Cement Industry in India: Analysis of Financial Statements
Cement Industry in India: Analysis of Financial Statements | | By:Group 7 | | | | Ankit Bansal | PGP28316 | Niraj Kumar | PGP28311 | Aditya Julka | PGP28331 | Chiranjib Saha | PGP28394 | Upasana Rustagi | PGP28301 | Rosemir Dodre | PGP27178 | |
Revenue trends
Insights from Industry sales data
1. Modest Growth – Cement being a pro-cyclical industry suffered a slowdown in sales growth from year 2008 onwards due to the global economic recession. The effect was felt by all the major players of the Indian cement industry. 2. Fast price growth fast with lacklustre volume growth – While a slowdown in construction and realty sector has kept sales volume growth in check, rising input costs led many cement majors to increase end consumer price of cement.
3. Doubling of Production volume of Ultratech – At the end of 2009, Ultratech Cement merged with Samruddhi Cement Ltd, a wholly owned subsidiary of Grasim Industries Limited. Samruddhi was the biggest cement manufacturer of India at the time of merger. This merger enabled Ultratech to double its sales turnover and production capacity. The merger helped Ultratech establish a strong presence in North India.
Cost structure
Insights from cost structure 1. Inflation and its impact – Uptil 2008, input costs constituted 35% to 40% of sales for the top players. Over the years, it has increased to as high as 45%. Since, cement is a bulk good, the cost of transporting it to various parts of the country also forms a major chunk of cost price. Not so surprisingly, selling and administrative expenses as a proportion of sales increased, especially in FY2011 due to rising fuel prices. 2. Increase in Employee compensation cost – After the merger, the proportion of employee compensation to sales revenue has increased marginally for Ultratech. However, at 5% it is still the lowest in the industry. 3. India cements Ltd is the cost leader in terms of raw material prices – Cost
Revenue trends
Insights from Industry sales data
1. Modest Growth – Cement being a pro-cyclical industry suffered a slowdown in sales growth from year 2008 onwards due to the global economic recession. The effect was felt by all the major players of the Indian cement industry. 2. Fast price growth fast with lacklustre volume growth – While a slowdown in construction and realty sector has kept sales volume growth in check, rising input costs led many cement majors to increase end consumer price of cement.
3. Doubling of Production volume of Ultratech – At the end of 2009, Ultratech Cement merged with Samruddhi Cement Ltd, a wholly owned subsidiary of Grasim Industries Limited. Samruddhi was the biggest cement manufacturer of India at the time of merger. This merger enabled Ultratech to double its sales turnover and production capacity. The merger helped Ultratech establish a strong presence in North India.
Cost structure
Insights from cost structure 1. Inflation and its impact – Uptil 2008, input costs constituted 35% to 40% of sales for the top players. Over the years, it has increased to as high as 45%. Since, cement is a bulk good, the cost of transporting it to various parts of the country also forms a major chunk of cost price. Not so surprisingly, selling and administrative expenses as a proportion of sales increased, especially in FY2011 due to rising fuel prices. 2. Increase in Employee compensation cost – After the merger, the proportion of employee compensation to sales revenue has increased marginally for Ultratech. However, at 5% it is still the lowest in the industry. 3. India cements Ltd is the cost leader in terms of raw material prices – Cost