India despatches show cascading effect of price dip

India despatches show cascading effect of price dip
Published: 02 September 2010

The cascading effect of Indian cement prices heading southwards has started to show, reports Daily News & Analysis.

ACC, the second-largest cement manufacturer controlled by Holcim, for the seventh consecutive month reported a decline in its despatch figures.

Its despatches in August fell by 5% to 1.57 million tonnes (mt) from 1.65 mt reported in August last year. ACC’s production for January-August, 2010, also dropped to 14.05 mt, as compared with the last year’s 14.48 mt while despatches for the period were subdued by 3.4% over the last year’s first eight months.

In July 2010, ACC’s sales fell by 12.3% to 1.56 mt as compared with previous year’s 1.78Mt.

Ambuja Cements, too, reported flat despatch numbers for this month at 14.29 lakh tonnes as compared with the last year. It produced 14.13 lakh tonnes in August 2010 as compared to 14.18 lakh tonnes year on year.

An analyst from a domestic brokerage said, "The demand scenario is very poor and for grade A players things are difficult. In the western region excessive monsoon has hampered business and overall the demand is very bad."

UltraTech Cement, the Aditya Birla group controlled biggest cement player in the country, saw a rise of 2.4% in despatches at 2.96 mt in August as compared to last year.

Jaiprakash Associates Ltd, the northern dominant player with a capacity line-up of 36 mt by the end of this fiscal, has reported sales volume of 10.85 lakh metric tonnes for this year as compared to last year’s 7.19 lakh metric tonnes, a jump of 51% year on year.

An analyst said, "Jaiprakash Associates saw an increase in despatches due to doubling of its capacity and north is still better off than the southern and western belt."

Another analyst from an international brokerage said, "We expect a deterioration of `300-400 per tonne in earnings before interest, depreciation, tax and amortisation (Ebidta) for the next quarter which is going to be disastrous."

An analyst from a domestic brokerage said, "Northern region has shown growth in double digits at around 12% for the first three months, but South is going to pull down the growth going forward. Some places in eastern region, which was the strongest belt, are going to pull down the figures. We don’t have any expectation of price recovery till January-February 2011."