GAME FOR MORE

Mumbai, July 18: The AV Birla group is on the prowl looking to acquire coal mines abroad.

The move is designed to meet the raw material requirements of its expanding cement business where plant capacities are being raised.

At present, the group is scouting for opportunities in South Africa and Indonesia. UltraTech Cement Ltd, which is a subsidiary of Grasim Industries, alone imports close to 1 million tonnes of coal a year.

Coal prices have jumped to $179 per tonne in the first quarter of 2008-09 from $78 per tonne in the corresponding quarter a year ago. As a result, the variable costs for UltraTech Cement have jumped 19 per cent during the quarter.

UltraTech Cement chairman Kumar Mangalam Birla told shareholders today that the company would make a capital expenditure of about Rs 2,400 crore over the next three years.

It plans to set up waste heat recovery systems, additional ready mix concrete (RMC) plants, extend its Gujarat jetty and build new port terminals, and adopt a variety of productivity enhancing schemes.

Birla said the group intended to focus on its RMC business which has strong potential. Between Grasim Industries and UltraTech Cement, the plan is to set up another 41 RMC plants. UltraTech Cement now has 27 such plans with a combined capacity of 4.8 million cubic metres a year. The plan is to increase this to 39 RMC plants with a capacity of 7.2 million cubic metres by the end of 2008-09.

Birla, however, presented a bearish outlook for the cement sector. India, he said, was the second largest cement producer in the world. During the Eleventh Five-Year plan period, the industry is expected to increase its capacity by around 115 million tonnes at a capital outlay of Rs 50,000 crore. This is expected to go on stream by 2011-12.

“The new capacity may coincide with slower economic growth and lead to a surplus scenario from calendar year 2009, with consequent impact on margins,” he told shareholders.

K.C. Birla, the CFO of UltraTech, said growth in the cement industry would dip to 8-9 per cent because of high inflation, rising interest rates and a slowdown in the economy. Earlier, the company had forecast a growth rate of 10 per cent this year.

Ultratech Cement posted a 2.3 per cent increase in net profit at Rs 265 crore against Rs 259 crore in the year-ago quarter.