back to making concrete at project sites: ACC

Suresh P. Iyengar Mumbai | Updated on June 18, 2012

Hans Fuchs ACC

Ready mix concrete market is slackening on slowdown in clearances, liquidity crunch

The ready mix concrete (RMC) business in India has been facing teething problems. Established players have to take on intense competition from smaller region-specific companies. Major RMC companies are reworking strategies. Holcim-owned ACC recently proposed to merge its subsidiary ACC Concrete with itself. ACC Concrete operates 51 plants across the country. Speaking to Business Line, Mr Hans Fuchs, Managing Director, ACC Concrete, said there will be a turn around in RMC on penetration to new markets.

How is the demand for RMC?

To be honest there has been a bit of dichotomy in the market place. We got a standard level of cement growth and stagnation in RMC demand. In the concrete market, volume has seen a bit of de-growth. It is actually difficult to put a fine figure to it because there has been no published figure. Moreover, there are many unorganised players. Market-wise, we believe RMC demand is down five per cent year-on-year.

Why has demand stagnated?

One may wonder why RMC demand has not kept pace with the cement, which has grown about 11 per cent year-on-year. If you take the Mumbai market, there has been a general slow down in clearances. Besides, liquidity was an issue for people. In this scenario payments are delayed and people look to stretch the rupee as far as they can. They have gone back to the process of producing concrete at the project site by utilising the existing assets and resource of people. They may be financially right. If there is no continuous source of funding, it is the easy way to keep the construction going.

Have you faced slowdown in real estate or infrastructure projects?

With the concern over liquidity there has been a general slow down in both real estate and infrastructure projects. Many of the high-end residential projects, especially in metro cities, have been delayed. Unfortunately, only these projects depend on RMC as these buildings come up generally in congested residential areas.

Why has demand for RMC has not picked up as envisaged?

There are many reasons. One important aspect is the tax structure. Builders have to pay a duty of two per cent if they buy RMC from the market. So they prefer to do it themselves. The tax burden may weighs heavy for large projects.

Does use of RMC save cost?

Definitely it does, if one takes into account the overall advantages. One can save on reduced inventories, material handling and storage of raw material at sites. Storage becomes a costlier affair, especially in big metros. One can also save on labour requirements, labour cost and supervision of labour. Cost overruns due to delay in projects can also be avoided by reliable supply of RMC. The use of RMC can prove to more cost effective in the longer term while ensuring that structures are built faster and using concrete that comes with higher levels of quality assurance.

Have you been able to pass on your incremental operational cost?

No, the industry has not been able to pass on the cost increases. Price of almost all the key raw materials such cement, power and sand have gone up. Besides, logistics cost have also increased. The recent hike in fuel prices has also taken a toll on the industry. Most of the concrete manufacturing companies' profits are under pressure due to cost increase and fall in demand.

What is the quality assurance of RMC produced by small companies?

The National Ready Mixed Concrete Association (NRMCA) has come up with certifications for both ready mixed concrete industry facilities and professionals involved.

Certifications provide a competitive edge in the industry, showing customers and regulatory agencies that certified producers have an understanding of and support measures to provide the highest quality RMC in the safest and most efficient ways possible.

The NRMCA Green-Star Program has been designed by the Environmental Task Group of the Operations, Environmental and Safety Committee as a means to support the efforts of the industry towards environmental excellence. There are about 250 RMC plants that have been certified by the association.

>suresh@thehindu.co.in

Published on June 18, 2012

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