Madras Cements expects more capacity addition

Madras Cements expects more capacity addition
Published: 05 July 2011

Madras Cements Ltd expects the surplus capacity situation to continue and prices to be under pressure in the southern region, from which it derives 90% of its sales.

"With the capacity growth outstripping demand in the southern region, prices would continue to be under pressure," Madras Cements said in its recent annual report. "The cement industry would continue to experience lower capacity utilisation levels. Inflation would also affect the costs of various inputs of production and distribution, thereby affecting realisation," it added.

The Madras Cements stock has been under pressure and hit a 52-week low of INR80 last month. It has lost 23% of its value so far this year.

Ajit Motwani, analyst at Emkay Global Financial Services, said, "Cement prices have dwindled in Andhra Pradesh, followed by other places like Tamil Nadu and Karnataka. There has been an increase in discounts in Andhra, while a rise in coal prices is adding up to growth concerns. The situation is worse in the South than the other regions."

Nikhil Deshpande, analyst at Pinc Research, said, "There has been lower demand on the one end and oversupply on the other. There has been a capacity of 100Mt, and more capacity is going to be added. It is going to be a tough fiscal for the South-focused cement makers."