Indian cement majors lose momentum

Indian cement majors lose momentum
Published: 06 December 2005

Strong projections of sales fail to surface in the cement industry, as despatches continue to show single-digit growth. Apparently, it’s worse for the big four cement manufacturing companies in India. Cement majors such as ACC, Gujarat Ambuja, Grasim and Ultratech showed a single-digit growth in November even as the smaller regional players managed to buck the trend lately by posting double-digit growth. The smaller regional players — Shree Cement, Birla Corp and Dalmia Cement — are expected to unleash new capacity from this month onwards as their capex plans come to fruition.

De-bottlenecking operations have also helped the cement majors increase production. But all this comes at a time when parts of the country are being inundated by unseasonal and heavy showers. As a result, talk that cement offtake will mirror the growth in other sectors connected to the infrastructure industry is yet to happen.

“A 7-8 per cent growth in despatches is not a bad sign under the given circumstances. It reflects a 10-12Mt annual incremental increase in overall cement dispatches,” says Nirbhay Mahawar, a cement analyst affiliated to Motilal Oswal, a leading stock broking firm in the city. The slow growth in demand is expected to put off the long speculated price hike for December. This month is also expected to be lacklustre for the cement industry.

The Aditya Birla Group, that include UltraTech Cement Ltd and Grasim Industries Ltd, the second-and third-biggest cement makers in the country, announced that sales of cement fell two per cent in November. Cement sales dropped to 2.19Mt from the same month a year earlier. Production increased 0.8 per cent to 2.24Mt. Gujarat Ambuja, however, expects a growth of 8.5-9 per cent in the current fiscal.

For the record ACC showed a 7.64 per cent at 1.48metric tonnes, GACL up 4.06 per cent at 1.051 mt, GRASIM up 5.65 per cent at 1.16 mt,  Ultratech down 9.65 per cent at 1.03mt.  Mahawar warns that the smaller players have already readied an increase in cement capacity. The coming months will see the big players to do the same. The accretion in capacity could mean that the makers may find it difficult to flex their pricing power in the coming days.

Cement shares were down after the cement companies announced the dispatched figures for the month of November. ACC was down by 2.75 per cent to Rs523.70, Grasim fell sharply by 1.90
Per cent to Rs1400 and Gujarat Ambuja Cement was down by two per cent to Rs82.