Holcim, the trendsetter in Bangladesh cement industry 3/30/2006 Holcim is one of the largest multinational cement producers in the

world with manufacturing plants in more than 71 courtiers. In Bangladesh, Holcim stepped back in 1998 through a Joint Venture, and it started its fullfledged production and marketing operations from September 2000 through acquisition of erstwhile Hyundai Cement Bangladesh Ltd. Since then, Holcim (Bangladesh) Ltd has proved itself to be the fastest growing company in Bangladesh through acquisitions of two more plants (United and Saiham) and more importantly by introducing pioneering practices in the cement industry of Bangladesh. Holcim has set many trends in the cement industry in Bangladesh, like l the first cement company to launch blended/ composite cements, l Introduced the masonry cement for the first time in the country, l achieved ISO 14001 l first to get the recognition of OHSAS 18001 l for the first time to achieve BIS certification and start official export to India l first to introduce mobile laboratory facilities for their customers. These are just to name a few. In an exclusive interview with the FE, Managing Director of Holcim Bangladesh P N Iyer spoke about the prospect of the cement industry of the country, Holcim's visions and its rule to grow this industry further. Iyer is a Commerce Graduate from Kolkata University with Post Graduation in Business Management & Rail Transport Management, and an alumnus of International Centre for Management Development (IMD), Switzerland. Started carrier in Cement industry in 1984 with Raymond Cement; one of the largest Cement Manufacturers in India, Iyer is holding successful experiences in the cement field for about long 22 years. During his long carrier with Cement, Iyer took on a wide variety of responsibilities, which included sales and marketing, development of new business areas, strategic planning and business development, market expansion and exports. He attached highest importance to the training in his whole carrier. Besides conducting and participating in numerous in-service training himself, attending seminars and workshops in India and Bangladesh; he attended many high profile training and seminars in various Asian and European countries. Iyer is fully committed and determined to contribute more to the Cement Industry of Bangladesh in the days to come. He says, "Holcim always considers people are its base". The strength of our people and international exposures are key drivers for all our achievements, Iyer added. Excerpts of the interview follow: Q1. How is the state of affairs with the country's cement industry? The history of cement industry of the country is not too far. Besides two old plants such as Chatak Cement and the Chittagong Cement that were built in 1947 and1974 respectively, the revolution began in nineties. In less than half a decade or so it has reached to a over capacity situation. The cement market in Bangladesh is highly competitive. The supply capability is much larger - about 250% -- of demand of cement. While 6-8 major companies can meet the total demand, there are currently 64 registered companies in the market. The Country has been growing on an average @ 7 to 8% per annum and in 2005 the growth was over 15%. With all the Fly-overs and other infrastructure projects coming up as well as fuelling demand in the housing sector, this Country is poised to grow further in the years to come. The construction industry has been facing higher price of cement since mid 2004. Recently price of cement have marked sharp rises. Exorbitant clinker price, higher ocean freight for carrying clinker, continuous currency devaluation and power crisis specially at the peak season are the leading causes of price hike of cement.

Cement being a freight sensitive commodity, we obviously cannot import clinker and export back cement .However, industry had witnessed a ray of hope while cement was allowed to export to India by Bureau of Indian standard (BIS) during end 2004 and Holcim is the first cement to achieve this prestigious permission.. Though Tripura's requirement of cement is low, Bangladesh has started its exports in a modest way. Should there be any trade concessions from the Indian side, ofcourse the exports could find its way into other parts of North Eastern Region. Q2. Is the cement sector is now suffering from an ailment called 'overcapacity' Yes, this sector has been suffering from overcapacity since 2002. While the country's demand today is about 7.5 million tons, the installed-capacity of the country is over 17million tons, mainly grinding stations only. Q3. A good number of smaller cement factories are reportedly finding it difficult to survive the competition. Why is so? Clinker is the basic raw material of cement and it is mainly carried by various sizes of ocean going vessels ranging from 6000-toner capacity to 50000-toner capacity. Obviously small players alone cannot afford to go for higher capacity vessel. So alternately either they pay extra cost to carry clinker by smaller vessel or they pay additional charges for being syndicated to bring by bigger vessel. Moreover, they mostly do not have proper quality control arrangement and resultantly failed to realize the due price from the market. Considering all these situation, absence of captive sources of clinker, inadequate quality control system and poor market image have made the situation that many small players have either shut down their plants or run with interval. The reason for small players unable to survive is purely due to very high competition. The market needs Quality product at a reasonable price which they are not in a position to give due to the following reasons l They do not have their own Clinkerization plant and their clinker is sourced from different places that makes their quality inconsistent l Very few have close circuit technology l Cement is a volume game which only few are capable l Unless you produce quality cement, you cannot get a good price in this competitive market. Price & Volume being the key to one's success the fittest survives. In 2002 few players even resorted to predatory pricing with a view to minimize the number of players. Many small plants went out of scene then and thereafter few go out of the scene due to poor margin in this business. Q4. There has been a hike in the prices of cement recently. What are the reasons for such hike? Bangladesh is an import dependent country for basic raw material of cement i.e. clinker. The large portion of clinker of about 6 million tons are carried by ocean going vessels from countries like Thailand, Indonesia,China, Malaysia, India, Philippines etc. every year. The ocean freight for transportation of clinker go up due to increase in bunker prices. The Bangladesh Taka has depreciated alarmingly since end of last year resulting in extra burden to all imported items and clinker is not an exception to that. In addition to this, the packaging cost has gone up substantially in the recent past. The rise has been to .the order of 20%All these factors have lead to the increase cement prices Q5. How is your company faring? Will you, please, elaborate the growth of business of your company in recent years? Despite various difficulties, we made remarkable progress like in setting trends in the industry, which are briefly narrated above. Customers are aware of our quality and the increased demand for our product most certainly contributes to our volume.. We have a long tradition of supplying cement for large constructions like bridges, tallest buildings etc and we are the undisputed choice on infrastructure projects.. Recentone being China Technical Team for sixth Bangladesh-China Friendship Bridge (Mukterpur Road Bridge) for supplying cement exclusively to construct Mukterpur Bridge. Since getting the official permission from India, we have continuously been exporting cement to northeast India. We mostly supply cement to cater the demand of ready mix concrete industry of the country. With all these

positive indicators and very positive perception of our customers due to our quality, we are buoyant about growth in our business in Bangladesh. Q6. Do you have any expansion plan? If yes, please give details. A: We certainly want to grow more than the market and we first would utilize fully our available capacity and thereafter go for expansion. Q7. The construction sector has been doing well for the last couple years in spite of substantial hike in the price of steel and other construction materials. What are the factors contributing to this development? A: Bangladesh is the most densely populated country in the world where many people are still fighting to alleviate poverty. Despite many natural calamities like flood, cyclone and tidal bore that hit almost every year, political unrest, poor infrastructure; country has in the recent years made remarkable progress in her various economic fields. The Country has been consistently achieving economic growth of about 5 - 6 % for last 7-8 years; attained selfsufficiency in food; export of readymade garment and frozen food figured out significant foreign currency that fuelled the economy and remittances by non-resident Bangladeshis have also been considered as the significant driver of the economy. All these positive economic indicators have lead to boast the construction industry at large despite the price hike various construction materials. The demand of cement has been growing at the rate of 7-8% every year for last one and half decades and the country is poised to grow further. 1. Rapid growth in urbanization 2. Huge industrialization 3. Increase in Infrastructure activities These are the important drivers contributing to the growth in this sector. Rehab has been successfully & continuously holding road shows in Europe & USA, which not only help them sell the space but also brings in the much-desired foreign exchange. Upmarket products has more clienteles overseas and they have rightly been tapping this segment. A few developers have concentrated in middle income group and successfully operating in this area. Housing sector will certainly grow with such a lot of unsatisfied demand.