Cement cos maintain 8% despatch growth
The domestic cement industry has continued to perform well with demand for the building material sustaining at over 8 per cent for four successive months since November. In fact, the 207-million-tonne industry despatched more cement than it could produce in February. Industry experts and market players said they were optimistic that, at least till the onset of monsoon, demand will continue to remain good.
According to latest updates from the Cement Manufacturers' Association (CMA), the industry despatched 16.02 million tonnes of cement in February, up 8.39 per cent, compared with 14.78 million tonnes in the same month last year. Production during the month stood at 15.96 million tonnes as against 14.73 million tonnes.
Hari Mohan Bangur, president of CMA, told Business Standard that demand for cement from non-metro regions was good and, in the current month, despatches' growth rate would be somewhere around 10 per cent.
In October last year, despatch growth had come down to as low as 4 per cent. However, from November onwards, the situation took a dramatic turn with demand pouring in and despatches going up. Amrit Lal Kapur, managing director of Ambuja Cements, said that the company's sales were more than its despatches. Analysts tracking the cement sector said the demand should sustain till monsoon.
"Since this is the peak period for the construction sector, demand for cement will sustain, and so will the prices. We expect the industry to perform well in the current quarter as well as the next one," an analyst with one of the country's leading infrastructure development and finance companies said on condition of anonymity.
He maintained that, at present, most pending projects are on track for completion. Moreover, the upcoming general election is also stoking demand for cement as the government is trying to wind up its projects, the analyst added.
ACC officials told Business Standard that semi-urban, retail and low-cost housing projects were boosting demand for cement. Companies like ACC, Ambuja Cements and Shree Cement are of the view that the outlook for cement demand is positive at least till May-June. By that time, an additional incremental cement supply of around 10 million tonnes will start coming into the market.
Industry analysts pointed out that companies will surely derive benefits after the hike of Rs 5-7 for a 50-kg bag of cement last month, and the decline in cost of imported coal.
"There has been no increase in input costs, while prices have firmed up too. So the industry will not do as bad as was expected earlier. Cement makers will anyhow maintain an EBIDTA margin of 15-20 per cent," said an analyst with a domestic brokerage firm.
Stock prices of the top five cement makers, which sank to their 52-week lows in October-November period last year, have seen some rise, outperforming other sectors.
For the April-February period, the industry produced 163.28 million tonnes – 7.48 per cent more than the 151.92 million tonnes produced in the same period last financial year. Similarly, despatches grew by 7.66 per cent to 162.84 million tonnes in the period under review from 151. 26 million tonnes earlier.