Cement Index Up 17% In 7 Months

The Business Standard Cement Index has outperformed the Bombay Stock Exchange (BSE) Sensex with a rise of 17.4 per cent at 117.38 points between April 1, 2001, and November 15. During the period, the Bombay Stock Exchange (BSE) Sensex declined by 10 per cent.

Cement stock prices, which have been crawling back to April 2001 levels, are likely to consolidate in the coming months, says cement analysts. In the long-run, all cement stocks are bound to gain, they said.

The key factors which will drive the cement sector in the coming days will be the rise in demand on account of the construction of national highways and jump in housing sector activities.

In the first half of 2001-02, housing loan sanctions have gone up by nearly 15-20 per cent. During 2000-01, loan allocations were up 25 per cent.

Analysts feel that negative factors such as breakdown of price cartels during April-June and over capacity are likely to take a back seat on account of a possible second attempt at price cartelisation.

However, two factors could severely hurt current prices --poor demand and increase in utilisation of new capacities. Cement companies on the back of undercutting capacity utilisation registered a robust growth in profits during the first half of 2001-02. On an aggregate sales growth of 6.86 per cent, the net profit of 13 major cement companies rose 250 per cent during the period.

Larsen & Toubro (L&T), which generates 28 per cent of its sales from the cement business, registered a 261.9 per cent rise in net profit.

For Grasim Industries, despite a 35.6 per cent share of cement in its business mix, the company's net profit during the period looked up by 7.7 per cent.

ACC has reported a turnaround with a net profit of Rs 98.59 crore in the first half compared with a net loss of Rs 5.03 crore in the corresponding period of the previous year. Madras Cement showed a 10 per cent dip in net profit during the period.