The Chairman and Chief Executive of INSEE Cement Sri Lanka is leading the company through the economic crisis, ensuring investments go to the right areas.
Domestic cement consumption has fallen by 60% due to the challenges related to the economic crisis. However, with most competitors cutting costs and jobs, Nandana Ekanayake, Chairman and Chief Executive of INSEE Cement Sri Lanka, says the company is investing in its people, operating efficiency and innovation, laying the foundation for rapid growth once the economy revives.
How is the unfolding economic crisis in the wake of the pandemic impacting the cement industry?
The construction and related industries are the worst affected by the unfolding economic crisis. The impact of the Covid-19 pandemic was temporary, and the recovery was fast, but unfortunately, the economy began to falter just when the industry gained momentum. The challenges confronting us now are unprecedented in scale and severity, with demand falling by 60%. The retail segment, which accounted for 75% of the domestic cement market, has nearly collapsed. However, the commercial cement market is less impacted by the crisis due to the availability of foreign funding for large-scale infrastructure and high-rise projects.
What was your experience with INSEE during this period?
The pandemic was a big scare initially, especially from a shareholder point of view, because that was a global issue that affected everybody. However, those initial worries quickly dissipated.
The only major problem we faced was how to keep the operations going while complying with all the health guidelines, travel restrictions and sudden curfews. We would bring staff and keep them for two weeks and send them back for home quarantine. We did get a lot of support from the government, security forces, and health authorities, and as long as we complied with the health guidelines controlling the spread of COVID, we were able to run our plants and keep the market supplied.
The economic crisis has had a completely different impact on our operations due to all the import restrictions, inability to open LCs, lack of diesel and power cuts
We had to lobby hard to keep the plants supplied with electricity because we are one of the largest electricity consumers, and diesel had to be bought from the private sector at a much higher price because we could not get our supplies from the CPC. All our raw material imports were obtained on credit from our parent company due to our inability to open LCs because our entire revenue is in local currency; sourcing spares for timely repairs and maintenance was also challenging. Fortunately, we had enough stock in hand, and despite running our plants at 40% capacity, we gained market share during this period because our competitors did not have the scale, we had to withstand this crisis. We aim to maintain market share at 40%, in line with our plant capacity utilization.
We have a combined production capacity of around three and a half million tonnes. We have a fully integrated cement manufacturing plant in Puttalam, and just outside the southern port, we have two cement grinding units with a total capacity of one million tonnes. We have another grinding plant with a half a million capacity inside the Galle port. The value addition from the Puttalam plant is around 85% and from the units in the south is approximately 40-45%. In addition, we have an import terminal inside the port where cement can be imported in powder form and packed.
Just before the crisis, we were to embark on an ambitious expansion programme because pre-crisis, when we did the market forecast, we felt the domestic cement industry would run out of capacity by 2024. Those plans are on hold for the time being. However, we are laying the foundations for rapid expansion by investing in our people and improving efficiencies across the company despite running operations under capacity.
What are some of the bold measures you have had to take to ensure that the company remains stable?
Shelving our expansion plans for the moment is far from a survival strategy. While running production at 40% capacity, we are investing in people, innovation and process improvements to ensure we are on a stable platform for a rapid takeoff once the economy recovers and the construction industry revives.
Despite the idle capacity, we have not retrenched our people. On the contrary, in addition to the annual increments, we are paying extra allowances to reflect the cost-of-living spike while increasing training budgets and providing transport to employees. We are also investing in machinery upgrades and automation to improve efficiencies and continuing to commit resources to R&D to develop eco-friendly and more sustainable cement products for the market. These are challenging things to do in the current economic climate, but we have the blessing of our investors and the parent company.
In your mind, what gives INSEE the edge over other cement manufacturers in the country?
We are the only company with a 40% local manufacturing capacity, our unique advantage in the domestic market. Thus, production value only depends on the local importation of energy. Coal importation has been challenging, but we can source our requirements through our parent company.
Even if there is a complete ban on other raw material imports, we can still supply the market because we are confident that we will not run out of production capacity, unlike our competitors. We have a separate company called INSEE Ecocycle that is helping us recycle industrial waste for energy or inputs into cement production. INSEE Ecocycle has served over 1,000 customers, co-processing and eliminating industrial waste of over 1,000,000MT over the last two decades.
As a leader, how do you view your purpose?
Becoming the first Sri Lankan CEO of INSEE Cement Lanka was a welcome change because the company had always had a foreign CEO. Having held top leadership positions here and then overseas, I was motivated to return to Sri Lanka to take over as the CEO of INSEE. I knew the company, its culture and the people. I also recognized that there was a tremendous opportunity to make a difference. No one was prepared for the pandemic or the unfolding economic crisis, but these challenges presented me with the opportunity to be impactful as a leader.
I believe that success for any business means prioritizing employee well-being. Leaders can be harsh, pushy, and uncompromising when driving employees to achieve KPIs, and the results may please investors. However, that is not a sustainable approach to building a successful and sustainable business. I am not only looking at the recognition from my shareholders because I firmly believe that a leader who grows with the people and shares in the rewards is a leader securing the future of the company, its people and stakeholders.