PMR Corporate

Holcim in India - a Building Materials world leader  - is on the move in India and gives details of Indian market shares and forecasts in notes to investors.

Successful construction companies are investing and acquiring in the BRICs (Brazil Russia India and China)

The media is full of the growing crisis in the financial services sector. While the financial services sector has serious problems, there is lots of good news not being highlighted.

Well funded and far sighted market leading companies, including PMR clients, are on the move.

Holcim – one of the world’s leading building materials companies, told investors that  cement demand is expected to increase to 9-10% per annum compared to the previous level of just over 8 % p.a. Total Consumption is expected to increase by 9-10% per annum to reach 230 mtpa in 2010 and consumption per capita rise to over 190kg per person by 2011.

If we put modern India together with the former British India (Bangladesh, Pakistan and Sri Lanka), the population is pretty similar to China, and the Indian Subcontinent together with China probably makes up more than half the world’s population – probably because some estimate that China’s population is understated by 200-300 million. With cement consumption per capita is going up by 40% in 3 years in such an important market , we have to pay attention, and Holcim is.

In December 2007 Holcim announced its intention to invest another UA$600 million in India, increasing their stake in Ambuja (ACL). Even with the dollar at record lows, this is a sign of their commitment to the market place, and makes sense in view of the very high returns their business units are making there.

Whether this will lead to the merger of ACL and ACC remains to be seen. But for the time being there Grasim and Holcim will continue to hold more than 45% market share, with a few smaller companies Jaypee, JK,  India Cem  and  Ultratech holding about another 15% and a large number of much smaller operators taking up the remaining 30-40%.  With Holcim reporting $1.5bn of sales and EBITDA (earnings before interest, tax and depreciation) profit over $500 million shareholders should be delighted.

According to ACC, the 2006 market shares in Cement in India of the leading companies are

ACC 12.8%,

ACL 10.7%

Grasim 10.4%,

Ultratech 9.5%,

India Cement 6%

Jaypee 4.1%

Lafarge 3.2%

Anyone who reports market shares to a decimal place % point has to be a little bit suspect in terms of their methodology, but even if these figures are only broadly correct, they are still valuable

Another PMR client, subject to non disclosure, announcing historically record revenues worldwide in November 2007, told us not only that they want to roll out a study done in two of the BRIC countries to a third, but that the big name consultancies they might use if not PMR are so busy in those countries they are not sure if they will have capacity in Q1/2008.

When Michael Dell said that “business success is 95% nuts and bolts execution”, he meant that getting things done, swiftly well and efficiently is a huge proportion of effective strategy implementation. It sounds obvious – but it is worth re-stating. Today and tomorrow’s market leaders are not just talking about doing business in the BRICS, and other important high growth and population developing countries. They are far beyond the phase of strategy development and are instead already making or extending their investments . As much of the G7 and other advanced economies move into low growth or even recession, and with falling property prices, the companies that have balanced their strategy  -  not to rely exclusively on the familiar markets they know  - are the best placed. For companies not yet sure about how to exploit the fast growing markets in the developing world, it is not too late, but 2008 has to be the year in which strategy is both decided and implementation begins.