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ACC Ltd

BSE: 500410 | NSE: ACC ISIN: INE012A01025
Market Cap: [Rs.Cr.] 25,002.67 Face Value: [Rs.] 10
Industry: Cement - North India

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Director's Report
BOARD

AND MANAGEMENT DISCUSSION AND ANALYSIS

TO THE MEMBERS OF

ACC LIMITED

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

Consolidated Standalone
Rs. Crore Rs. Crore
2014 2013 2014 2013
Revenue from Operations(Net) and other income 11,995.42 11,431.10 12,006.49 11,435.28
Profit Before Tax (PBT) 1,119.54 1,213.64 1,135.20 1226.96
Provision for Tax (31.13) 131.91 (33.09) 131.20
Profit After Tax (PAT) 1,161.82 1,094.67 1,168.29 1,095.76
Balance brought forward from previous year 4,158.74 3,845.79 4,175.87 3,861.83
Profit available for Appropriations 5,320.56 4,940.46 5,344.16 4,957.59
Appropriations:
Interim Equity Dividend 281.62 206.52 281.62 206.52
Proposed Final Equity Dividend 356.72 356.72 356.72 356.72
Tax on Equity Dividends 119.18 95.72 119.18 95.72
Previous Year Tax on Equity Dividends - 2.76 - 2.76
General Reserve 130.00 120.00 130.00 120.00
Surplus carried to the next year’s account 4,433.04 4,158.74 4,456.64 4,175.87

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 Loss.

3. DIVIDEND

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.

5. FINANCE

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 continuous monitoring.

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 extinguished.

5.2 DEPOSITS

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, 2014.

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 year’s 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 Government’s 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 Company’s 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

2014 2013 Change %
Production - million tonnes 24.24 23.86 1.59
Sales Volume - million tonnes 24.21 23.93 1.17
Sale Value (Rs. Crore) 10,720.28 10,233.17 4.76
Operating EBITDA (Rs. Crore) 1,473.13 1,609.19 -8.45
Operating EBITDA Margin (%) 13.74 15.73

9. MARKET DEVELOPMENT

9.1 Volume

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 profitability.

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 programmes.

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 2013.

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 Company’s 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 Company’s 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.

12. CAPEX

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 the Company.

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 Hon’ble 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 Hon’ble Supreme Court’s decision. The Management, based on its understanding of it’s 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 Court’s 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 Court’s 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.

2014 2013 Change %
Production - Lakh Cubic Meters 19.65 15.96 23.12
Sales volume - Lakh Cubic Meters 21.24 18.00 18.00
Sale value - (Rs. Crore) 760.77 655.91 15.99
Operating EBITDA - (Rs. Crore) 34.12 19.61 73.99
Operating EBITDA Margin (%) 4.48 2.99

16. SUSTAINABLE DEVELOPMENT

Sustainability has been deeply embedded into the Company’s 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 Company’s 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 cement.

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 Company’s 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 Company’s 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 Company’s 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 fugitive emissions.

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 water;

• Implementing rain water harvesting measures in mines, plant, colony and surrounding communities.

16.9 Biodiversity

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 Company’s 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 Act, 2013.

During the year 2014, the Company’s 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

Futures & Options Quote
Expiry Date :
1,400.05    [24.95] ([1.75]%)
Instrument: FUTSTK
Expiry Date: 31-Jul-2014
Open Price: 1,429
Average Price: 1,405.24
No. of Contracts Traded: 2,739
Open Interest: 6,60,250
Underlying: ACC
Market Lot: 250
Previous Close: 1,400.05
Day's High | Low: 1,434.80 | 1,390.10
Turnover (Cr.): 96.22
Open Int. Change: -1,23,250 ([15.73]% )
Key Information

Key Executives:

N S Sekhsaria , Chairman

Shailesh Haribhakti , Director

Burjor Dorab Nariman , Company Secretary

Sushil Kumar Roongta , Director


Company Head Office / Quarters:

Cement House,
121 Maharshi Karve Road,
Mumbai,
Maharashtra-400020
Phone : Maharashtra-91-22-33024473/33024469 / Maharashtra-
Fax : Maharashtra-91-22-66317458 / Maharashtra-
E-mail : brr.info@acclimited.com
Web : http://www.acclimited.com

Registrars:

ACC Ltd
Cement House,121 M Karve Road, ,Mumbai - 400 020

 
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