UltraTech to spend Rs11,000 crore in three years on capacity expansion

“The pricing environment may remain challenging and with the impact of surplus capacity, margins continue to remain under pressure,” UltraTech said in its outlook for the current fiscal

New Delhi: UltraTech Cement, the country’s largest cement-maker, today said it will spend around Rs11,000 crore over three years to increase its cement-making capacity by 9.2 million tonnes per annum (mtpa), reports PTI.

“The company has a capital outlay of around Rs11,000 crore, to be spent over the next three years. These include setting up of additional clinkerisation plants in Chhattisgarh and Karnataka, together with grinding units, bulk packaging terminals and ready-mix concrete plants across the country,” the Aditya Birla Group firm said in a statement.

UltraTech said that orders have already been placed for major equipment for setting up the projects.

“These expansions are expected to be operational from early FY13-14 and will enhance the company’s cement capacity by 9.2 mtpa,” it said.

UltraTech Cement has 52-mtpa annual capacity. It has 11 integrated plants, one white cement plant, one clinkerisation plant in the UAE and 15 grinding units. It is also the country’s largest exporter of cement clinker.

Meanwhile, due to subdued demand growth for cement, the company’s net sales stood at Rs13,210 crore and profit before interest and tax at Rs2,063 crore in FY10-11.

“FY10-11 recorded industry demand growth of 5.3%, the lowest in 10 years. This was primarily on account of the de-growth/subdued growth in various key cement consuming states by lower infrastructure spending, slowdown in realty sector, an extended monsoon and non-availability of railway wagons,” UltraTech said.

Net sales of the company during the final quarter of the last fiscal stood at Rs4,490 crore and profit before interest and tax at Rs904 crore.

On the outlook for the industry in the current fiscal, it said, “The cement industry is likely to grow more than 8.5% on the back of government initiatives in rural development, infrastructure and housing.”

“The pricing environment may remain challenging and with the impact of surplus capacity, margins continue to remain under pressure,” UltraTech added.

 

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ACC’s Q1 net down on high input costs

On future outlook, the company said that it continued to maintain a "healthy outlook" for overall growth in demand for cement in the national economy during the year

Mumbai: Steep escalation in input and transport costs pulled down cement major ACC's net profit to Rs350.17-crore in the first quarter of FY11 against Rs392.88-crore in the year-ago period, reports PTI.

Its profit before tax also declined to Rs481.21-crore in the reporting quarter as against Rs563.58-core in the year-ago period, the company said in a press release issued here.

Sales turnover, however, increased to Rs2,556.21-crore in the January-March 2011 quarter as against Rs2,240.33-crore in the year-ago period.

"While the company's operations benefited from better volumes, realisations remained challenged by steep escalations in input costs," the cement major said.

Manufacturing costs rose sharply as a result of increases in the cost of energy, fuel and raw materials like fly ash and slag. Coal became dearer in both the national and international markets while transport costs also shot up, it said.

On future outlook, the company said that it continued to maintain a "healthy outlook" for overall growth in demand for cement in the national economy during the year.

"With increased availability of cement from our newly-expanded plants at Wadi and Chanda, we expect the company will remain well-placed to benefit from this growth," the company said.

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Headline inflation to average 8.6% in 2011-12: Nomura

In its 'Asia Economic Alert', global banking giant Nomura said that the Reserve Bank of India is likely to hike the short-term lending (repo) rate by 100 basis points in 2011 with the purpose of curbing inflationary pressure

New Delhi: India's headline inflation is likely to remain high this year too, registering an average of 8.6% in 2011-12 as manufacturers are likely to pass on input costs to consumers, reports PTI quoting global banking giant Nomura.

In its 'Asia Economic Alert', the banking and asset management behemoth also said that the Reserve Bank of India (RBI) is likely to hike the short-term lending (repo) rate by 100 basis points in 2011 with the purpose of curbing inflationary pressure.

"We expect Wholesale Price Index (WPI) inflation to average 8.6% year-on-year in FY11-12 from 9.4% in FY10-11," it said.

The high projection is on account of the fact that costs have not yet been fully passed on to the consumers.

"Countering expectations of a moderation inflation accelerated to (almost) 9% in March 2011... The negative surprise owed largely to manufacturers' passing on the higher input costs to consumers, amid strong demand.

"Our analysis suggests that the cost pass through is still incomplete and both headline and core WPI inflation will accelerate further in the first half of FY11-12 before retreating in the second half," it said.

The report also added that while output prices have risen sharply, margins continue to remain under pressure. This is specially so in case of tea and coffee, man-made fibres, wood products, machinery, transport equipments and fuel segments.

Headline inflation has been above the 8% mark since February 2010. The March numbers of 8.98% was much above the government and RBI's projection of 8%.

"We are pencilling in 100 basis points of additional repo interest rate hikes in 2011, taking the terminal rate to 7.75%," Nomura said, without making any projections about the RBI's short-term borrowing (reverse repo) rates.

The RBI has already hiked the key-policy rates eight times since March 2010. Experts have said the central bank is likely to go for another mild hike at its next quarterly review on 3rd May as inflationary pressure still persists.

The rate hikes are intended to suck out excess liquidity from the system and tame demand.

The repo and reverse repo rates currently stand at 6.75% and 6.25%, respectively.

Regarding fuel prices, it said the biggest disconnect between input cost and output price exists in that segment.

"The local price of LPG cylinder, petrol, kerosene and diesel prices need to be hiked by around 90%, 8%, 300% and 50%, respectively, in order to offset the losses of oil marketing companies which sell these fuels at subsidised prices," Nomura said.

Nomura said margins are under pressure compared with average high levels "suggesting that if input costs do not fall, a further rise in output prices is likely'.

"A global shortage has pushed up cocoa prices, which should propel domestic coffee prices higher. Supply disruptions in China have inflated India's raw cotton prices by 36% so far in 2011, but cotton fabric prices are up only 10%," it said.

Nomura said that core inflation, which do not take into account price rise of food items, have also started accelerating. In March, core inflation stood at over 7%.

"We expect core inflation (non-food manufactured WPI) to accelerate to around 8% by September," it said.

The increase in core segment numbers will lift headline inflation from 8.9% in the first quarter of this fiscal, and take it further to 9.1% in Q2 and 9.6% in Q3, before moderating again, Nomura's report said.

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