Cement prices to remain under pressure: Grasim head

Aditya Birla group-controlled Grasim today said that cement prices will remain under pressure over the next six to eight quarters due to oversupply.

"Cement prices are expected to remain under pressure due to an oversupply scenario," Grasim Whole-Time Director and CFO Adesh Gupta told reporters here.

Cement prices are under pressure across the country and particularly in the South. The oversupply is due to new capacity addition, Gupta said.

The uptrend in input prices, like the increase in imported and domestic coal prices and the increase in diesel prices, has also hit the cement industry.

However, the company expects cement demand to grow at 10 per cent for the next five years on the back of growth of the overall Indian economy, which will result in increased cement consumption, both in the government and private sector, Gupta said.

During Q1, FY11, the company reported an 8 per cent decline in consolidated net profit to Rs 685 crore. Consolidated net revenue improved marginally by 2 per cent to Rs 5,119 crore.

Profit was down due to the demerger of the cement business into Samruddhi Cement (SCL) and the allotment of SCL equity shares to Grasim shareholders.

The company's Viscose Staple Fibre (VSF) business has reported an improved performance in Q1, FY11. The recovery in global markets vis-à-vis the corresponding quarter, coupled with the cost push effect, has led to an increase in VSF prices.

Capacity utilisation was higher, despite the suspension of operations at the Nagda plant due to a water shortage in June, 2010. With the advent of the monsoon, the plant resumed operations in July.

Meanwhile, the company has drawn up a Rs 11,527 crore capital expenditure plan for VSF and cement expansion.

"We plan to spend around Rs 11,527 crore, which includes Rs 1,452 crore for the cement business, Rs 4,475 crore for cement business subsidiaries and Rs 5,600 crore for cement capacity expansion in Chhattisgarh and Karnataka," Gupta said.

The company proposes to set up the Rs 1,000 crore Vilayat project at Gujarat under its VSF division.

Grasim also plans brownfield expansions aggregating to 9.2 million TPA at its Chhattisgarh and Karnataka units.

An additional capex of Rs 5,600 crore has been earmarked for the same. The company will spend Rs 3,400 crore in FY11 for modernisation and improving infrastructure, Gupta said.