ACC Ltd, India?s largest cement producer, has put on hold its Rs 600-crore expansion plans for the ready-mix concrete (RMC) business in 2009, citing low demand due to the global slowdown.
?The extensive expansion plans have been put on hold for 2009. Focus shall be on consolidating the existing business, whilst continuing to grow volumes from the current base of 38 available batching plants,? ACC said in its 73rd annual report.
ACC Concrete Ltd, the RMC business of ACC, had planned to invest Rs 600 crore to add 200 plants across the country by 2012. However, with the global financial crisis taking a toll on the Indian market and in particular the real estate and construction business, the company had put its expansion on hold for an indefinite period last year.
Sumit Banerjee, MD of the company, had earlier told FE, ?The RMC business in the past two years was growing at 25-30% and we were on the growth track. But, owing to the downturn, the short term outlook for the RMC business had to be re-written.?
ACC Concrete will now be taking steps to improve its performance in the current financial year.
ACC Concrete posted a net loss of Rs 96.81 crore in 2008, after providing for fringe benefit tax. The sales volume in 2008 grew by 37.4% compared to 2007, as the number of available production units increased from 23 to 38, the company said in its annual report. The current plant capacity of ACC Concrete Ltd is more than 7 million cubic meters per annum.
?We have a very strategic view of the RMC business. We believe that the business, over time, will address the delivery of cement in a bigger way,? Banerjee had said previously.
According to experts, although India is the second largest cement producer in the world, with 208 million tonne cement capacity, the consumption of RMC by the Indian construction industry is only 3-4%. The ratio in developed countries, on the contrary, is over 60%.
ACC Ltd, nevertheless, is going ahead with its planned organic expansion programme of increasing the overall capacity to 30.58 million tonne by 2010, from about 22.63 million tonne currently. The company has planned Rs 1,600-crore capex in 2009, followed by Rs 1,300-crore capex in 2010.
ACC Ltd, in its annual report, has anticipated cement prices to be reasonably stable. However, the bunching of fresh capacity, particularly in the second half of 2009, could cause a supply overhang.
?Demand in 2009 will largely be driven by the pass-through effect of the stimulus packages announced by the government for housing and infrastructure,? ACC said in its annual report.
ACC Ltd shares on Friday slipped 0.54%, to close at Rs 543.05 on the Bombay Stock Exchange.