BANGLADESH: Two business groups to venture into cement manufacturing

Two business groups are set to join the cement manufacturing market with about Tk 5 billion investment by the beginning of next year amid the sector's steady growth of around 15 per cent annually.

Bengal Group of Industries and Aman Group are planning to put their money in this sector as they see a shining future of cement, one of the key backward linkages of the growing construction and real estate sectors.

"Bangladesh has been rapidly urbanising and the speed of urbanisation will be geared up in the future. So the investment in cement manufacturing will be an intelligent move," Bengal Group director Firoz Alam told The Financial Express.

The group, a pioneer in plastic processing industry in the country, is stepping into this sector for the first time after expanding their business in media, real estate, packaging, chemical, food processing, paper etc.

"We have decided to primarily invest around Tk 2.3 billion to set up a plant with capacity to produce 3200 tonnes cement per day," said Mr. Alam, who is looking after the new venture. 

Bengal Group is a market leader in producing cement bags which will be a great advantage for the business group, he said.

Aman Group is already in the cement business under the name of Aman Cement Ltd with very little capacity. The new venture will be named Aman Cement Mills Unit-2 Ltd. with a production capacity of around 5000 metric tonnes per day.

Aman Group is constructing their factory in Munshiganj on 300 acres of land. The total investment of the company in the new project is around 2.7 billion, company sources said.

"We will use only 60 per cent of production capacity primarily and produce only high-value products in the second unit," Sirajul Islam, a senior officer (admin) told FE. He is looking after the project.

"We expect the new Aman Cement project will come to the market by March next year," he said. 

Like other sectors, the cement industry was affected in 2013 due to political unrest. Still the sector saw around 10 per cent growth.

In 2014, cement consumption grew 12 to13 per cent, according to an industry insider.

According to a market research firm, cement consumption growth was 3 per cent in January, 13 per cent in February and 23 per cent in March this year. 

Abdur Razzak Chowdhury, general manager of Tiger Cement, said the installed capacity of cement factories in the country is 33-35 million tonnes a year, while annual demand is 20-21 million tonnes as of 2014.

He said: "Most plants operate at 50 to 60 per cent efficiency, which is why we still have scope for cement growth."

There are 31 companies operating in the market now although some 71 companies are registered with the Office of The Registrar of Joint Stock Companies and Firms. 

"Some of them stopped operating," Mr. Chowdhury said.

Contacted, Policy Research Institute (PRI) executive director Ahsan H Mansur said there are huge opportunities of investment in the sector, but it needs restructuring. 

"Some companies will be out of the market, some big players will join," he said adding that Bangladesh is largely non-urbanised, so the potential is there. 

Firoz Alam said it is very common in the business that uncompetitive companies leave the market to competitive players.

"It is true that political instability left scars on the businesses of the country, but our research says there is massive potential in the sector," he said.

He said Bangladesh has become cement exporting country and there is also huge potential to grow.

Bangladesh exports 40,000 to 50,000 tonnes of cement a month to the 'seven sister' states of India.

However, Indian manufactures are now offering cement at lower rates than Bangladeshi companies due to tax benefits.

Mr Chowdhury said it is very much possible to export again to India and other new markets if government takes some measures including giving tax benefits to the exporters.

BANGLADESH: MI Cement to add new unit soon

M.I. Cement Factory Ltd looks to install new production unit soon to cater the growing demand for cement in the country.

"We have decided to set up another Packing Unit and 1,500 tonnes capacity OPC Silo to enhance the delivery capacity of our cement (Crown Cement)," Mohammed Jahangir Alam, chairman of M.I. Cement Factory Ltd, said.

"This will also help maintain the quality of our cement and thus keep the pace of increasing revenue," he said in the company's annual report.

Bangladesh is ready to get the wave of much anticipated development in terms of public infrastructure, communication and housing facilities, he said, adding that "So, the cement industry in Bangladesh is headed for a revolution."

High densities of people in cities, unplanned urbanisation and rapid economic development are likely to expand cities vertically rather than horizontally to achieve maximum utilisation of available space and ensure future food security by not urbanising fertile land, he continued.

"To achieve this, there is no alternative to cement," Mr Alam said on behalf of the company's board of directors.

Quoting a recent study, Mr Alam also said that the per capita cement consumption in Bangladesh was still lower at 107 KG, which is 210 KG in India, 265 KG in Pakistan, 310 KG in Sri Lanka and 570 KG in Korea, indicating future growth of cement consumption here.

The growing per capita income and socio-economic condition of the people are pushing them to change their choice and taste towards modern home, further increasing the demand of construction materials including cement, he said.

At present, the company's total production capacity is 5,800 tpd, which is amounted to 1.740 million tonnes, per year.

Listed on the bourses in 2001, the company has emerged as one of the leading manufacturers of cement in Bangladesh.

Mr Alam said that in the fiscal year 2013-14, the political unrest hampered the day to day normal business activities of M.I. Cement and lessened its cement delivery than expected.

However, the competitive environment prevailing in the market, the company always strives towards enhancing the revenue by satisfying the valued customers.

Thanks to the efforts, the company became able to increase its revenue by 17 per cent compared to the previous year despite the political unrest.

Cost of goods sold in the year ended on June 30, 2014 was Tk 6,731.73 million as against Tk 5,731.17 million in the previous year; this increase in cost of goods sold is mainly due to the fiscal year's higher sales volume comparing to that of the previous year.

Its operating profit increased to Tk 937.10 million from Tk 822.47 million of the last year, reflecting the effect of increase in gross profit, said the annual report.

In the year 2013-14, the company's turnover was Tk 7,990.64 million against Tk 6,829.70 million in the previous year, registering 17 per cent growth.

Till date, the company competes internationally to maintain 45 per cent of the cement export from Bangladesh and significantly contribute to the country's economy by earning foreign currency.

In the year ended on June 30, 2014, it contributed Tk 1,969,838,314 to the national exchequer as corporate tax, customs duty and value added tax (VAT) etc.

At the annual report, the board of directors also expressed their continued commitment to comply with all relevant safety, health and environment requirements.

BANGLADESH: Cement sales poised to rise if political turmoil ends

Cement consumption in Bangladesh is expected to grow 13-14 percent this year, riding on the development of roads and bridges and small rural housing projects, the managing director of Holcim Cement Bangladesh said yesterday.

“We are confident and positive about the scope of the cement market,” said Sumanta Pandit.

But growth will largely depend on the political situation, Pandit told The Daily Star in an interview at the company's office in Dhaka. “Sales will grow if the political situation improves in the coming days.”

The Swiss company has already witnessed 'a marginal decline of sales' in its Bangladesh operations due to the nonstop blockade that has disrupted the supply chain, he said.

Like other sectors, the cement industry was also affected in 2013 due to political unrest. “We were looking forward to a great 2015. But unfortunately, the political situation has again taken a negative turn. We only expect that a better situation will prevail.”

In 2014, cement consumption grew 12-13 percent, said Pandit, an Indian national, who took up his current assignment in October 2014.

The installed capacity of cement factories in Bangladesh is 33-35 million tonnes a year, while annual demand is 20-21 million tonnes as of 2014.

“Most plants operate at 50 to 60 percent efficiency, which is why we still have scope for cement growth. In spite of all these issues, companies are still staying afloat.”

More than 35 to 40 companies are operating actively in the market.

Pandit, 49, has nearly 25 years of experience in the cement industry and worked in different cement companies such Ambuja, Lafarge, and UltraTech.

Prior to Holcim, he was the country manager for Emirates Cement, a Bangladesh unit of India-based UltraTech Cement.

Holcim is bullish about the multinational's prospects in the country, thanks to the ongoing high-profile infrastructure projects, which will pave the way for more growth.

“We look at the Bangladesh market with great positivity,” he said, adding that the company recently invested Tk 3,000 million to expand its production capacity to two million tonnes a year.

Holcim is also upbeat on being a premium cement supplier to the ongoing Padma bridge project. 

“Considering our global and local expertise and experience in large and infrastructural projects, we are expecting the concerned authorities to allow us to participate in the Padma Bridge project, and the other projects centring it.”

“We are hopeful and enthusiastic about being a part of the growth process of Bangladesh, and we would like to be an important part of any development in this country, for which we are already in talks with consultants. Hopefully, we will be one of the premium suppliers for this project,” he said.

Holcim has contributed to building some of the longest bridges around the world.

In Bangladesh, the Bangabandhu Multipurpose Bridge and Syed Nazrul Islam Bridge (Bhairab bridge) have been built with Holcim cement, he said.

Pandit said Bangladesh will be able to earn a huge sum of foreign currency from cement exports, especially to north-eastern India, if the government provides export incentives and if bilateral cooperation between India and Bangladesh is further improved.

Bangladesh exports 40,000-50,000 tonnes of cement a month to the seven-sister market in India. Indian manufactures are now offering cement at lower rates than Bangladeshi companies due to tax benefits.

Currently, Bangladeshi cement makers cannot compete with Indian manufacturers as there is a price gap of Tk 50-Tk 70 a bag between Indian cement and Bangladeshi cement.

Pandit also called upon the government to arrange low-cost loans for the housing sector in a bid to boost apartment sales. Bangladeshi banks charge 15-16 percent on home loans at present.

The interest rate on housing loans in Bangladesh is still higher than in the Middle East and India. Currently, Indian banks charge 9- 9.25 percent on an average on long-term loans, while it is below 5 percent in the UAE, he said.

Founded in 1912, Holcim has operations in more than 70 countries and is the market leader in cement production in India, Australia, Azerbaijan, Slovakia, Switzerland and Latin America.

Holcim Bangladesh began its journey in September 2000 by acquiring Hyundai Cement Bangladesh. Gradually, Holcim solidified its interest in the country by acquiring two more plants: United Cement Industries at Meghnaghat and Saiham Cement Industries in Mongla. Its Bangladesh operation employs about 600 full-time and temporary employees.

BANGLADESH: Lafarge Surma signs deal with Metrocem

Lafarge Surma Cement Ltd has signed a toll grinding agreement with Metrocem Cement Ltd at a ceremony in the city’s Gulshan on Tuesday. Under the agreement, Lafarge Surma Cement will provide high quality clinker from its fully integrated cement plant at Chhatak to Metrocem Cement, which will then produce a world class Portland Composite Cement brand for Lafarge Surma Cement. Tarek Elba, CEO of Lafarge Surma Cement and Md Shahidullah, Managing Director of Metrocem Cement signed the agreement on behalf of their respective companies, according to a news agency.

BANGLADESH: Lighter vessel capsizes in Bay

A lighter vessel capsized with 950 tonnes of cement clinker in the Bay of Bengal near Patenga Sea Beach in Chittagong this morning.

All the crew of the vessel, numbering 7 to 8, were rescued by the staff of other ships soon after the incident, reports our Chittagong correspondent

Confirming the incident, radio control operators at the Chittagong Port said the vessel ‘Bristi’ sank in the Bay around 8:30am when it was going to a private jetty in Isanagar area of the city.

Bristi was returning to the jetty of Diamond Cement Limited after uploading clinker from a mother vessel named Xing Peng Da, the sources said.

Reason behind the capsize could not be known immediately, they said adding that Diamond Cement Ltd imported the raw material for making cement.

MYANMAR: SMGR looks to Myanmar, Bangladesh

After expanding its business to Vietnam, cement producer PT Semen Indonesia (SMGR) is planning to strengthen its regional grip by acquiring a cement company in Myanmar, the process of which is expected to be completed in July.

Semen Indonesia president director Dwi Soetjipto confirmed, saying the state run company was in the process of taking over a cement maker in Myanmar.

“It is a private company and the acquisition can be executed after the prospective partner finishes several legal documents,” Dwi said on the sidelines of the new Indarung VI cement factory groundbreaking ceremony in Padang, West Sumatra, on Monday.

Semen Indonesia has prepared a total fund of US$200 million to $300 million for the acquisition. The state company is targeting to finish the acquisition process in July, as reported by kontan.co.id.

Semen Indonesia, he said, is also eyeing a cement factory in Bangladesh that can produce around 600,000 to 1 million tons per year and is targeting to finish the factory’s acquisition process later this year or earlier next year. 

“I hope [the acquisition] can finish within the next six months,” he added.

Although Dwi is reluctant to disclose the total investment for the Bangladesh factory, he stated the acquisition of the Bangladesh factory was not as expensive as the takeover of Thang Long Cement Company (TLCC) in Vietnam.

On Nov. 14, 2012, Semen Indonesia acquired 70 percent of Thang Long’s shares from Geleximco with a total transaction value of $157 million.

In a bid to strengthen its position in Vietnam, Semen Indonesia has two options to pick, Dwi said. First, to acquire a new company with a total investment under Rp 1 trillion (US$86 million), far below Thang Long’s acquisition price. In this option, Semen Indonesia will target a small company with a production capacity of around 2.3 to 2.5 million tons.

“Semen Indonesia has met representatives from three companies,” he said, adding that Semen Indonesia would be the majority shareholder, if it picks this acquisition option.

Second, to establish a new factory under the supervision of TLCC. Semen Indonesia, however, will take the demographic factor of Vietnam into account, considering that the market in Vietnam is divided into North and South Vietnam. “The market in South Vietnam is better than in the North, but the supply is dominated by North Vietnam,” he said.

In addition, Semen Indonesia kicked off the construction of its new Indarung VI cement factory in Padang, West Sumatra, on Monday.

State-Owned Enterprises Minister Dahlan Iskan led the groundbreaking ceremony, witnessed by West Sumatra Governor Irwan Prayitno, Dwi Soetjipto of Semen Indonesia and Semen Padang president director Munadi Arifin.

Dwi said that the Rp 3.25 trillion project was targeted to finish in the second semester of 2016 and that the establishment of the factory was based on the increasing demand of cement in Sumatra and West Java areas

BANGLADESH: Businesses for reducing import duty on cement.

Businesses at a meeting here today urged the government to reduce high import duty on cement, which will save a lot of money of the cement users who are paying over Tk 200 extra per bag in the local market.

It would also aid smooth growth of the real estate sector and make residential flats affordable to the lower

middle class people, they observed.

The prices of flats were now remaining beyond the reach of 90 per cent of people mainly because of the

excessive prices of construction materials like cement and bricks, the businesses also said.

"The cement buyers are paying Tk 400 to Tk 450 a bag while the import cost will be below Tk 200 a bag. The

government is directly discouraging import of cement. It is good. But why will the buyers pay exorbitant prices for cement, which is the main raw material for construction," said AM Mahbub Chowdhury, vice president of the Chittagong Metropolitan Chamber of Commerce and Industry.

He said the cement industry in the country was being "controlled by a syndicate of local cement producers who successfully used the government or its finance ministry to impose unusual duty and other charges on import of the product."

"This is one of the main reasons why the real estate developers have been raising the flat prices beyond the reach of the commoners. This is not a fair deal from the finance ministry or the National Board of Revenue.

We would urge the government to lift all barriers to import of cement in the era of free market economy," he

said.

Turkey-Bangladesh Chamber of Commerce and Industry Earlier secretary general Murat Karaca said Turkey is one of the leading exporters of construction materials, especially cement.

He said that his country could export cement to Bangladesh at prices in the range of US $ 2.00 or around Tk

150 per bag.

The businesses of Turkey would also like to set up cement factories in Bangladesh, especially in Chittagong, under joint ventures with the local entrepreneurs, he said in the meeting.

Murat Karaca was accorded a reception at the Chittagong Metropolitan Chamber of Commerce and Industry

in the afternoon, as Mr. Karaca arrived in the city to invite the local businesses to attend the Turkey World

Trade Bridge (TWTB 2014) to be held from June 6 to 22 in Istanbul.

The Confederation of Businessmen and Industrialists of Turkiye (TUSCON) will organise the 17-day trade fair.

On the sidelines of the reception, Mr. Karaca told the FE that Turkey had a big reserve of clinker, the main raw material for cement, and the businesses of Turkey expressed eagerness to set up cement plants in

Bangladesh, especially in the port city of Chittagong under joint ventures.

Mr. Karaca further said that the Republic of Turkey with the population only half the size of that in Bangladesh was importing goods worth US $ 240 billion while the share of Bangladesh in his country's imports stood at around $ 2 million.

"Both the countries maintain an excellent bilateral relation and Bangladesh can enhance its volume of exports to Turkey and import cement from there at much lower prices than that locally available," he said.

BANGLADESH: No claimant for Padma Cement property

Nobody is claiming property of Padma Cement Limited, a publicly listed company dissolved two years back.

A public notice was issued on Mar 6, asking the claimants of the company’s property or creditors to turn up with their claims in 15 days.

Company’s liquidator Barrister Moksedul Islam told that nobody had contacted him, though 13 days had passed since the publication of the notice.

He said if former officers, employees and workers, other creditors and shareholders had any dues with the company they could contact him with documents and detailed description.

Padma Cement was enlisted on the country’s capital market in 2002 and its dissolution process started in November, 2012 at the decision of the board of directors.

According to information at the Dhaka Stock Exchange, the company suffered continuous losses from 2002 to 2010 before making a small profit in 2011.

Padma Cement gave dividend to its shareholders only in 2002.

According to DSE information, general shareholders are holding 99.64 percent of the company's shares and the sponsors only 0.34 percent.

Dhaka University Accounting Department teacher Prof Mizanur Rahman found it surprising the company repeatedly incurred losses for consecutive years and then folded up after posting a promit.

It was equally unusual, he said, that no creditors had turned up for their dues yet.

BANGLADESH: SMGR eyes Bangladesh after Vietnam, Myanmar

State-owned cement producer PT Semen Indonesia, trading on the Indonesia Stock Exchange (IDX) as SMGR, is seeking to expand to Bangladesh, after success in Vietnam and plans to enter Myanmar later this year.

“We will probably acquire grinding mills in Bangladesh [...] but not this year,” Semen Indonesia corporate secretary Agung Wiharto said on Thursday evening on the sidelines of the company’s first anniversary celebration.

“For this year, we are looking to acquire a cement company or to establish a joint-venture company in Myanmar,” he said. Semen Indonesia started negotiating with three potential partners in Myanmar last year, but had not reached an agreement yet, he added.

“We told them that we wanted to be a major shareholder, but they are still thinking about it. Many Myanmar conglomerates also want to acquire major shares,” Agung said.

Semen Indonesia had allocated a budget of around US$300 million from both cash reserves and bank loans for the overseas expansion, he said. “We are upbeat that expanding overseas is the right decision as shown by the successful growth of our company,” Agung said, referring to Vietnamese Thang Long Cement Joint Stock Company (TLCC), a 70 percent share in which was acquired by Semen Indonesia in November 2012 for $157 million.

TLCC had recorded an increase in its earnings before interest, taxes, depreciation and amortization (EBITDA) margin from 14 percent before the acquisition to 20 percent afterward, he said.

The higher the EBITDA margin, the less operating expenses eat into a company’s bottom line, leading to a more profitable operation. Agung said that TLCC still suffered losses but relatively light compared to its initial losses, without disclosing the amount of the EBITDA. 

Trading consultant firm PT Astronacci International president director Gema Goeyardi said on Friday that Semen Indonesia’s overseas expansion would help the company create new markets.

“With the Bank Indonesia [BI] interest-rate hike, fewer people will build houses in the country because residential mortgage interest rates will also increase. So, having other markets will help the company obtain other revenue sources in difficult times,” he said.

Semen Indonesia president director Dwi Soetjipto said recently that his company had allocated up to Rp 5 trillion ($411 million) for its multiyear expansion projects to strengthen its position in Indonesia.

Of the total budget, up to Rp 3 trillion would be spent on constructing new plants in Rembang, Central Java, and Indarung, West Sumatra, he said. The plants are scheduled to commence operations in 2017.

Up to Rp 1 trillion will be spent on building two new grinding plants and another Rp 500 billion on cement distribution.

The company is aiming to increase its domestic and overseas sales by 11 percent to 31 million tons this year, from 28 million tons last year. “The national cement demand will grow around 6 percent this year, from about 59 million tons last year,” said Semen Indonesia finance director Ahyanizzaman.

To achieve this target, the company has started operating a new grinding plant in Tuban, East Java. The plant produces 14.5 million tons of cement per year, taking the company’s total production to 31.8 million tons this year. The company has also launched a new packing plant in Banjarmasin, South Kalimantan, to cut the distribution time and cost from Gresik, East Java, to Banjarmasin.

SMGR’s shares closed at Rp 14,900 on Friday, up by 5.67 percent from the previous day.

BANGLADESH: Seven Rings Cement production capacity to be raised to 4.4 million MT

The Hong-Kong based Shun Shing Group has planned to increase its Seven Rings Cement production capacity in Bangladesh up to 4.4 million metric tons (MT) per year by 2015, officials said.

Currently, the group has few cement factories having annual production capacity of 1.6 million MT in Bangladesh, they said Wednesday at the corporate night-2012 of Seven Circle Bangladesh Ltd (SCBL), a cement company fully owned by the group, at a city hotel.

The corporate night was attended among others, by professors of various universities, engineers from different government and non-government organisations including Prof Jamilur Reza Choudhury, vice chancellor of the University of Asia Pacific, Prof Dr AMM Shafiullah, vice chancellor of Ahsanullah University of Science and Technology, Prof Dr M Shamim J Bosunia, SCBL Managing Director Mohammad Ali Pasha and its CEO Sheikh Raihan Ahmed.

The guests highly praised the consistent good quality of seven rings cement and urged the officials to continue the quality. 

They also called upon to increase its CSR activities for the betterment of the people and the company.

Prof Jamilur Reza Choudhury, who is also a former advisor to the caretaker government, unveiled an updated corporate brochure of Seven Circle.

The corporate night was arranged to enhance enthusiasm for stronger bondage and to create a new horizon of progress among the valued customers of the company, the officials said.

At the programme, the company officials shared and exchanged their knowledge and views as well as technical capacity of their products for different purposes, by which Seven Rings Cement can contribute in the development work in Bangladesh, they added.

To meet up the growing demand for seven rings cement, the group invested for another cement unit in Khulna to increase its production capacity to 2.9 million MT per year by 2013 in the country, they said.

They further said that Seven Rings Cement’s commitment in service and consistent quality toward their customers will be more ensured by the strong relationship to be built at the programme.

They also expressed their readiness to take the challenges of the 21st century.

SCBL was incorporated in Bangladesh in 2000. Its initial annual production capacity was 0.5 million MT.