Cement, Energy and Environment

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 Ultra Tech Cement buying a Dubai based Indian would like overseas not of the within India. companies to venture only because valuation 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. Shailendra Chouksey, Whole-Time Director J K Lakshmi Cement ETA Star company, JK Lakshmi Cement is reported to be exploring opportunities to expand overseas. According to a IIFL report, cement capacity in the UAE has increased from 29 million tonne per annum (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, and 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 has 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 (EV) 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 earning-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 Ultra Tech earnings. Denying any overseas acquisition currently on the cards, Shailendra Chouksey, Whole-Time Director, J K Lakshmi told, "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." • J K Lakshmi Cement is reported to be exploring opportunities to expand overseas • Binani had invested in Dubai almost 5-7 years back and was one of the early entrants there • Ultra Tech Cement had recently acquired Dubai based ETA Star Company. Courtesy: Indian Cement Review, June 2010, P23. International Country profile COUNTRY CAPSULE· Haiti Haiti's government has banned the use of a particular type of loose white quarry sand in structural construction in an attempt to improve building safety. Following the ban, the use of this material will be punishable under Haiti's penal code. The government is recommending the use of river sand as an alternative. Courtesy: World Cement, March 2010, P18. IN SEARCH OF HOPE IN A DECLINING US CEMENT SECTOR The end of 2009 brought good news to the US economy. Fourth quarter GOP increased at an annual rate of 5. 7 per cent. While encouraging, this figure is a bit deceiving as a large portion of recent growth stems from a dramatic slowing in the rate of inventory decumulation. Nevertheless, final sales increased 2.2%, an improvement from the third quarter's 1.5% expansion, spurred by strong expansions in exports and business equipment spending. IHS Global Insight expects GOP growth to ease to 3.0 per cent in the first quarter, and maintain that pace for the year. While total output expanded in the fourth quarter of 2009, total construction put-in-place contracted 1.3 per cent. Declines in the construction industry will accelerate in the first quarter of 201 0 with an expected 20.6 per cent retrenchment in the market. The construction industry is currently battling a rapidly deteriorating nonresidential sector in addition to a still-weak residential sector that has been in decline since 2006. 57