AND MANAGEMENT DISCUSSION AND ANALYSIS
TO THE MEMBERS OF
The Directors take pleasure in presenting the Seventy Ninth Annual Report together with
the audited financial statements for the year ended December 31, 2014. The Management
Discussion and Analysis has also been incorporated into this report.
1. HIGHLIGHTS OF PERFORMANCE
Consolidated income for the year increased by 5% to Rs. 11,995.42 Crore as
compared to Rs. 11,431.10 Crore in 2013;
Consolidated net sales for the year was Rs. 11,480.31 Crore as compared to Rs.
10,889.08 Crore in 2013, a growth of 5.4%;
Consolidated profit before tax for the year was Rs. 1,119.54 Crore as compared
to Rs. 1,213.64 Crore in 2013;
Consolidated Profit after tax for the year was Rs. 1,161.82 Crore (including tax
write back of Rs. 309.23 Crore) as compared to Rs. 1,094.67 Crore in 2013 (including tax
write back of Rs. 216.74 Crore).
2. FINANCIAL RESULTS
|Revenue from Operations(Net) and other income
|Profit Before Tax (PBT)
|Provision for Tax
|Profit After Tax (PAT)
|Balance brought forward from previous year
|Profit available for Appropriations
|Interim Equity Dividend
|Proposed Final Equity Dividend
|Tax on Equity Dividends
|Previous Year Tax on Equity Dividends
|Surplus carried to the next years account
The Company proposes to transfer an amount of Rs. 130 Crore to the General Reserves. An
amount of Rs. 4,456.64 Crore is proposed to be retained in the Statement of Profit and
Your Directors are pleased to recommend a final dividend of Rs. 19/- per equity share
of Rs. 10 each. The Company had distributed an interim dividend of Rs. 15/- per equity
share of Rs. 10 each in August 2014. The total dividend for the year ended December 31,
2014 would accordingly be Rs. 34/- per equity share of Rs. 10 each. The total outgo for
the current year amounts to Rs. 757.52 Crore, including dividend distribution tax of Rs.
119.18 Crore as against Rs. 658.96 Crore including dividend distribution tax of Rs. 95.72
Crore in the previous year.
During the year, the unclaimed dividend pertaining to the 69th dividend for
the year ended December 31, 2006 and the 70th Interim dividend for the year
ended December 31, 2007 were transferred to the Investor Education & Protection Fund
after giving due notice to the Members.
4. SHARE CAPITAL
The paid up Equity Share Capital as on December 31, 2014 was Rs. 187.95 Crore. During
the year under review, the Company has not issued shares with differential voting rights
nor granted stock options nor sweat equity. As on December 31, 2014, none of the Directors
of the Company hold shares or convertible instruments of the Company.
Cash and cash equivalent as at December 31, 2014 was Rs. 1,686 Crore. The Company
continues to focus on judicious management of its working capital. Receivables,
inventories and other working capital parameters were kept under strict check through
5.1 NON CONVERTIBLE DEBENTURES
During the year, the Non-Convertible Debentures aggregating Rs. 32 Crore were redeemed
(Rs. 125 Crore were bought back / redeemed in 2013). Accordingly all the debentures stand
The Company had discontinued its fixed deposit scheme in the financial year 2001-02.
Despite efforts to identify and repay unclaimed deposits the total amount of fixed
deposits matured and remaining unclaimed with the Company as on December 31, 2014 was Rs.
0.02 Crore. The Company has not accepted deposit from the public falling within the ambit
of Section 73 of the Companies Act, 2013 and The Companies (Acceptance of Deposits) Rules,
5.3 PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS
Details of Loans, Guarantees and Investments covered under the provisions of Section
186 of the Companies Act, 2013 are given in the notes to the Financial Statements.
6. ECONOMIC SCENARIO AND OUTLOOK
Indian economic growth in 2014 rose to ~5.2% from 4.7% last year as a result of the
improving macro-economic situation. The wholesale and consumer price inflation has fallen
to ~4.2% and 7.4% from last years 6.3% and 10.1% on the back of a strong base
effect. Falling oil prices, lower food and commodity prices and the proactive measures
taken by the Government helped in containing inflation in 2014.
Contrary to expectations, agricultural growth was strong at ~4.5% in 2014. However, the
slow pace of reforms, lack of impetus for infrastructure projects, high interest rates and
tightening of fiscal policies adversely impacted the capital goods sector. Industrial
production / output was also sluggish.
The low economic growth appears to have bottomed out and a gradual increase in economic
activity is expected in 2015. The medium term to long term growth prospects look positive
in view of the Governments determination to bring in reforms. For the year 2015, the
economy is expected to grow at a higher rate than in 2014. The long term prospects for the
economy is optimistic.
7. CEMENT INDUSTRY OUTLOOK AND OPPORTUNITIES
The Indian Cement Industry has an installed capacity of ~360 million tonnes and the
domestic consumption in the calendar year 2014 was ~264 million tonnes. Cement consumption
grew at the rate of ~6% in the calendar year 2014.
The overall cement demand is estimated to grow at the rate of 6% in 2015. The
consumption growth may go beyond 6% if investment is made in the infrastructure segment.
With the gradual reduction in fiscal deficits and Consumer Price Index, it is expected
that the interest rates would gradually come down which would stimulate demand in the
housing sector. The Companys continued focus on cost reduction, its thrust on
increasing the sale of premium products and various other customer excellence initiatives
should help in presenting an improved performance.
8. CEMENT BUSINESS PERFORMANCE AT A GLANCE
|Production - million tonnes
|Sales Volume - million tonnes
|Sale Value (Rs. Crore)
|Operating EBITDA (Rs. Crore)
|Operating EBITDA Margin (%)
9. MARKET DEVELOPMENT
Domestic sales in 2014 increased by 1.5% to 24.14 million tonnes as compared to 23.80
million tonnes achieved in 2013. Cement exports in 2014 reduced to 0.07 million tonnes as
compared to 0.13 million tonnes in 2013. Total cement sales (including exports) increased
by 1.2% to 24.21 million tonnes as compared to 23.93 million tonnes achieved in 2013. The
Company continues to focus on the Individual House Builder segment for higher
The sale volumes of premium products in 2014 was 2.73 MT as against 1.55 MT in 2013.
9.2 Selling Price
Selling price of cement improved by 4% in 2014 over 2013.
10. COSTS CEMENT BUSINESS
During the year 2014, the economy witnessed an upward movement in the overall cost
structure and the Company continued to focus on cost improvements through its excellence
10.1 Cost of materials consumed
Cost of materials consumed accounted for 15%oftotalincomefromoperations(14.4%in 2013).
Cost of material consumed increased by 11% in 2014 over 2013. Slag prices were lower by
17% in 2014 as compared to 2013 while gypsum prices remained almost flat. Fly ash prices
increased by 11% in 2014 over 2013. The cost of material consumed during the year
increased on account of purchase of clinker as a result of temporary suspension of
limestone mining operation at Chaibasa and Bargarh.
10.2 Power & Fuel
The power and fuel spend was Rs. 2,441.82 Crore which constitutes 21% of the total
income from operations of the Company (Rs. 2,375.97 Crore in 2013 i.e. 21% of the total
income from operations of the Company). The various initiatives taken such as the usage of
industrial waste and biomass as alternate fuels and optimization of fuel mix, has limited
the power and fuel costs increases to 2.8% in 2014 over 2013. Coal cost for kilns
increased by 3.6% in 2014 over 2013 mainly on account of a drop in supply of linkage coal
due to shortage of rakes and resultant higher procurement of imported and e-auction coal.
Use of imported coal increased to 24% in 2014 (21% in 2013) while linkage coal
availability reduced to 57% in 2014 (67% in 2013). Coal cost for captive power plants
increased by 10% mainly because of limited availability of CPP grade linkage coal and
resultant higher procurement of market / imported coal. Improved operating efficiencies of
kiln and captive power plants and benefits derived from Waste Heat Recovery System (WHRS)
operations had a positive impact in limiting cost increases.
The Company continues to focus on maximizing Alternative Fuels & Raw Materials
(AFR) consumption in the cement manufacturing process.
10.3 Freight & Forwarding expenses
Freight and forwarding expenses were Rs. 2,598.33 Crore which constitutes 22% of total
income from operations of the Company (Rs. 2,308.87 Crore in 2013 i.e. ~21% of total
income from operations). Freight and forwarding expenses went up by 12.5% in 2014 over
Freight on clinker transfer increased mainly on account of railway freight increase,
freight rationalization by Railways and long lead inter unit movements of clinker.
Freight on cement despatches increased on account of higher cement sale volumes as also
on account of hike in rail and road freight. This increase was partially offset by
improvement in logistics operational efficiencies.
10.4 Other Expenditure
Other expenditure constitutes ~21% of total income from operations of the Company. The
increase in other expenditure was restricted to 3.5% in 2014 over 2013.
Continued focus on reduction in fixed cost helped in restricting the fixed cost
increases to ~3% in 2014 on a YoY basis.
11. INSTITUTIONALIZING EXCELLENCE
In 2012, an Institutionalizing Excellence programme was launched across all functions
to sustain exceptional performance over time. The programme is now central to the
Companys growth initiatives and the whole organization is galvanized to accomplish
targets. Over a period of two years, the programme has yielded encouraging results and has
helped the Company balance inflationary pressures by improving efficiencies. The
Institutionalizing Excellence journey continues with a strong focus on Safety.
In Manufacturing Excellence, two Plants, Chanda and Jamul, figured in the top fifteen
amongst all Holcim Plants globally in terms of efficiency. Efforts are underway towards
raising the Companys overall efficiency parameters closer to aspirational targets
and to pursue further reductions in input costs of coal, power generation and in mineral
components like gypsum, slag and fly ash. A manufacturing academy was setup that drives
continuous improvement in each Plant by regular training and skill enhancement.
The Customer Excellence programme focuses on the customer and seeks to achieve volume
and price improvement and steps for the enhancement of brand equity.
The Logistics Excellence journey saw visible and significant initiatives to optimize
cost-to-serve and time-to-serve, reduce lead distances, eliminate multiple handling and
initiate the creation of modern infrastructure at the plants and warehouses. The Radio
Frequency Identification Device (RFID) and Global Positioning Systems (GPS) modules which
were successfully deployed at three plants are being replicated at all plants of the
Company in a phased manner.
The ongoing Jamul Project in Chhattisgarh, which comprises a new state-of-the-art
clinkering line of a capacity of 2.79 million tonnes per annum and grinding facilities of
a capacity of 1.10 million tonnes at Jamul and of 1.35 million tonnes at Sindri are
expected to be commissioned during 2015.
The pre-processing and co-processing Alternative Fuel and Raw Materials (AFR) platforms
at Wadi in Karnataka and Kymore in Madhya Pradesh have been commissioned in December 2014.
13. COAL BLOCKS
During the year 2009, the Company through its wholly owned subsidiary, ACC Mineral
Resources Limited (AMRL), had entered into four separate Joint Venture Agreements (JVA)
with Madhya Pradesh State Mining Corporation Limited (MPSMC) for the development and
operation of four coal blocks with an equity participation of 49% by AMRL and 51% by
MPSMC. The coal from these four coal blocks was earmarked for supplies to cement plants of
Out of the four coal blocks being developed, the Bicharpur Coal Block in district
Shahdol was in an advanced stage of development. The second coal block Marki Barka in
district Singrauli was also ready for commencement of mine development activities with all
its regulatory clearances in place.
While the development of coal blocks was in progress, on September 24, 2014, the
Honble Supreme Court of India cancelled the allocation of Coal Blocks by the
Government of India to State and private sectors. Consequently, allocation of Marki Barka,
Semaria/Piparia and Morga IV coal blocks to MPSMC stood cancelled with immediate effect.
However, by virtue of an advanced stage of development, the Bicharpur coal block is liable
for cancellation with effect from March 31, 2015.
As of December 31, 2014, the amount incurred, invested and advanced (including deposits
/ advances to MPSMC and other parties) by the Company in this regard is ~Rs. 153.79 Crore.
Subsequently, the Government promulgated The Coal Mines (Special Provisions) Ordinance,
2014, which intends to take appropriate action to deal with the situation arising pursuant
to the Honble Supreme Courts decision. The Management, based on its
understanding of its contractual rights under its JV agreements, its interpretation
of the Ordinance and on the basis of legal advice, believes that the financial loss or
operational impact if any, will not be significant.
In addition to the above "Moira Madhujore North and South" Coal block in the
State of West Bengal was allocated to six companies by Ministry of Coal in December 2009,
wherein your Company holds equity of 14.37%. The allocation of the said coal block has
also been cancelled by the aforementioned Order of Supreme Court. The Company has impaired
its investment amounting to Rs. 0.69 Crore made in this Joint Venture Company.
14. LIMESTONE MINING NEW REGULATORY CHANGES:
As a sequel to the Supreme Courts Order dated May 16, 2014 in two separate Public
Interest Litigations, policy changes were made by the Government with regard to renewal of
mines and deemed mining rights.
As per the Supreme Courts directive, such of the mines which were hitherto
operating under "deemed renewal" without any express orders of renewal passed by
the State Governments were not allowed to operate until express orders were passed by the
respective State Governments in terms of Section 8(3) of the Mine and Mineral (Development
and Regulation) Act, 1957. Pursuant thereto, the Government of India amended Sub Rule,
24A(6) of the Mineral Concession Rules which had the effect of disallowing deemed renewal
status for second and subsequent mining leases and limiting the deemed renewal status even
in case of the first renewal application to only two years. This development has
temporarily impacted the mining operations at Bargarh and Chaibasa which in turn affected
the clinker production at the said Plants and clinker was required to be procured from
other sister plants as well as from outside. The Government has since passed the Mines and
Minerals (Development and Regulation) Ordinance on January 12, 2015 in terms of which the
mining leases would stand extended from the date of their last renewal upto March 31, 2030
in cases where the mines were being operated for captive consumption, such as in the case
of the Company.
15. READY MIXED CONCRETE (RMX)
Ready Mixed Concrete business continues to perform well despite the fact that in 2014,
the Industry witnessed the entry of more players and increased liquidity issues. The RMX
market is greatly fragmented and with increased participation by the unorganized segments,
there is pressure on pricing. Against this backdrop, the Operating EBITDA increased to Rs.
34.12 Crore in 2014 from Rs. 19.61 Crore in 2013. Sales volume improved by 18%.
The growth in business is attributed to the efforts made to enhance customer
satisfaction. ACC Concrete is being perceived as a solutions provider rather than merely
as a concrete supplier. This was made possible by continuous customer involvement in
projects and by offering various products and providing value added services for its
stakeholders. A new line of allied products which could be supplied in the form of ready
to use mortar were developed, produced and marketed. The Centre of Excellence set up by
the Company facilitates and supports capability demonstration initiatives, helps in
engaging with customers and trains professionals in advanced construction techniques.
There is considerable focus by the Government on infrastructure development and in the
year 2015, the construction sector is expected to grow at a higher rate than in 2014.
Demand for RMX is expected to revive in almost all markets across the country and is
likely to be stronger in metro markets like Mumbai, Bengaluru, Chennai, and Delhi. Major
demand is expected to come from large investments in infrastructure and development of
real estate across India in proposed future cities. Reduction in lending rates by banks
and restructuring of loans should ease the liquidity position and help boost sales and
profitability. Ready Mix Concrete is expected to maintain the momentum and contribute to
the overall business with enhanced participation.
|Production - Lakh Cubic Meters
|Sales volume - Lakh Cubic Meters
|Sale value - (Rs. Crore)
|Operating EBITDA - (Rs. Crore)
|Operating EBITDA Margin (%)
16. SUSTAINABLE DEVELOPMENT
Sustainability has been deeply embedded into the Companys business and has become
an integral part of its decision making process while considering social, economic and
environmental dimensions. During the year 2014, a Sustainability Development road map for
the period 2014-2017 was developed with a focus on the following areas:
(a) Reduction of Specific CO2 emissions;
(b) Enhancing Thermal Substitution Rate (TSR);
(c) Reducing specific water consumption;
(d) Reduction of specific total energy intensity (Thermal & Electrical);
(e) Improving CSR footprint focusing on inclusive business projects.
The Companys cement operations retained its certifications under various
management systems for quality, environment, energy and safety.
16.1 CO2 Emissions:
The Company continued in its efforts towards achieving the commitments of Low Carbon
Technology Roadmap for the Indian Cement Industry under the umbrella of the Cement
Sustainability Initiative (CSI) in India of the World Business Council for Sustainable
Development (WBCSD). The various initiatives taken resulted in reducing the specific CO2
emissions per tonne of cement to 526 Kg CO2/tonne of cement from 538 Kg CO2/tonne of
The CO2 emission per tonne of cement including emissions from on site power generation
has been reduced to 617 Kg CO2/ tonne of cement from 641 Kg CO2/tonne of cement.
16.2 Alternative Fuels and Raw Materials (AFR):
The Company provides co-processing and waste management services to over a hundred
customers which facilitates disposal of a wide range of hazardous and non-hazardous
industrial waste streams in the form of solids, sludges and liquids.
The pre-processing and co-processing platforms which were commissioned during the year
at Kymore and at Wadi will add momentum to co-processing of larger volumes of wastes in an
efficient manner. The AFR feeding and storage systems have also been ramped up in these
plants to the required levels.
16.3 Reduction of Thermal Energy
Many initiatives for process optimization were taken to reduce specific thermal energy
in the manufacturing of clinker. These efforts resulted in reduction of 16 MJ of specific
thermal energy / tonne of clinker to 3050 MJ in 2014 as compared to 3066 MJ in 2013. Other
measures such as enhancing the usage of industrial waste and biomass as alternative fuels
and optimization of fuel mix has helped to contain the energy costs to some extent.
16.4 Clinker Factor
Through research and product innovation, the Company has been able to reduce clinker
factor in both varieties of blended cements viz. Portland Slag Cement and Portland
Pozzolana Cement. The use of slag and fly ash in cement manufacture helps the steel
industry and power plants to dispose of their waste in an environmentally friendly manner.
The Companys blended cement production activities at Wadi, Kymore, Chanda and
Tikaria are registered with United Nations Framework Convention on Climate Change (UNFCCC)
as a Clean Development Mechanism (CDM) Project. The blended cement project is one of the
biggest CDM of its kind in the Indian Cement Industry.
16.5 Renewable Energy:
The Companys renewable energy portfolio consists of 19 MW in the form of wind
farms across three states viz. 9 MW in Tamil Nadu, 7.5 MW in Rajasthan and 2.5 MW in
Maharashtra. These helped the Company meet its non-solar renewable purchase obligations
for Madukkarai and Lakheri Plants.
Various options are being evaluated to enhance the renewable energy portfolio such as
setting up new assets of renewable energy and by use of renewable energy through the Power
Purchase Agreement route.
16.6 Waste Heat Power generation from process waste heat
During the year 2014, the Waste Heat Recovery System (WHRS) at Gagal Cement Works
became fully operational and produced 46.64 million kWh of electrical energy.
16.7 Dust Emissions
The Companys average kiln stack dust emissions were well below the statutory
norms fixed by the States in which the Company operates. This has been achieved through
various controls and maintenance measures which were implemented on a continuous basis.
The Company has also implemented various measures across all its operations to control
16.8 Water Initiatives:
Multiple initiatives were taken in process and non process areas to improve the water
performance which resulted in 15.6% reduction of specific water consumption/ tonne of
cement. These include: ??
Increased use of recycled water for process and non-process applications; ??
Minimizing leakages and wastages; ??
Implementing water metering systems for accurate measurement of water
consumption/withdrawal and to initiate more intense and focused measures for conserving
Implementing rain water harvesting measures in mines, plant, colony and
A biodiversity risk assessment of all mines of the Company has been carried out.
Afforestation and biodiversity conservation programmes have been initiated / implemented
across all the Companys plants and mines. The Company has become a member of Indian
Business Biodiversity Initiative (IBBI) a collaborative initiative of Confederation of
Indian Industry (CII) and Ministry of Environment Forest and Climate Change (MoEF &
CC) and Leaders for Nature (LfN), an initiative led by International Union for
Conservation of Nature (IUCN) India. It has agreed to their charters and is in the process
of implementing various associated initiatives.
16.10 Green Products
The Company made efforts to promote and increase sales of various innovative cement
products like ACC-Gold, ACC-F2R, ACC Plus, ACC Coastal+ and concrete products such as
Permecrete, Stampcrete and Imprincrete, ready to use mortar, Thermocrete and Hi-densecrete
which have lower environmental footprint.
16.11 Green Building Material Centres:
During the year 2014, four new Green Building Material Centres were setup in different
parts of India. These centres provide a one-stop solution in housing expertise and
building materials required for high quality low cost housing. These centres also offer
architectural services, skilled masons for housing construction. The building material
supplies include bricks, blocks, tiles, cement etc. These materials are produced from
local resources and incorporate waste material like fly ash which help in reducing CO2
emissions. This initiative received global recognition for its environment and social
benefits. The Company is planning to scale up these centres in the coming years.
17. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES
As part of its initiatives under "Corporate Social Responsibility (CSR), the
Company has undertaken projects in the areas of Education, Livelihood, Health, Water and
Sanitation. These projects are largely in accordance with Schedule VII of the Companies
During the year 2014, the Companys community development efforts successfully
touched the lives of almost 5,00,000 people spanning ~150 villages across the country.
Providing quality education initiatives in the plants neighborhood schools benefited
~29,000 students during the year. Scholarships were awarded to ~500 meritorious students
from weaker sections of the society to help them continue with their education. Technology
aided education initiative