Ambuja Cement | Annual Report 2020-21

Chairman’s communiqué

Fast-tracking
inclusive growth

Dear Stakeholders,

I am happy to share our first Integrated Report, which is the outcome of our integrated strategy for value creation. Before I dwell on our performance for the year, it is pertinent to share a few words on the India growth story, which we are extremely bullish about.

Notwithstanding challenges, India aspires to become a 5 trillion-dollar economy in the next few years. However, this growth needs to be more inclusive and diverse to raise the quality of lives of millions of people, conserve natural resources, deploy capital prudently and drive the climate agenda very strongly. As one of India’s leading core sector players, with focus on responsible manufacturing, we see a larger role for ourselves in this operating environment.

COVID-19 hit the world hard to say the least, and unprecedented lockdowns disrupted economies, businesses and society in a manner that we have never seen in our lives. India was no exception, but our country has managed to flatten the COVID-19 curve remarkably better than many other economies. This was made possible by the government’s timely and consistent interventions to enforce stringent health and safety guidelines. Additionally, the government’s huge stimulus package supported businesses and vulnerable communities.

During the year, one of our major concerns was to ensure the well-being of our community and lend a helping hand when the need arose. Ambuja Cement Foundation (ACF), our CSR arm, sprang into action with a detailed action plan that touched the lives of more than 34 lakh people. The initiatives included the creation of rural Single Point of Contacts (SPOCs) between the community and ACF, working diligently alongside health authorities.

ACF helped the SPOCs disseminate messages around social distancing, sanitisation, and other safety protocols to community members. It also engaged 525 Self-Help Groups (SHGs) and 4,52,000 face masks were made under the livelihood enhancement programme, helping generate income during the difficult months of the lockdown.

Resolute steps forward

During the year, we adopted a razor-sharp focus on ‘health, cost and cash’ and resolutely steered the business forward, notwithstanding the adversity. Our concerted efforts also helped restart operations and dispatches faster than our industry peers. The result was that despite a 2% decline in the topline, we could grow our EBITDA by 23% and Profit After Tax by 17% vis-à-vis 2019.

Industry scenario

Acute shortage of labour and social-distancing measures resulted in the suspension of construction activities across the country, which adversely impacted the cement industry. After an uninspiring first half, the second half of the year reported stronger recovery and 8% volume growth driven by a gradual pick-up of construction activities, and the government’s thrust on infrastructure creation to accelerate economic recovery. The industry reported a decline of 11% during the whole year, while Ambuja Cement’s volume declined by 6%. This vindicated the strength of our fundamentals.

We expect the economy to improve further during 2021. Given the government’s focus on affordable housing and infrastructure, we believe that the cement sector has a strong growth potential in the coming years.

Dynamics work in our favour

India continues to be the world’s second largest cement producer. However, the country lags in terms of per capita consumption vis-à-vis the global average. There has been a growing demand in construction, infrastructure and housing sector. The housing sector accounts for over 65% of the total cement consumed in India. In line with this reality, Ambuja Cement has focused specifically on the retail segment of the market, accounting for ~81% of the Company’s total sales in 2020.

Our focus remains on individual home builders across existing and new markets. We are stepping up innovation to offer durable solutions to individual home builders in home construction. Our growing presence in suburban and rural regions, along with strategically located grinding units, enables us to service these markets better and faster. Additionally, our upcoming capacities will help us carve out a larger market pie.

Sustainability is a way of life

We are putting into action bolder plans in terms of emissions reduction, resource optimisation and water conservation. We continue to consistently rank higher on water positive performance in our sector. Besides, co-processing of plastic waste in our kilns has helped us become a plastic negative company.

Also, to increase the use of green energy, we are setting up waste heat recovery systems at our plants.

Upon completion, the share of green energy in our total power requirement will increase substantially. Going ahead, this will also provide us with cost-competitiveness. This year, health and safety remained one of the key focus areas for us, and we are working towards the goal of ‘Zero Harm’ across our operations.

Together we deliver

COVID-19 had posed a temporary pause in economic activity, and we are already seeing green shoots of recovery. The government’s mega push on affordable housing and infrastructure will further widen the opportunity horizon for us, as the Indian economy gradually regains its pre-COVID momentum. We have the capability and the commitment to help build the India of tomorrow. I, along with other members of the Board, am thankful to our customers, suppliers and governments for their continued support. Also, I express my gratitude to our employees for their grit and determination, which helped us navigate through the COVID-19 pandemic.

Warm regards,

N.S. Sekhsaria
Chairman and Principal Founder
February 18, 2021