For November 2009, cumulative dispatches of nine cement companies, which control about 55 per cent of the market, were up 11 per cent YoY. While demand from government-sponsored infrastructure projects as well as rural and semi-rural regions were some positives, shortage of railway wagons and monsoons in certain markets weighed negatively on dispatches. The trend in dispatches at the company level, thus, showed a mixed trend.
The Aditya Birla group, comprising Grasim and UltraTech Cement, reported a 15.3 per cent rise in despatches at 2.93Mt supported by capacity addition of 4.1Mt in the current fiscal. The group also gained from its relatively larger exposure to north and western markets, where demand was better. With the group’s annual cement capacity expected to rise 3.1Mt to almost 49Mt by end-December 2009, it should be able to sustain double-digit volume growth. North India’s largest cement player, Shree Cement also reported a good 15.3 per cent rise in cement despatches on the back of better demand in the region.
On the other hand, ACC and Ambuja Cements reported lower-than-industry growth in despatches for November. Ambuja’s despatches were higher by 4.7 per cent, while ACC’s fell by four per cent compared with a year earlier. Analysts said ACC’s dispatches were partly impacted by shortage of railway wagons as the government gave priority to transport of food grains and fertilisers.
In a recent report, Credit Suisse says the lower-than-industry volume growth for the duo is possibly due to the strategy of trying to protect realisations; feedback from dealers suggests the companies are maintaining their premium pricing. Some other key players like the Aditya Birla group (on an annualised basis, its November dispatches translate into a capacity utilisation of just 77 per cent) have also been slow in ramping up production, indicating their desire to manage the over-supply problem, says the analyst.