The Indian cement industry is upbeat about its results this fiscal following its financial performance in the first three quarters ended December 31, 2005. Industry sales rose 9%, while net profits shot up by 30%. Higher margins this fiscal are a result of savings in fuel costs because of fall in prices of imported coal and optimum use of fuels. Use of alternate fuels resulted into lower fuel costs for Gujarat Ambuja, for example.
UltraTech and India Cement got back into black as they generated profits of Rs 84 crore and Rs 18.28 crore, respectively for the nine month period ended December 31, 2005.
The overall outlook for the sector is positive. Analysts expect that the 9% growth rate will be maintained y-o-y for FY2006-07 also. Market analysts feel that the sector will maintain a growth of around 10% compounded annual growth rate (CAGR) for the next five years. Jigar Shah, head of research, KR Choksey, says "The booming housing and infrastructure sectors have driven the growth in cement sector. Improved volumes, coupled with the rising prices, have resulted in improved margins. On the back of continued investment in the housing and infrastructure the industry is expected to grow by 11% for the next one or two years." Supply for cement is expected to remain tight which, in turn, will push up prices of cement.