India: the Italcementi
experience
Rodolfo Danielli
Chief Operating Officer
Milano, February 23rd , 2006
0
Index
Italcementi Group
The Indian Market
Indian Presence
1
The Group has secured a worldwide presence...
(at 30/06/2005)
ALBANIA
NORTH AMERICA (U.S.A./CANADA)
9
5
1
1
1
BULGARIA
SPAIN
2
37
3
KAZAKHSTAN
9
MOROCCO
3
17
1
3
1
INDIA
2
MAURITANIA
THAILAND
1
3
GAMBIA
35
1
SRI LANKA
FRANCE
1
9
193
1
81
1
EGYPT (*)
ITALY
BELGIUM
11
18
246
3
8
52
TOTAL GROUP
5
1
TURKEY
GREECE
1
CIPRUS (**)
8
4
18
2
1
1
19 Countries
62 Cement plants
152 Quarries
12 Grinding centres
Over 20.000 Employees (*)
(*) including 2 plants of Asec Cement, consolidated from August 2005
(*) N° employees in the consolidated area
(**) Not consolidated on a line-by-line basis
570 Concrete plants
4 Terminals (one of which is also grinding center)
2
...with an organisation focused on four strategic
areas...
CEO
Carlo Pesenti
Staff
Staff
COO
Rodolfo Danielli
Staff
Staff
North America
Europe
MENA a)
Asia
- United Staes
- Italy
- Morocco
- India
- Canada
- France
- Egypt
- Thailand
- Puerto Rico
- Belgium
- Turkey
- Kazakhstan
- Spain
- Cyprus
- Greece
- Bulgariab)
Mature
Emerging
a) Middle East North Africa
b) Included in MENA for consistency with Italcementi Group strategic portfolio
3
...and a perspective of further growth in emerging
markets...
1992-2007 Influenced Cement Capacity a)
Million tons
> 70
Italy
Other mature countries
Emerging countries
~ 50%
42%
> 45
11%
47%
> 20
94%
42%
1992
1997
31%
~ 50%
27%
2002
2007
a) full capacity included for participation > 33%,
4
...particularly in Asia where the Group already
operates in Kazakhstan, India and Thailand
(at 30/06/2005)
Kazakhstan
Shymkent Cement
India
Zuari Cement (JV 50%)
Thailand
Asia Cement
5
Index
Italcementi Group
The Indian Market
Indian Presence
6
India is the second largest national cement market
worldwide, driven by an emerging economy and a
buoyant population …
Population:
Pop. CAGR '99-'04:
GDP per head:
1.080 m
1,5%
610 US $
GDPa) CAGR ’99 - ’04:
5,7 %
GFIb) CAGR ’99 - ’04:
6,9 %
Cement sector ‘04:
Companies:
55
Plantsc):
127
Production Capacityc) (mt):
146
Cement Consumption:
- million tons:
- Kg/inhab:
Source:
119,4c)
110
macroeconomic data, EIU January ’05
cement data, Cement Manufacturers Ass.
a) Gross Domestic Product
b) Gross Fixed Investment
c) CMA plants with production capacity > 200 kt, 2005 est. 131 mt
7
...with a construction sector showing solid growth,
overcome in recent years only by the growth of
Services...
Grafico 6 - Pil al costo dei fattori per industria di
GDP at origine
cost of factors
byindice
origin 1993-94=100)
(index 1993-94=100)
(numero
 Construction sector accounts today
220
for 5% of Indian GDP
 Strong growth in recent years driven
190
by non-residential (incentives to FDI)
 Increasing weight of residential
160
Agricolture
Agricoltura
Construction
Costruzioni
Industry
Industria
Services
Servizi
PIL GDP
(easier access to financial credit,
strong development of major cities)
130
100
1993-94
1996-97
1999-00
2002-03
Fonte: Ministry of Statistics
Source: Ministry of Statistics
8
...and is expected to further grow due to high
development rates and infrastructure programs...
Infrastructures development
supported by private/public
partnerships:
 National Highway Development
Plana)
Legenda
Stato avanzamento lavori al 30 novembre 2005
Golden quadrilater*:
NS & EW corridor:
Lavori completati
Lavori in corso
Progetti da assegnare
* Completato al 90%.
Fonte: Governo indiano
 National Marine Development
Programb)
 Airports development c)
 Relaunch of railways
a)
b)
c)
d)
d)
Creation of 52 thousands km of new highways and modernisation of secondary roads
Modernisation of 180 Indian ports
New airports (Hyderbad, Bangalore) and modernisation of existing (New Delhi, Bombay)
New 9 thousand km railway corridor
9
... with a positive impact on cement demand growth
in the medium and long term
India cement demand, mt/year
200
Period
CAGR
%
1973 - 83
1983 - 93
1993 - 03
6,7
7,2
7,6
180
160
Long term
expected
growth
CAGR 5,5%
140
120
100
80
60
40
20
Actual data
20
12
20
10
20
08
20
06
20
04
20
02
20
00
19
98
19
96
19
94
19
92
19
90
19
88
19
86
19
84
19
82
19
80
19
78
19
76
19
74
19
72
19
70
0
Structural Curve
10
Index
Italcementi Group
The Indian Market
Indian Presence
11
Italcementi invested USD120m since 2001 to acquire
2 plants with 3,2 mt capacity and a 7%a)- 8%b) share
of the South India market...
Italcementi plants in South India
January 2001:
acquisition of 50% of Zuari Cement
(Yerraguntla)
Sitapuram
 Capacity 1.950 kt
 Net Sales 2005: USD82,6m
January 2002:
acquisition (through Zuari Cement)
of Sri Vishnu Cement (Sitapuram)
Yerraguntla
 Capacity 1.250 kt
 Net Sales 2005: USD39,5m
a) on total market
b) on CMA market
12
...with the aim to further develop its presence in the
country
 It has taken time to fully assimilate the complexities of operating in the country
(challenging cement market, strong price pressure, changing fiscal environment)
 The high expertise of local human resources allows today to maintain only one
expatriate as General Manager in the organisation, and various plans are underway
to capitalise Groupwide on Indian resources
 Several important industrial investments are underway:
- 40 MW steam coal power plant
- second clinker line in Yerraguntla
- grinding centre in Chennai
 The Group is continuosly seeking opportunities for further growth in the Country
through acquisitions
13
India:
a successful integration and
an increasingly bright future
14