Cement demand has been showing signs of revival aided by strong demand in rural areas. However, new housing projects in major cities and urban areas are hard to come by, given the economic uncertainty and job losses caused by the Covid-19 pandemic. Cement producers are banking on government stimulus to boost the economy. Amid challenging times, Ambuja Cements plans to commission a new plant in Rajasthan in the second half of next year. Neeraj Akhoury, CEO India, LafargeHolcim and Managing Director & CEO, Ambuja Cements Limited, shares his views on the industry with BusinessLine . Edited excerpts:

 

Will the recovery in cement demand sustain, given that the ability of the government to spend on infrastructure projects is being tested by its weak financials?

There is an underlying demand in our country for cement coming from rural housing and individual home-builders. The government has also introduced various measures to create a demand-side push to the economy. Public and private spending is also on the rise in various infrastructure projects. Post the severe disruption during the lockdown, we have seen healthy volumes supported by government measures. We are confident that this trend will sustain in the future.

Will the lower production costs continue, going forward?

We have reported a reduction in production costs, which are partly due to suppressed input prices, elimination of costs during lockdown and mostly due to operational efficiency program. We have a strong operational efficiency programme within the framework of which we systematically address efficiency areas. This programme has started delivering and we are confident of its success in keeping our production efficiencies at a high level.

The new cement plant in Rajasthan was supposed to go on stream in second half of 2020. Has the project been delayed?

Our expansion plans are well on track. There is a delay of three months in the commissioning of our new integrated plant in Marwar Mundwa, and this is due to the pandemic-related lockdown. Work on site is in full swing, following all health and safety measures. Commercial production will start by end of second quarter of 2021.

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Do you expect consolidation in the cement sector?

India is already a very mature market for the cement industry. The top five-six cement-producing groups manage about 60 per cent of the utilised capacity and production. I believe we will see more consolidation in the coming years, subject to attractive valuations.

 

The recent capacity addition by top cement company Ultratech Cement has widened the gap between second-largest producer, the Ambuja-ACC combine. Is this a cause for concern?

Ambuja and ACC together are the second-largest cement producing group in India, offering best value proposition for its customers across segments and regions. Both the companies have significant expansion plans both in form of new integrated plants supported by increase in grinding capabilities. With Ambuja’s integrated plant in Marwar Mundwa and ACC’s new grinding facility in Sindri becoming operational in the early part of 2021, both companies will increase their volume market share. ACC’s 4.5-mtpa integrated plant in Ametha, Madhya Pradesh will further expand ACC’s footprint in the profitable market of Central India. I am confident of our market positioning, and with these expansion plans and further plans under review, Ambuja and ACC together will be able to take a large share of the cement market in India. With our focus on premium and special products, we continue to be the preferred brand in the market.

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Cement prices have been going up in last four months. Will this sustain due to weak demand?

The fundamentals in the cement industry are very strong. As I mentioned earlier, demand outlook is positive, supported by the underlying demand in rural and housing and government focus on infrastructure. Prices are a function of market dynamics, and as a company, we do not give guidance on the same.

 

Do you expect demand to recover in the real estate sector?

The Indian economy is showing signs of strong recovery. The government is going all out to support demand growth. The measures for economic revival announced by the government, specifically those around lower interest rates, will aid infrastructure and real estate demand in the medium-to-long term.

 

The price cartelisation case on the cement industry, including Ambuja and ACC, has been pending for long in the Supreme Court. Do you think the industry will win the case since no cement company has made any provision?

This matter is sub-judice and hence we will not be able to comment on this.

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