We enjoy a number of key competitive advantages, which have helped us maintain our position as one of the leading
cement manufacturers in the Northern Indian cement market. Our principal strengths and competitive advantages are as
follows:
Based on CMA data, Northern Indian cement manufactures have consistently operated at the highest levels of capacity utilization among India’s five regions. We believe this reflects the strong demand in Northern India for cement products relative to supply. Further, based on capacity expansions announced by cement manufacturers, we expect cement plants in Northern India to continue to operate at high utilization levels and anticipate continued strong demand for our grey cement products in the near and medium-term.
We believe that we are well positioned to take advantage of this demand, as the fourth largest grey cement manufacturer in Northern India, and the largest grey cement manufacturer in the state of Rajasthan.
White cement accounted for 16.6% of our total cement revenue and 35.2% of adjusted EBITDA from our cement operations in fiscal 2005, and 15.5% of revenues and 26.7% of our adjusted EBITDA from our cement operations in the six months ended September 31, 2005. Unlike grey cement, the white cement industry in India is highly concentrated with the two largest players accounting for the substantial majority of India’s production capacity. Consequently, prices of white cement have been relatively less volatile and sales of white cement have generated more stable cash flows for us even during industry downturns in grey cement. We also believe our position as the second largest producer of white cement in India, together with our nationwide delivery network, significantly enhances the overall brand image of JK Cement.
We have access to large reserves of limestone for both our grey and white cement operations, which we believe are sufficient to sustain our operations well into the future. Based on independent geological surveys of different mines during 1996 to 2001, we believe that our limestone reserves are sufficient to support our current and planned capacity for approximately 40 years for both grey and white cement. (Put in risk - assuming we are able to renew our existing leases upon their expiry) As one of the first cement producers in Northern India, we were able to choose our limestone reserves in an area with high quality limestone resources. In addition to allowing us to produce white cement, which requires high quality limestone, it also provides us with a cost advantage, as we are not required to purchase sweeteners to improve the quality of limestone. Further, our manufacturing plants are in close proximity to our limestone reserves, resulting in lower transportation costs. Finally, our mines that supply our white cement plant at Gotan also have a supply of white clay, an important additive necessary for white cement production.
We believe that brand name and reputation are important to retail purchasers of cement in India. We have built a strong reputation among cement purchasers by consistently providing high quality products. We believe that there is strong customer awareness of our brands, JK Cement (“Sarvashaktiman”), for grey cement in our principal market in Northern India, and JK White (“Camel”), for white cement across India. Further, we believe that our brand name and our reputation for consistently supplying high quality products provide us with a competitive advantage in ensuring that cement dealers carry our products.
We have a wide distribution network for grey cement in Northern India. We also have a strong all-India distribution network for white cement. Our distribution network for grey cement products consists of 44 feeder depots serviced by seven regional sales offices in Delhi, Haryana, Uttar Pradesh, Punjab, Rajasthan, Madhya Pradesh and Gujarat. Our white cement network comprises 20 feeder depots serviced by 13 regional sales offices in Delhi, Chandigarh, Uttar Pradesh, West Bengal, Andhra Pradesh, Tamil Nadu, Karnataka, Kerala, Maharasthra, Gujarat, Madhya Pradesh and Rajasthan. In addition, we have more than 4,000 retail stores that stock our grey and white cement products, as well as 22 sales promoters and four handling agents. We believe that the extent of this network, and our relationships with our dealers, enables us to market and distribute our cement widely and efficiently.
We have 30 years of experience in the Indian cement industry, which we believe provides us with the skills to maximize production efficiency, expand production capacity quickly and reduce costs. Over the years, we believe that we have developed long-term customer relationships and a strong reputation for quality. In addition, we have a proven track record of upgrading and modernizing our production capabilities efficiently, having increased our production capacity at Nimbahera by more than 80%, from 1.54 million tons in 1998 to 2.8 million tons as of September 30, 2005. Further, we have a stable and experienced middle and senior level management team, many of whom have been working in our cement operations for more than 20 years. Our Nimbahera manufacturing facility was chosen by the World Bank and the Danish International Development Agency as one of the four training centers in India to serve as the “Regional Training Center” for Northern India. There are only four regional training centers for the cement industry in India, and we believe our operation of the training center provides us with access to state of art training aids, live working models, and technical expertise developed by well known national and international cement producers.
Leading position in attractive Northern India grey cement market.
Based on CMA data, Northern Indian cement manufactures have consistently operated at the highest levels of capacity utilization among India’s five regions. We believe this reflects the strong demand in Northern India for cement products relative to supply. Further, based on capacity expansions announced by cement manufacturers, we expect cement plants in Northern India to continue to operate at high utilization levels and anticipate continued strong demand for our grey cement products in the near and medium-term.
We believe that we are well positioned to take advantage of this demand, as the fourth largest grey cement manufacturer in Northern India, and the largest grey cement manufacturer in the state of Rajasthan.
One of the Leading white cement producer in India
White cement accounted for 16.6% of our total cement revenue and 35.2% of adjusted EBITDA from our cement operations in fiscal 2005, and 15.5% of revenues and 26.7% of our adjusted EBITDA from our cement operations in the six months ended September 31, 2005. Unlike grey cement, the white cement industry in India is highly concentrated with the two largest players accounting for the substantial majority of India’s production capacity. Consequently, prices of white cement have been relatively less volatile and sales of white cement have generated more stable cash flows for us even during industry downturns in grey cement. We also believe our position as the second largest producer of white cement in India, together with our nationwide delivery network, significantly enhances the overall brand image of JK Cement.
Proximity and access to large reserves of high quality limestone
We have access to large reserves of limestone for both our grey and white cement operations, which we believe are sufficient to sustain our operations well into the future. Based on independent geological surveys of different mines during 1996 to 2001, we believe that our limestone reserves are sufficient to support our current and planned capacity for approximately 40 years for both grey and white cement. (Put in risk - assuming we are able to renew our existing leases upon their expiry) As one of the first cement producers in Northern India, we were able to choose our limestone reserves in an area with high quality limestone resources. In addition to allowing us to produce white cement, which requires high quality limestone, it also provides us with a cost advantage, as we are not required to purchase sweeteners to improve the quality of limestone. Further, our manufacturing plants are in close proximity to our limestone reserves, resulting in lower transportation costs. Finally, our mines that supply our white cement plant at Gotan also have a supply of white clay, an important additive necessary for white cement production.
Quality of products and strong brand name
We believe that brand name and reputation are important to retail purchasers of cement in India. We have built a strong reputation among cement purchasers by consistently providing high quality products. We believe that there is strong customer awareness of our brands, JK Cement (“Sarvashaktiman”), for grey cement in our principal market in Northern India, and JK White (“Camel”), for white cement across India. Further, we believe that our brand name and our reputation for consistently supplying high quality products provide us with a competitive advantage in ensuring that cement dealers carry our products.
Extensive marketing and distribution network
We have a wide distribution network for grey cement in Northern India. We also have a strong all-India distribution network for white cement. Our distribution network for grey cement products consists of 44 feeder depots serviced by seven regional sales offices in Delhi, Haryana, Uttar Pradesh, Punjab, Rajasthan, Madhya Pradesh and Gujarat. Our white cement network comprises 20 feeder depots serviced by 13 regional sales offices in Delhi, Chandigarh, Uttar Pradesh, West Bengal, Andhra Pradesh, Tamil Nadu, Karnataka, Kerala, Maharasthra, Gujarat, Madhya Pradesh and Rajasthan. In addition, we have more than 4,000 retail stores that stock our grey and white cement products, as well as 22 sales promoters and four handling agents. We believe that the extent of this network, and our relationships with our dealers, enables us to market and distribute our cement widely and efficiently.
Experience and technical know-how
We have 30 years of experience in the Indian cement industry, which we believe provides us with the skills to maximize production efficiency, expand production capacity quickly and reduce costs. Over the years, we believe that we have developed long-term customer relationships and a strong reputation for quality. In addition, we have a proven track record of upgrading and modernizing our production capabilities efficiently, having increased our production capacity at Nimbahera by more than 80%, from 1.54 million tons in 1998 to 2.8 million tons as of September 30, 2005. Further, we have a stable and experienced middle and senior level management team, many of whom have been working in our cement operations for more than 20 years. Our Nimbahera manufacturing facility was chosen by the World Bank and the Danish International Development Agency as one of the four training centers in India to serve as the “Regional Training Center” for Northern India. There are only four regional training centers for the cement industry in India, and we believe our operation of the training center provides us with access to state of art training aids, live working models, and technical expertise developed by well known national and international cement producers.