ACC and Ambuja Cements propose to enter into master supply agreement
With a merger of ACC and Ambuja Cement (ACL) on hold, the companies have proposed to get into a Master Supply Agreement (MSA) with each other. ACC-ACL announced to put their merger on hold on February 26, 2018. Now in order to (a) achieve synergies and economies of scale, (b) reduce operational costs and (c) increase sustainability of businesses, the companies have proposed to enter into a MSA, subject to approval.
This agreement is for supply of cement, clinker, raw materials (including fuel, fly ash, slag, gypsum etc.), spare parts, and for providing toll grinding services in certain plants. This will be executed through a purchase order based on the company’s requirements.
This agreement is for supply of cement, clinker, raw materials (including fuel, fly ash, slag, gypsum etc.), spare parts, and for providing toll grinding services in certain plants. This will be executed through a purchase order based on the company’s requirements.
According to the pricing formula:
- Cement would be provided at a 5% discount on their average net selling price (in the respective district for the preceding month).
- For grinding of each tonne at other’s plant, the conversion charge is proposed at 8% of the gross block and 10% markup on the variable cost (as per the last quarter).
- Clinker purchase would be done at market price, and in absence of market price, it would be priced at 35% markup over clinker plant variable cost (as per previous quarter).
- Other raw materials like fuel, fly ash, gypsum and slag would be provided on need basis at replacement cost or landed cost plus carrying cost of 8% p.a. for the holding period.
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