Cement, Energy and Environment

In India's cement space, the Holcim-ACC combine and the Aditya Brila group, with-flagships Ultratech and Grasim, are way ahead with a combined capacity of 97 million tonnes. Then comes Jaiprakash, which has a capacity of 15 million tonnes. Others, including Shree, Lafarge, Dalmia and Penn, are far behind, with the average capacity ranging between 7 and 11 million tonnes. Courtesy: The Business Standard, Mumbai, 23.06.2010. CEMENT GIANTS EYE WEST ASIA TO PLUG OVERSUPPLY PROBLEM Oversupply and tense competition in the domestic market has prompted cement manufacturers to set sights abroad via acquisitions, especially in West Asia. However, the domestic cement demand is expected to rise by 8-1 0 % this year. Industry experts suggest acquiring cement assets in West Asia currently may not augur well for Indian companies at a time when supply has overtaken demand in the Gulf region also. In India, competition in the sector is intensifying, with more foreign players eyeing the market and more capacities being added by small- and mid– size cement firms. Faced with this, cement players are looking overseas, especially the Gulf, where valuations are running cheaper compared to that of India. After Binani Cement acquiring cement companies in Dubai and China and UltraTech Cement buying a Dubai-based ETA Star company, JK Lakshmi Cement is reported to be exploring opportunities to expand overseas. According to an IIFL report, cement capacity in the UAE has increased from 29 Mtpa in 2008 to 34 Mtpa by end of 2009. On the other hand, demand has declined from 21 .7 million tonne in 2008 to 18.3 million tonne in 2009. Furthermore, per capita cement consumption of more than 4,000 kg per annum in the UAE and 2,000 kg per annum in Gulf countries (2009 data), compared to India's less than 200 kg, indicates little scope for sustained demand growth. Binani Cement MD Vinod Juneja agrees that the Dubai market is not that attractive now as it was earlier. Binani had invested in Dubai almost 5-7 years back and was one of the early entrants there. However, the scene has completely changed now. Ultra Tech Cement recently acquired Dubai-based ETA Star Company at an enterprise value/tonne of $125, matching the replacement cost in India and current valuations of cement companies in UAE. The Ultra Tech management has stated that the acquisition will be earnings-accretive, implying a reasonable price paid. But HSBC Global Research says although this move makes strategic sense, the size of transaction, coupled with potential weakness of the UAE construction sector indicate that the acquisition is unlikely to be meaningfully accretive to UltraTech earnings. Denying any overseas acquisition currently on the cards, Shailendra Chouksey, whole-time director, JK Lakshmi told FE, "Indian companies would like to venture overseas not only because of the valuations within India. The Price of Inputs required for cement industry - be it fuel, coal or petcoke - is high, and so are the taxes. Domestic movement is also a problem due to issues in the availability of wagons." Courtesy: The Financial Express Mumbai, 01.06.2010. CEMEX-PENNA DEAL RUNS INTO VALUATION ISSUES Mexican giant Cemex's bid to take over Hyderabad-based Penna Cement hangs fire with both parties unable to arrive at an acceptable pncmg. P Prathap Reddy, a senior Congress leader from Andhra Pradesh, who owns Penna, was in talks with Cemex to sell a majority stake or the whole company. The talks were held in the backdrop of the acquisition of Bharathi Cements, owned by Y S Jagan Mohan Reddy, son of late Andhra Chief Minister Y S Rajasekhara Reddy, by French major Vicat. "Penna is seeking a valuation of $160-170 per tonne. Cemex is ready to cough up only $140 per tonne at the maximum," a source tracking the developments told DNA Money. ''The deal was to be signed in May; it was almost in the final stages, but Penna has been insistent on getting more. The Mexican company is n't ready to cough that up," said the source. Penna has a capacity to produce 4.7 million tonnes of cement and caters to markets in Karnataka, Andhra Pradesh, Tamil Nadu and Goa. Sources in investment banking circles had earlier told DNA Money-the-deal-was– struck-at $150-160 per tonne, far less than the $200/tonne Vicate paid for Bharathi. ''The age of the plant makes a difference. Bharathi's price at $200 was well within the range 13