Cement firms earnings lower as capacities kick in

Cement firms earnings lower as capacities kick in
Published: 03 August 2010

Cement makers India Cements and Madras Cements posted lower net profit for April-June, as additional capacities went on stream as construction activities slowed down in the quarter.

The industry was expecting an addition of close to 72Mt of capacity by 2013, increasing total Indian capacity to 319Mt, an Mumbai-based analyst said.

"During the first quarter of this year itself a total of 15 million MT has been added, but demand has been subdued due to normal monsoon and near-completion of projects, including the Commonwealth Games," he added.

India Cements net profit plunged 83% lower in the quarter, while Madras Cements’ was down 47%, broadly living up to A Reuter’s poll of brokerages that forecast lower net profit for the quarter.

"There is a slowdown in construction activities, particularly in the residential and commercial front, because the demand has fallen. The volumes have gone down," Knight Frank (India) Chairman Pranay Vakil told Reuters.

Cement demand comes primarily from construction of roads, bridges and other infrastructure projects, which has been growing, Abhinav Bhandari, analyst at Elara Capital, said.

"Sixty percent is from infrastructure, while the remaining 40% is from residential sectors."