Ambuja Cements Ltd

BSE: 500425 | NSE: AMBUJACEM | ISIN: INE079A01024 
Market Cap: [Rs.Cr.] 38,557.68 | Face Value: [Rs.] 2
Industry: Cement - North India

Management Discussions


Dear Members,

We are pleased to present the Annual Report of the Company for the year 2013.


A Year of Challenges

Slowing growth, rising inflation and the depreciating rupee marked the onset of 2013setting in motion a challenging year for the Indian economy. Growth rate continued toslide despite attempts by the government to stem the tide with a host of traditional andinnovative measures. Efforts were further constrained due to global headwinds.

To boost investor confidence, the Cabinet Committee on Investments approvedinfrastructure projects entailing huge investments.

However, given the weak start, we expect that real GDP growth would average at 4.5-5%in 2013-14.


The cement industry witnessed flat growth in 2013 due to several reasons - a prolongedmonsoon that extended until the festive season, natural calamities (floods and cyclone)that hit many parts of India and low demand due to financial crunch and slowdown in realtyand infrastructure sectors.

In the first half of 2013, industry demand was slow due to fall in constructionactivity and a virtual halt in government spending. During the second half, the earlyarrival of the monsoon compared with the previous year did not augur well.

The cement industry also faced rising costs, high interest rates, land acquisition andclearance issues. An overall weak macro environment and ban on sand mining continued toworry the industry.

Increase in freight rates for several commodities has had a cascading impact on thecement industry. An increase in freight rates for coal and cement drove up transportationcost as well as the landed cost of imported goods. Moreover, the rupee’s weaknessagainst the U.S. dollar and other global currencies prevented India from taking advantageof the decline in commodity prices in the world market.

Over the past few years, the cement industry witnessed huge capacity addition (almost90 million tones on the available supply basis), which substantially increased the gapbetween demand and supply and consequently lowered capacity utilization.

We expect demand to gradually revive over 2014 and 2015 with a new government andrecovery in construction activity.



• Cement production decreased by 3% to reach 20.96 million tonnes, from 21.62million tonnes while clinker production decreased to 14.27 million tonnes, 10% down from15.81 million tonnes in year 2012.

• Domestic cement sales volume continued with sluggish demand by recording adecrease of 2% at 20.94 million tonnes from 21.31 million tonnes in year 2012. Cementexports decreased to 0.10 million tonnes from 0.12 million tonnes in year 2012. Clinkersales (including exports) were up at 0.56 million tonnes from 0.55 million tonnes in 2012.

• Net sales at Rs. 9,087 crores were 6% lower than that of previous year’sRs. 9,675 crores. Average sales realisation decreased by around 4% at Rs.4,208 per tonneagainst approx Rs.4,400 per tonne in 2012.

• Total (operating) expenses for the year 2013 increased by 2% over that of year2012.

• The Company achieved an absolute EBITDA of Rs.1651 crores in year 2013. This islower by 33% over the corresponding Rs.2473 crores of the year 2012.

• Profit before tax at Rs.1,514 crores was down by 20% over corresponding figureof Rs.1902 crores for year 2012.

• Net Profit at Rs.1,295 crores was down by 0.2% over corresponding figure ofRs.1297 crores for the year 2012.

Amount in Rs. crores

Stand alone Consolidated
Current Year Previous Year Current Year Previous Year
31.12.2013 31.12.2012 31.12.2013 31.12.2012
Sales (Net of excise duty) 9086.84 9674.94 9118.00 9739.54
Pro t before interest and depreciation 2044.45 2821.84 2033.91 2821.95
Less: Finance Cost 65.08 75.66 66.75 78.46
Gross pro t 1979.37 2746.18 1967.16 2743.49
Less: Depreciation and amortisation expense 490.07 565.22 493.67 568.68
Pro t before Exceptional Items and Tax 1489.30 2180.96 1473.49 2174.81
Exceptional items (24.82) 279.13 (24.82) 279.13
Pro t before tax 1514.12 1901.83 1498.31 1895.68
Less: Tax expense 219.55 604.77 219.87 603.86
Pro t after tax but before minority Interest 1294.57 1297.06 1278.44 1291.82
Less: Minority interest (0.13) (1.39)
Pro t for the Year 1294.57 1297.06 1278.57 1293.21
Add: Balance as per the last financial statements 737.01 284.75 1048.09 598.72
Pro t available for appropriation 2031.58 1581.81 2326.66 1891.93
Consequent to change in group’s interest - - - (0.96)
General Reserve 150.00 200.00 150.00 200.00
Dividend on Equity Shares (including interim) 556.34 554.80 556.34 554.80
Corporate Dividend Tax 94.55 90.00 94.55 90.00
Total Appropriations 800.89 844.80 800.89 843.84
Balance carried forward to Balance Sheet 1230.69 737.01 1525.77 1048.09


The Company has paid an interim dividend of 70% (Rs.1.40 per share) during the year.The Directors are pleased to recommend a final dividend of 110% (Rs.2.20 per share). Thusthe aggregate dividend for the year 2013 works out to 180% (Rs.3.60 per share) and thetotal payout will be Rs.648.37 crores, including dividend distribution tax of Rs.92.71crores. This represents a payout ratio of 50%.


The Company’s domestic cement sales in 2013 declined by 1.7% to 20.94 milliontonnes as compared to 21.31 million tonnes achieved in 2012. Total cement sales (includingexports) declined by 1.8% to 21.04 million tonnes as compared to 21.43 million tonnesachieved in 2012.


In the North region, domestic cement sales of the Company declined by 1.7% to 8.64million tonnes in 2013 compared to 8.79 million tonnes in 2012.

In the East region, the Company achieved sales of 4.21 million tonnes of cement in thedomestic market, registering a decline of 0.2% over the previous year sales of 4.22million tonnes.

In the West & South region, the Company’s domestic cement sales in 2013declined by 2.5% to 8.09 million tonnes as compared to 8.30 million tonnes achieved in2012.

Cement exports in 2013 reduced further to 0.10 million tonnes as compared to 0.12million tonnes in 2012.


The Company continues to develop and leverage its large and able network of around8,500 dealers and 27,000 retailers across India. Their reach and penetration helps theCompany in core rural and semi-urban markets across the country. This, coupled with thestrong brand equity and efficient channel management, has significantly helped the Companyto withstand severe competition in an over-supplied market.

The Company’s network of ports, bulk cement terminals and captive ships on thewest coast has supported a sustainable and strong market position in Mumbai, Surat andCochin. The Mangalore Bulk Cement Terminal that commenced its commercial operations in2013 will further strengthen the Company’s position and enhance its footprint in theSouth region.


The Company embarked on the Marketing and Commercial Excellence (MaCX) programme tofurther sharpen its marketing, sales and distribution functions. This ambitious programmeis part of the comprehensive Holcim Leadership Journey (HLJ), announced by Holcimmanagement across the globe to deliver gains and create value in a competitive environmentover the next few years. MaCX aims to supplement in-house skills with global expertise ofHolcim and that of advisory firms, to revamp customer interfacing functions by focusing oncore value levers. This is an investment to future proof the Company and to promote anenvironment of innovation and excellence.


During the year 2013, the economy witnessed upward movement in overall cost structureand volatile foreign exchange rates. However, the Company implemented cost optimisationinitiatives which helped in containing inflationary impact to some extent.


i) Cost of major raw material, fly ash, increased by 7% on per tonne basis. However,strategy to change in mix of gypsum resulted in cost decrease by 2% on per tonne basis.Overall, the absolute raw material cost decreased by approx. 6% over the previous yearincluding the impact of lower volumes.

ii) Power and fuel costs account for approximately 26% of the total operating cost ofthe Company. Coal cost for kiln and captive power plants reduced by 8% and 10%respectively, due to reduced usage of imported coal and also substitution of high costcoal by pet coke usage. Besides, there was increased usage of Alternate fuels by 3% overthe usage for the year 2012.

Cost of grid power continued its upward movement with per kwh rate increasing byapproximately 22% over the previous year. In 2013, captive power generation which supports66% of the total power requirements of the Company, reduced by 10%.

Overall, the reduction in dependence on grid, increase usage of captive power andreduction in fuel prices have helped the Company in registering a decrease of 11% inabsolute cost of power and fuel as compared to the year 2012.

iii) Freight and forwarding cost works out to 30% of total operating costs. During theyear, the same hardened by 6% on per tonne basis over the year 2012 due to an increase indiesel prices.

iv) The cost of packing bags went up by around 14%, driven by increase in PP granuleprices.


i) Keeping in line with the corporate philosophy, focus on production of fly ash basedPPC was maintained.

ii) The Company launched its first fully automatic one million tonne capacity terminalin Mangalore. This will help the Company in reducing the negative seasonality effect ofthe Company’s Gujarat plant. Besides, the logistic costs will be reduced as therewill be an opportunity to optimise by using the same vessel for both Mangalore and Cochinterminals in one trip. It will also help the Company enhance its footprint in the southernpart of India.

With the launch of this terminal, all states along the country’s west coast arecovered by Ambuja Bulk Cement Terminals.

iii) The new Ulwe channel at Panvel, Navi Mumbai was successfully made operationalduring the year. This will lead to handling of higher cargo and thus result in savings incoastal freight cost.

iv) A mechanised wagon loading system at Farakka was put to use during the year. Thishelps in reducing loading charges while loading cement from truck to rake as well asreduction in the transportation cost from packing plant to railway siding.

v) With the introduction of the SCOPE (Supply Chain Optimisation Project forExcellence) project, a supply chain excellence initiative, the Company is trying to deriveoperational efficiencies in logistics. This is targeted by improvisation in directdespatches to customers by undertaking fleet optimisation measures such as installation ofRadio Frequency Identification (RFID), Global Positioning System (GPS) on trucks tomonitor movement and improving turnaround time etc.

vi) The efforts by the Company for the usage of cost efficient fuel mix are part of the‘GEO 20’ project which will be operational in the first half of year 2014. Here,as a result of handling, storing and processing of waste materials, the Company will beable to ensure more usage of Greener Fuels thereby reducing energy cost.


The Company took up several projects to serve its customers in a more efficient,cost-effective, reliable and environment-friendly manner, while bolstering its marketposition in the industry.


The new Bulk Cement Terminal (BCT) at Mangalore commissioned this year will help theCompany expand its footprint in the southern markets of India.


Getting better at being the best

The Company focused on consolidation and optimisation of its existing capacities in allthe three regions. Capital investments kept flowing in during the year, to ensure thehighest standards of safety in order to meet the Company policies of ‘ZeroHarm’, clean and energy efficient infrastructure, cost efficient andenvironment-friendly material handling systems and process optimisation.

Achievements at a glance

i) A Waste Heat Recovery (WHR) plant at Rabriyawas with an approved investment of Rs.75crores is being installed to bring efficiency in fuel utilisation, optimise power costsand meet our Renewable Power Obligation.

ii) In order to strengthen logistics capability and extend its reach to customers, anew railway siding project has been initiated at the Rabriyawas unit in Rajasthan. Thetotal project cost is Rs.250 crores. So far 40% work of the Railway Project iscompleted and our timelines for completion are within the second quarter of 2016.

iii) An automatic wagon loading system constructed at the Farraka unit in West Bengalbuilt at a cost of approximately Rs.32 crores was completed and made operational duringthe year. This system will reduce cost and improve efficiency of material handling.

Upcoming Capacities and Investments

i) A new brown-field expansion project was announced in 2011 at Sankrail grinding unitin the eastern region comprising a roller press and related logistics. The project isunderway, with extended scope to include advanced technical specifications. It is slatedto cost Rs.325 crore and aimed for completion by 2016. So far, equipment orders have beenplaced and civil work is in progress. This project would add 0.80 million tonne grindingcapacity to the unit, along with other facilities.

ii) Significant cement capacity addition of approximately 4.50 million tonnes withassociated clinkerisation capacity of 2.17 million tonnes is coming up at the proposedintegrated plant at Marwar Mundwa, Nagaur district in Rajasthan with cement capacity of1.5 MTPA; and with similar capacity grinding units at Osara (M.P.) and Dadri (U.P.), thetotal project cost is estimated at Rs. 3500 crores. Environmental clearances for theproject were acquired but kept in abeyance for Marwar Mundwa by the MoEF. Part of themining land is already in possession and the rest is under an advanced stage ofacquisition. The Company is also in the process of tying-up water sources required forconstruction and operations. Full-fledged construction work is expected to commence in thelatter part of 2014.

iii) Last year, the Company had taken up 13 new ambitious projects at differentlocations worth Rs.272 crores to optimise and enhance efficiency. These projects have aquick payback of two and half years to four years. Work is progressing well and most arelikely to be completed in the first half of 2014.

iv) A new brown-field expansion project to set up a roller press at a cost of Rs. 70crore at the Rabriyawas unit in Rajasthan, will add 0.80 million tonne grinding capacityin the first half of 2014.

The year 2014 will see capital expenditure worth Rs.802 crores, over and above theRs.725 crores investment made in 2013. The entire proposed expenditure would be financedby internal accruals.


Keeping the planet green through cement

Ambuja envisions being the most sustainable Company in the cement industry and drawsheavily on Holcim’s sustainability policy on CO2 and energy, eco-efficient products,atmospheric emissions, sustainable construction, etc. The strategic stress onenvironmentally-friendly and cost-effective resources resulted in the establishment of theGeocycle department to focus on Alternative Fuels and Raw Material (AFR).

An ambitious project, named ‘Geo20’ has been taken up by the Company lastyear, which involves a capital investment of Rs.200 crores. The project that is meant tosubstitute costlier traditional fossil fuels with Alternative Fuels (AF), is nearingcompletion and slated to be operational at all of our integrated plants by end of 2014.Holcim is actively supporting our efforts by making available its global experience andtechnical expertise in the area of clean and green technology and burning all sorts ofwaste materials without the corresponding release of harmful gases and CO2 in the air.Holcim’s rich experience in this area has helped to devise innovative ways ofsourcing.

During 2013, the Company increased its use of Greener Fuels in its kilns from 1.4% in2012 to 3.65% in 2013. The Company is determined to achieve higher thermal energysubstitution rates in the coming years.



The Economic Outlook

Economic growth accelerated to 4.8% in the second fiscal quarter from 4.4% in the firstdue to higher output in both industry and agriculture and a rebound in exports. However,it is less likely that we will see a complete turnaround in the economy as the domesticdemand remains weak and both consumption and investment continue to grow sluggishly. Weexpect growth to remain soft in the first quarter of year 2014 owing to delayed investmentannouncements in the run-up to general elections. Further, it is expected to be supportedby export recovery and likely sustained growth in capital expenditure after the secondquarter of FY2014, once political stability has been re-established.

We expect the Indian economy to grow at 5% during year 2014 and driven by India’sstrong economic fundamentals - high saving and investment rates, rapid workforce growth, aquickly expanding middle class, and the start of a shift from low-productivity agricultureto high-productivity manufacturing. However, given the country’s large externalfinancing needs, domestic expansion will be affected by the global availability ofcapital.

Economic growth could exceed our forecasts if the Administration’s reform effortsare sustained, infrastructural development accelerates and the government enjoys successin its bid to develop a labour-intensive manufacturing sector in India.

The Cement Industry Outlook

In the period 2011 to 2013 cement consumption grew at an average of 4% compared to thegolden period of 2008-2010, when consumption grew at a CAGR of 8%. The multiplier ofcement demand growth to GDP growth not only declined below one in 2011 to 2013 but alsolost its relevance.

Balancing growth with economic reforms

Mid-term outlook appears challenging in the current scenario. However, there arereasons to assume it will be more positive with a potential towards 6-7% growth per annumafter 2015 provided the new central government pushes economic reforms.

We expect the capacity utilization rate of the industry to improve gradually fromcurrent 73% to ~80% by 2018 given the slowdown in pace of capacity addition and gradualrecovery in cement demand.

Cement demand emanates from four key segments - housing which accounts for 67% ofcement demand, infrastructure (13%), commercial construction (11%) and industrialconstruction (9%). Economic reforms announced by the Government and RBI, including theexpected lowering of interest rates in 2013, will surely boost sentiment and rejuvenatethe economy.

Long-term growth prospects

The cement industry is looking for an up-cycle backed by an increase in ruralconsumption and recovery in infrastructure activity after a muted growth for the lastthree years. Recent government measures to fast-track infrastructure projects ahead ofgeneral elections that are just around the corner; construction activity is expected topick up steam leading to strong demand for cement.

Long-term growth prospects for cement demand are favourable, riding on the back of agrowing economy and the impetus provided to the housing and infrastructure constructionactivities in the 12th Five-Year Plan period (2012-17). The total investment ininfrastructure sectors in the 12th Five Year Plan is estimated to be Rs 56 lakh crores(one trillion USD).



OH&S is given top priority within the organisation. The Company aims to achieve‘Zero Harm’ through the implementation of formal directives, improvement inlogistics flow and visible leadership by line management. Plant workers/ contractors andour own management staff have put in every effort to imbibe and ensure safety in theirday-today activities.


Demand for cement is closely related to overall economic development and tends to varyacross States within the country, depending on the level of industrialisation andinfrastructure development. Fall in demand has been a concern for both the industry andthe organisation but with strong economic fundamentals, we are hopeful to see a revival ofdemand in the near to medium term.


Domestic and global cement majors are strengthening their production bases across Indiato mitigate the location risk associated with cement operation but at the same time thishas also led to a rise in additional capacity. With decrease in exports, there isconsistent pressure on the

Company to beat competition. The Company counts on its resources and various othermarketing and service elements that will help the organization stay afloat and deliverimproved performance.


Logistics is another area of concern for the industry and distribution cost is one ofthe major costs for the industry. The industry has witnessed a rise in movement of cementthrough the sea route to optimise distribution cost. Ambuja is continuously workingtowards strengthening their distribution network along the coast of India, while at thesame time concurrently trying to bring down distribution and logistics costs.


Energy is one of the major expenses faced by the cement industry and it is constantlyworking towards reducing its traditional energy consumption through measures such as useof greener fuels, setting up captive power plants and increasing the production of blendedcements. Energy Activation across Regional Network (EARN), is an in-house initiative thatAmbuja has embarked upon, to build a lean energy culture across the Company.




The Human Resource function at Ambuja strives to provide the ‘People Edge’ tobusiness through continuous process improvement and innovation. Our people strategy,systems and processes are aimed at making the Company an employer of choice withsustainable talent by attracting, retaining and developing talent in the organisation andworking on concrete actions plans to enhance employee engagement. This is in perfectalignment with the Company’s vision of being the most sustainable and competitivecompany in the industry.


To keep pace with the competitive, dynamic business environment that we operate in, astructured Campus Recruitment process with a long term perspective was created to help inthe induction of Management Trainees and Graduate Engineer Trainees from the best Businessand Engineering Schools in India.


The people processes have been designed to completely involve managers and employees toraise levels of performance through ownership and responsibility. Competency and KeyResult Area (KRA) based Performance Management System (PMS) constitute our persistenteffort to build an achievement-oriented culture. Periodic discussions through dialogues onwork performance against the set KRAs help focus not only on individual performance, butalso on work processes, resources and other issues that may have had a bearing onperformance. Continuous efforts are made to enhance manpower productivity by creating andmanning an optimised organisation structure and ensuring the right fit and skills inbenchmarking the best in the industry.

It is our endeavour to consistently facilitate the learning of employees to enable acontinuous business transformation, and hence employee development is focused at differentstages of the employee life-cycle from recruitment to retention. Through this process ofcontinued learning, the Company intends to boost strategic behaviour and capabilities soas to sustainably achieve the Company’s objectives and outcomes. Our training anddevelopment initiatives are directed at enriching leadership, behavioural, functional andtechnical skills as well as bringing about a change in the attitude, knowledge and skillof employees. Through various leadership and management development programmes conductedin association with premier business schools based in India and abroad, we continue tofocus on creating leaders across levels and in the early stages of an employee’scareer. A separate organisational intervention was launched last year to develop asustainable pool of leaders, equip them with essential leadership skills and competenciesin creating a coaching culture.


Structured talent reviews across levels supported by individualised development plansand cross-functional and cross-location assignments have helped develop wholesomeleadership skills. All development efforts show good results with more and more seniorpositions being filled internally, while maintaining a healthy external talent intake.Thus, succession planning has helped to create a talent pipeline for key positions and astrong growth avenue for our developing leaders. Renewed focus is also being given to thecareer path and movement as a critical component of talent development.

Employee engagement surveys conducted in the recent past to gauge the pulse of theorganisation, recorded 98% participation. Feedback from the survey has translated toaction planning and implementation and now been institutionalised within the Company.

Ambuja’s people processes has been appreciated and recognised. The Company baggedthe CII National HR Award 2013 for “Strong Commitment for HR Excellence”.



We continued to progress on our path towards Sustainable Development in line with ourvision to be the most sustainable and competitive Company in our industry.

Our Sustainability framework comprising Sustainability Steering Committees continued toassess Sustainability risks and opportunities both at the unit and corporate levels andmonitor the various sustainability initiatives. Enhancing the focus on embeddingsustainability at the highest level, it has been made a regular item in our Board MeetingAgendas. In requirement of the newly introduced Clause 55 of SEBI, we have released ourfirst Business Responsibility Report (BRR) as a part of the Annual Report for 2012. TheCompany continues to take on initiatives aimed at low carbon emissions, water positive,use of alternative fuel, renewable energy, bio-mass, plastic reuse, etc.

We released our 6th Corporate Sustainable Development Report covering ourSustainability endeavours for the year 2012. The report is aligned with Global ReportingInitiative (GRI) G3 guidelines for A+ Level of reporting, having been “Assured”by an independent certifying agency. We have responded to the Metal & Mining SectorSupplement of the GRI while reporting on our Sustainability performance to ourstakeholders. Like last year, this year’s report too has been accorded the GRI checkfor A+ level by Global Reporting Initiative, Netherlands.

We continue to focus on developing our renewable energy portfolio in line withRenewable & Clean Energy Roadmap till 2020. In 2012, 330 KV of solar energy has beeninstalled at Bhatapara, in addition to the existing 7.5 MW of wind energy commissioned atKutch, Gujarat, the year before last. A 6.5 MW Waste Heat Recovery-based power generationsystem is being installed and is slated to be operational by 2014.


The Company is currently monitoring and reporting CO2 emissions as per the WorldBusiness Council for Sustainable Development’s (WBCSD) Cement SustainabilityInitiative (CSI) protocol. We have been able to reduce our Green House Gas emissions byover 26% taking 1990 as the reference year. To reduce the carbon footprint and avoid theuse of natural resources, we continue to produce fly ash-based cement a

Futures & Options Quote
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Key Information

Key Executives:

N S Sekhsaria , Chairman

Nasser Munjee , Director

Rajendra P Chitale , Director

Shailesh Haribhakti , Director

Company Head Office / Quarters:

Ambujanagar P O,
Taluka Kodinar Dis Gir Somnath,
Phone : Gujarat-91-2795-221137/232009 / Gujarat-
Fax : Gujarat-91-2795-232629 / Gujarat-
E-mail :
Web :


Sharepro Services India P Ltd
Samhita Complex,Plot No 13 AB,Saki Naka Andheri(E),Mumbai-400072

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