Dalmia Cement Working To Double Current Production
Cement maker Dalmia Cement is working on a plan to double its current capacity to 55-57 million tonne per annum (MTPA), and is likely to make an announcement about it soon, stated a report by Kotak Institutional Equities. The management is also working on a capital allocation policy that will allow most investments only in the core cement division. The cement maker was among the companies that made presentations at Chasing Growth 2021, the annual investor conference of Kotak Institutional Equities. The line-up on day 2 (February 17) of the conference comprised 42 companies from across the country. The management sounded confident of double-digit demand in East India and improved infrastructure demand from South India. This bullish approach towards demand has been courtesy the sharp increase in budgetary allocations for infrastructure in the Union Budget 2021-22. The management also sounded positive about the amendments made to the MMDR Act, which has created high barriers for new entrants in the cement industry. As a result, the position of incumbents has strengthened. Moreover, banks are also willing to back players with a proven track record making it difficult for new players to compete for limestone. So, the management expects big players to drive a larger share of growth in the cement industry. Though the company is open to inorganic expansion, they indicated that very limited distress assets are available in the market at the moment. In terms of price outlook, the company indicated that prices remain stable in their key markets from average prices of the December quarter. The management expects longer-term prices to rise as demand remains robust and the supply pipeline is lean relative to demand growth. With the recent increase in costs of pet coke and fuel, the company expects margins to remain under pressure. But the management expects to offset this through higher cement volumes from its expansion projects and cost efficiencies. The company is also taking a green approach and has a roadmap prepared to become carbon neutral by 2040. Its current share of renewable energy stands increased to 9 percent from 7-8 percent of the total energy requirement and the company aims to increase it to 30 percent by FY2024. Through these projects, the company expects to save about Rs 60 to Rs 90 per tonne. To reduce costs further, the management is working on increasing its production of PCC, which can use fly ash and slag interchangeably. The company is also focused on increasing the sale of premium products. The existing brand premium resulted in Rs 20 to Rs 30 per bag higher cement price.
Tags : ALLIED Infrastructure Production Expansion Dalmia Cement Pipeline