Cement sector may see double-digit growth in Dec too

Hopes are alive for the ailing cement industry. Robust sales from domestic majors have once again put industry on a double-digit growth trajectory. Initial estimates suggest the industry is likely to grow 12 per cent in December.

UltraTech Cement, part of Aditya Birla Group sold 10.5 per cent more cement while Swiss major Holcim's ACC dispatched close to nine per cent more during the month.

Jaiprakash Associates came up with a whopping growth in sales at 29 per cent while Shree Cement posted growth of 17 per cent. The Cement Manufact-urers’ Association will release overall monthly statistics next week.

Demand seems strong in the southern, northern and central markets, say analysts. “While the eastern and western markets could not match demand growth in other parts of country,” says a research head at a Mumbai-based brokerage.

The demand came at a time when industry witnessed corrections of five per cent in building material prices. Cement prices hit an all-time high of Rs 280 for a 50 kg bag in November, now around Rs 265 per bag.

Industry players term price cuts as a temporary phenomenon and add that soon prices would soon start going up as demand picks up. Already, so far in this month, prices in the northern markets have seen upside movement of Rs 5-8 for a bag after last month’s corrections.

However, the bigger question is whether industry would be able to post eight per cent growth in the current financial year. There are no takers for such a high growth.

Industry analysts and company officials prefer not to paint a rosy picture. Shailendra Choksi, whole time director at JK Lakshmi Cement, says, “The current year may see poorer growth than what we witnessed in FY11.” He expects industry could end up with growth of five-six per cent. In FY11, the cement industry grew less than five per cent, hitting the decade lowest growth.

Analysts agree. “The December quarter performance of cement companies in terms of sales is marginally better than our expectations. We had anticipated growth would be around eight per cent but with strong sales in the last month, I understand the overall quarter will see 10 per cent growth,”adds the research head.

But for FY12, experts feel the growth will not be more than six per cent on the back of poor performance in April-September.