Indian producers face lower profitability

Indian producers face lower profitability
Published: 18 June 2010

A sharp fall in demand, excess capacity and the onset of South-West monsoon may hamper the profitability of Indian cement manufactures for the next few quarters, according to a report in the Hindu Business Line.

Monthly cement dispatches reported by most leading cement manufacturers such as ACC, Ambuja Cement, UltraTech Cement and Grasim Industries have shown a steady fall when compared month-on-month in last two months.

Cement sales year-on-year also grew at a lower pace of 8.1 per cent in May as against 10.7 per cent in May last year. While the northern region clocked an impressive 14.4 per cent, the southern region grew 8.2 per cent largely due poor demand.

The Eastern and Central regions clocked marginal growth of 5.5 per cent and 2.1 per cent, respectively.

Mr Rupesh Sankhe, Research Analyst, Angel Securities, said, the poor demand in the Southern region was largely due to slowdown in irrigation and housing projects undertaken by the Andhra Pradesh government.

Despite cement companies tightening their production to match the demand slowdown, cement prices continued to fall in May across the country with the southern region leading from the front. The southern region registered the highest fall of Rs 20-45 per 50kg bag with Andhra Pradesh registering a decline of Rs 30-45 to Rs160 per bag. Sharp fall in cement prices in the western region was averted by a few consignments finding its way from the south. However, it fell by around Rs 10-20 a bag. While prices in western region remained stable, it fell by Rs 5 in the eastern sector.