Introduction

 Rapid urbanization and the property and infrastructure sector

boom caused increasing demand for cement in Bangladesh.

 The development of cement industry in Bangladesh dates back

to the early-fifties but its growth in real sense started only about
decade or so.
 Government gave permission for establishing cement industries
in Bangladesh in financial year 1995.
 Bangladesh cement industry is the 40th largest market in the
world.
 Current capacity of the industry is about 22 mn tonnes
(MT).And this sector is considered as one of the emerging sector
in the economy of Bangladesh.
Recent Cement Industry Overview
 Currently 123 companies are listed as cement
manufacturers in the country.
 63 have actual production capacity while about 30 do
not have any production at all.
 The current installed capacity is 22.0 MMT. However,
because of supply constraints for power and clinkers,
the actual capacity is about 17.0 MMT
 Recent Overview of Cement Industry

Total Production capacity (mn MT)

22

Industry average utilization rate 70%

Actual capacity excluding obstacles (mn MT) 13.96

Local consumption (mn MT) 13.93

Per capita consumption 84.5 Kg

Total factories registered

123

Factories started operation

63

Currently plants in operation

32
 Recent Overview of Cement Industry

Factories exporting cement to India 8

Size of export in FY2011 (K MT/year) 260

Construction % of GDP 10%

Construction sector growth in FY2010 (according to 8%

BBS)

Industry consumption growth in FY2011 32%

Expected industry growth rate in next 5 years 25% / year

Largest 13 cement companies hold (market share) 78%

Industry Structure
Local manufacturers
Multinationals

27%

73%
Market for Cement Industry
Cement Consumer

Individual
29% homebuilders
Real estate
developers
Construction
60% contractors
3%
8% Government
 Industry Demand & Production scenario
 consumption and the
 Installed capacity of the production of the cement in FY
industry is 22.0 mn MT. This 2007 to FY 2011.
installed capacity has been 25
calculated under two
conditions
20
1. All factories are in
Consumpti
operation on (mn
2. Production is at its peak 15 MT)

season
Capacity
10
 currently the actual capacity
(mn MT)

is about 17 mn MT due to 5
supply constraints for power
and clinkers.
0
2007 2008 2009 2010 2011
 Industry Characteristics
I. Seasonality and Cyclicality of
the Industry
 Peak Season –
Area Wise Consumption FY 2011

January to April/ May and October

to December
 Dull/off Season (depends on
2%
7% Dhaka
monsoon) – 12%
Mongla
June to September
16% Chattagong
II. Regional in Nature 64%
Sylhet
Cement is a high-volume, low-
Rajshahi
value commodity. Transporting
over long distances adds to the
cost,. This makes cement a
regional commodity where lower
distribution cost makes it
remunerative to producers
 Industry Characteristics
 Some other characteristics :
Supply
At present, the demand-supply situation is tightly balanced with
the latter being marginally higher.

Demand
However, recently industrial and infrastructure sectors have also
emerged as demand drivers.

Barriers to entry
High capital costs and long gestation periods. Access to cheap
source of clinker supplier also acts as a significant entry barrier.
Bargaining power of suppliers
Our cement industry depends on imported raw materials.
Currently international price of clinker is stable. But any kind
of volatility in its price remained a concern.

Bargaining power of customers

End users of the product get benefited if they are near to the
distribution plant of the company.

Competition
Intense competition among players regarding price due to
homogeneous product.
 Cost and Pricing Structure
i. Cost Elements  Raw material costs
Main raw material of production is
Cost elements % of cost of sales clinker which accounts 70-75% of
the COGS
Power and fuel 10%
costs
Raw material
Raw material 75%
Key raw material Clinker
costs
Transportation 5% Additives Gypsum and Fly ash
costs
Major Exporters of Thailand, Indonesia,
Other expenses 10%
Clinker Malaysia, China,
 Power and fuel costs Philippines and India
Cement industry is power-intensive with
power and fuel costs constituting
approximately 7%-10% of the cost of
sale of cement
ii. Pricing Structure

 the standard price of one bag of cement produced by the cement

companies ranges within BDT 450 to BDT 480 per bag. On the other
hand, price of one bag of cement produced by the local companies‟
ranges within the price bracket of BDT 430 to BDT 472.

 Hence, average price of cement is expected to increase by BDT 5.0 -

BDT 10.0 per bag over the next 3 years. Price may not increase in line
with increasing demand as the cost of sales may dip due to stable
clinker price and increasing supply of product
 Product and Technology
 Product:
Bangladesh has adopted EN197- 1:2000 as Bangladesh
Standard, titled BDS EN 197-1:2003.
Under this Standard there are 27 products in the family of
common cements, which are grouped into five main cement
types as follows:

1. Portland cement
2. Portland- composite cement
3. Blast furnace cement
4. Pozzolanic cement
5. Composite cement
 Technology
Two basic types of clinker production processes exist
 Wet method (use in Bangladesh)
 Dry method
The finished product is analyzed and tested to ensure that it complies
with all specifications

Standardization-Bangladesh is maintaining

Standardization BSTI (Bangladesh Standardization Authority) has been

adopted the European Norms and titled as BDS EN 197-1:2003

Main constituents a) Clinker

b) Slag
c) Fly ash
d) limestone
e) Gypsum
 SWOT Analysis of Cement Industry
Bangladesh:
Strength:

 High selling price of the product and profitability levels

 Taxes and restrictions set on imported cement
 Natural hedge from outside competition arising from high
transportation costs
 Capital-intensive industry with long construction periods,
creating natural barrier to new entrants
 Government incentive to domestic cement manufacturers.
 There is no Substitute for Cement. Steel can be used in
construction but in limited extent due to its high cost.
Weaknesses:
 High price of fuel and power shortage problem.
 Significantly increasing production and transportation costs.
 Increasing raw material cost.
 Most of the raw materials are imported so the supplier of raw materials
enjoys high bargaining power

Opportunities:
 Construction boom in both domestic and international markets
countries that is expected to continue in the short to medium term
 Possible entry of multinational companies, increasing efficiency and
opening new export routes.
 Private sector may get interested to invest in real estate for getting tax
advantages of their undeclared funds
 Lower bargaining power of the end users
Threats:
 Several capacity upgrades are planned, raising the
possibility of oversupply situation.
 Increased competition in local markets.
 Fragmented regional industry with no economies of
scale.
 Environmental threat.
 Unstable political situation.
 Price Hike/ Maintaining Substantial Price.
For the financial analysis of the study we have selected 5
companies which are Public listed companies that are
belonging to Cement Industry of Bangladesh:

 Heidelberg Cement Bangladesh Limited

 Confidence Cement Limited
 Meghna Cement Limited
 Lafarge Surma Cemnet Limited
 Aramit Cement Limited
Conclusion And
Recommendation
 Recommendation:
 Government should provide more incentives and tax benefits to
this sector.

 Power problem and fuel problem should be minimized in order

to generate higher production.

 Opportunities to go international should be analyzed and

utilized by domestic cement producers.

 If the import duty structure of various cement products, e.g.

finished cement, semi-finished cement and basic raw materials
for cement (25%, 12% and 7% respectively) should be maintained
which will foster the growth of domestic producers.