Indian cement industry in turnaround mode

Indian cement industry in turnaround mode
Published: 18 August 2006

A number of Indian cement companies are in a turnaround mode, thanks to rising demand from the infrastructure and construction sectors, reports the Financial Express. Of the 41 listed cement companies that had recorded losses in the March-June quarter of fiscal 2006, 10 of them have registered profits in the same quarter of fiscal 2007. Apart from this, nearly 19 listed companies have more than doubled their profits.

"The best examples of turnaround stories are South India-based India Cements and the Aditya Birla Group-owned Ultratech Cement. Hike in cement prices have led to an improvement in operating performance of companies. Besides prices, companies have gone into debt restructuring programmes to reduce borrowing and in turn bring down interest levels. The major contributor, however, is the cement pricing," says Rajan Kumar, an analyst who tracks cement sector for Networth Stockbroking Ltd. 
 
Other than these two companies, Prism Cement Ltd, Gujarat Siddhi and Sourashtra have also turned around and registered profits. Among companies that have shown highest profit growth over the first quarter of 2006 are India Cements (2061%), Mangalam Cement (376%), followed by Madras Cements (336%).

Cement prices touched an all-time high of Rs 240 for a 50-kg bag in the month April in Mumbai, India’s largest cement market and has been selling at the same levels since then. Even the monsoons could not pull the prices down.

The Indian cement sector saw an impressive growth of 234.64% growth in net profits, which stood at Rs 1,603 crore against last year’s Rs 479 crore. This is the highest growth registered by a sector when compared to all other prominent sectors.

Exports to West Asian countries have also considerably contributed to the topline, analysts say. Export realisations are 20-25% higher than the domestic realisation. India’s cement export stood at 6Mt during fiscal 2005-06, marginally higher than the previous year’s 5.5Mt.