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Better market mix…
We met the management of Heidelberg India Cement (HCIL) that has
clinker capacity of 1.6 million tonnes (mtpa) and grinding capacity of 3.1
mtpa. HCIL has a presence across the central, western and southern
regions, where it sells 70%, 20% and 10% of the output, respectively.
Further, the company is expanding its clinker capacity from 1.6 mtpa to
3.5 mtpa and grinding capacity from 3.1 mtpa to 6 mtpa. The expansion
projects are expected to be commissioned by Q1CY12.
§ Expansion of grinding capacity from 3.1 mtpa to 6 mtpa by Q1CY12
The company is expanding its grinding capacity to 6 mtpa from the
current 3.1 mtpa and clinker capacity to 3.5 mtpa from the current 1.6
mtpa. Expansion projects are expected to come on stream by
Q1CY12E. Total capex for the expansion projects is close to Rs 1200
crore that would be funded through a mix of debt and internal accruals.
§ Better regional presence
HCIL is mainly operating through four plants in Ammasandra
(Karnataka), Damoh (Madhya Pradesh), Jhansi (Uttar Pradesh) and
Raigarh (Maharashtra). As the company has a presence in the central,
western and southern region, UP and MP are its major selling markets
where it sells ~70% of its output. In the western region, it sells ~20% of
the output and caters to Mumbai and Pune markets. Bangalore and
Mangalore are its major markets in the southern region where it sells
the rest ~10% of the total output. We believe the company has a better
regional presence as majority of its sales comes from the central region
where the demand supply scenario is better than other regions.
The presence in the central region will further increase after expansion
projects as its grinding capacity expansion are at Damoh, MP and
Jhansi, UP units where it is adding 1 mtpa and 1.9 mtpa of grinding
capacity, respectively. Also, in the clinker capacity expansion at Damoh,
MP, its clinker capacity will increase to 3.1 mtpa from current 1.2 mtpa.
¡ Lower captive power consumption
The company has a captive power capacity of 13 MW out of which 8-9
MW is operational. As the captive power meets ~20% of the total
power requirement, the company procures ~80% of the power
requirement through purchase from grid. The company uses 100% of
linkage coal for its kiln operations and for generation of power. Further,
HCIL has no near term plans to establish captive plants to serve
brownfield expansions in future. It would rather be opting to purchase
electricity from open markets.
Clinker purchase costs high…
The company has been purchasing clinker from outside for its grinding
unit at Raigarh, which costs ~45% of the total raw material cost. For
CY09, cement production stood at ~2.66 MT against the clinker
production at ~1.35 MT. Thus, the company purchased ~0.34 of clinker
during the year.
…but low freight cost alleviates cost pressure
The company transports its output through a mix of rail (50%) and road
(50%) and has an average lead distance of ~350 km, which is less
compared to the industry average of ~500 km. Also, the company is
setting up a conveyor belt facility to reduce the dependability on trucks
to transport raw materials and, thus, reducing the raw material and
freight cost.
Backed by globally present Heidelberg Cement AG
Heidelberg Cement AG acquired Heidelberg India (then called Mysore
Cements) in 2006. This was actually the turnaround for Mysore Cements
when In July 2006, after taking over the company from Birlas,
Heidelberg AG infused a sum of Rs 360 crore by making a preferential
allotment of ~ 6.65 crore shares to itself at a price of Rs 54 per share.
The company had been making losses till FY06 due to its lower margins
and higher interest costs. However, after the acquisition, the company
had mopped up all accumulated losses and repaid the outstanding
debt. Currently, HCIL has net cash of Rs 420 crore as on June 2010.
About Heidelberg Cement AG
Heidelberg Cement is the global market leader in aggregates and a
prominent player in the fields of cement, concrete and other
downstream activities, making it one of the world’s largest
manufacturers of building materials. In 2009, group turnover amounted
to approximately €11 billion. The core activities of Heidelberg Cement
include the production and distribution of cement and aggregates, the
two essential raw materials for concrete.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Better market mix…
We met the management of Heidelberg India Cement (HCIL) that has
clinker capacity of 1.6 million tonnes (mtpa) and grinding capacity of 3.1
mtpa. HCIL has a presence across the central, western and southern
regions, where it sells 70%, 20% and 10% of the output, respectively.
Further, the company is expanding its clinker capacity from 1.6 mtpa to
3.5 mtpa and grinding capacity from 3.1 mtpa to 6 mtpa. The expansion
projects are expected to be commissioned by Q1CY12.
§ Expansion of grinding capacity from 3.1 mtpa to 6 mtpa by Q1CY12
The company is expanding its grinding capacity to 6 mtpa from the
current 3.1 mtpa and clinker capacity to 3.5 mtpa from the current 1.6
mtpa. Expansion projects are expected to come on stream by
Q1CY12E. Total capex for the expansion projects is close to Rs 1200
crore that would be funded through a mix of debt and internal accruals.
§ Better regional presence
HCIL is mainly operating through four plants in Ammasandra
(Karnataka), Damoh (Madhya Pradesh), Jhansi (Uttar Pradesh) and
Raigarh (Maharashtra). As the company has a presence in the central,
western and southern region, UP and MP are its major selling markets
where it sells ~70% of its output. In the western region, it sells ~20% of
the output and caters to Mumbai and Pune markets. Bangalore and
Mangalore are its major markets in the southern region where it sells
the rest ~10% of the total output. We believe the company has a better
regional presence as majority of its sales comes from the central region
where the demand supply scenario is better than other regions.
The presence in the central region will further increase after expansion
projects as its grinding capacity expansion are at Damoh, MP and
Jhansi, UP units where it is adding 1 mtpa and 1.9 mtpa of grinding
capacity, respectively. Also, in the clinker capacity expansion at Damoh,
MP, its clinker capacity will increase to 3.1 mtpa from current 1.2 mtpa.
¡ Lower captive power consumption
The company has a captive power capacity of 13 MW out of which 8-9
MW is operational. As the captive power meets ~20% of the total
power requirement, the company procures ~80% of the power
requirement through purchase from grid. The company uses 100% of
linkage coal for its kiln operations and for generation of power. Further,
HCIL has no near term plans to establish captive plants to serve
brownfield expansions in future. It would rather be opting to purchase
electricity from open markets.
Clinker purchase costs high…
The company has been purchasing clinker from outside for its grinding
unit at Raigarh, which costs ~45% of the total raw material cost. For
CY09, cement production stood at ~2.66 MT against the clinker
production at ~1.35 MT. Thus, the company purchased ~0.34 of clinker
during the year.
…but low freight cost alleviates cost pressure
The company transports its output through a mix of rail (50%) and road
(50%) and has an average lead distance of ~350 km, which is less
compared to the industry average of ~500 km. Also, the company is
setting up a conveyor belt facility to reduce the dependability on trucks
to transport raw materials and, thus, reducing the raw material and
freight cost.
Backed by globally present Heidelberg Cement AG
Heidelberg Cement AG acquired Heidelberg India (then called Mysore
Cements) in 2006. This was actually the turnaround for Mysore Cements
when In July 2006, after taking over the company from Birlas,
Heidelberg AG infused a sum of Rs 360 crore by making a preferential
allotment of ~ 6.65 crore shares to itself at a price of Rs 54 per share.
The company had been making losses till FY06 due to its lower margins
and higher interest costs. However, after the acquisition, the company
had mopped up all accumulated losses and repaid the outstanding
debt. Currently, HCIL has net cash of Rs 420 crore as on June 2010.
About Heidelberg Cement AG
Heidelberg Cement is the global market leader in aggregates and a
prominent player in the fields of cement, concrete and other
downstream activities, making it one of the world’s largest
manufacturers of building materials. In 2009, group turnover amounted
to approximately €11 billion. The core activities of Heidelberg Cement
include the production and distribution of cement and aggregates, the
two essential raw materials for concrete.
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