India production: too early to say worst is over

India production: too early to say worst is over
Published: 05 February 2009

The shares of cement companies have been moving up again, on the back of a decent rise in January dispatches for some companies. Industry data show that cement production and despatches increased by 12.6% and 12.7% YoY in December, after growing by 9.8% and 12% YoY in November.

The government’s numbers show that all-India growth in cement production was 8.7% in November and 11.6% in December. The momentum is likely to be kept up in January—the Aditya Birla group has said that cement production and despatches are up 9.76% and 7.35%, respectively, ACC Ltd’s production and despatches for January are up 12% and 12.5%, respectively.

The numbers have sparked some hope among analysts that demand for cement has picked up. The reasons for the higher demand include pre-poll spending and strong rural demand.

A research report by broking firm says, “With the revival of infrastructure and private house building activity, the cement industry has given an impressive performance in the last two consecutive months. But sustaining such growth is uncertain, as the real estate segment, which consumes about 55% of the total cement produced, has still not revived due to overall economic slowdown. However, we expect that the overall volume growth in FY2009 will be certainly ahead of street expectations. Further, cement companies are also expected to benefit from softening coal and crude prices.”