FLSmidth & Co. A/S, which has done business in India for more than a century, may make a "clean sweep" of cement-plant orders there in 2010 as demand in its biggest market grows twice as fast as the rest of the world.
"In India there's a boom in cement and most of our customers are very aggressive on expanding capacity," Chief Executive Officer Joergen Huno Rasmussen said in an interview yesterday at company headquarters in Valby, near Copenhagen. "We're estimating 10 percent growth in cement consumption in India, which is double the global rate."
India needs to spend $1 trillion on roads and other infrastructure projects from 2012 to 2017 for the economy to grow fast enough to reduce poverty, Prime Minister Manmohan Singh said last month. Improving infrastructure is already helping the incomes of farmers, allowing many to build or expand homes with cement, Rasmussen said.
FLSmidth won orders last year in India to install 9.45 million metric tons of cement capacity, equal to 21 percent of the industry's global expansion outside China. Those contracts helped it regain the position as the world's largest maker of cement kilns from China Sinoma International Engineering Co. Rasmussen said he has made India the top priority, betting the country, now the second-largest cement market, will overtake China as the biggest in the "long term."
"Some have said we're pressured by Sinoma but our market share shows that we've been capable of striking back," Rasmussen, 57, said. A "clean sweep" in India is "realistic," this year, "but not a goal in itself," he said.
Competing With Sinoma
FLSmidth jumped the most since Feb. 16 in Copenhagen trading, rising 15.2 kroner, or 3.9 percent, to close at 407.2 kroner ($73.79). The shares more than doubled in the last nine months of 2009 after tumbling almost 73 percent in the previous three quarters as the global credit crunch took hold.
The Danish company had a market share of 38 percent of new installed cement production capacity last year outside China, compared with Sinoma's 27 percent, according to FLSmidth. It had 32 percent in 2008 compared with Sinoma's 34 percent.
"FLSmidth contracted all new cement capacity in India during 2009 and can well be considered as the incumbent," Frederik Meinertsen, an analyst with Svenska Handelsbanken in Copenhagen, said in an e-mail reply to questions. "It will be difficult to maintain that kind of track record going forward, but India will remain a key market and priority."
Meinertsen, who has a "reduce" rating on FLSmidth, predicted its new orders will rise 10 percent this year.
Since 1904
FLSmidth, which first sold a cement production line in India in 1904, has moved engineering positions to the country, where it now employs 28 percent of its workforce, which shrank about 7 percent worldwide last year to 10,664. The company will hire more people in India this year, Rasmussen said, declining to provide a specific number.
Global cement consumption, excluding China, will grow 4 percent this year and 6 percent in 2011 after contracting 6 percent last year, Exane BNP Paribas said in an April 2 research note. Rasmussen said the estimate is "realistic."
"We're getting an increasing number of positive signals from our customers, suggesting that orders will pick up again," he said. "We've had many tentative approaches from customers."
ACC Ltd., India's biggest cement maker, plans to raise capacity by 17 percent in 2010, its chairman said yesterday.
FLSmidth, which also sells mining equipment, introduced a policy in February of paying fixed annual dividend of 7 kroner per share. The company will make acquisitions a priority for spare cash, followed by a possible share buyback or extraordinary dividends, Rasmussen said.
"It's likely that we'll make at least one acquisition in 2010 but not necessarily a huge one," said Rasmussen. The company, which has no net debt, will mainly look at targets costing less than $100 million. "It's now that companies can be bought cheap."
FLSmidth also said today it has signed a conditional agreement with Detour Gold Corp. to supply equipment for a gold project in Canada.
