Cement firms to profit from building boom

Cement firms to profit from building boom
Published: 18 January 2005

India’s leading cement producers are set to report a surge in quarterly earnings, driven by a construction boom in Asia’s fourth-largest economy. Rising middle-class incomes in an economy seen growing at 6-6.5 per cent in the year through March are fuelling the building of multi-storied apartment complexes, shopping malls and roads. The demand has boosted cement shipments and lifted prices -- a trend that is expected to continue in the coming months, analysts said.

A Reuters poll of 11 analysts showed India’s biggest cement group, Grasim Industries Ltd. would report a 27 per cent jump in October-December earnings to Rs 210 crore ($48 million). The company is yet to set a date for the results. Diversified Grasim’s earnings will also be helped by a strong performance from its chemicals and viscose fibre businesses.

Profit at Associated Cement Companies Ltd. the second-biggest producer which reports fiscal third-quarter results on Thursday, is expected to more than double to Rs 57.2 crore. "It was a good period for volume growth, though rising input costs could have squeezed margins," said Abhijeet Dey, an industry analyst with Pioneer Intermediaries.

Analysts expect shipments to gather momentum in the months ahead, after growing by about 12 per cent in the past quarter. Strong demand raised prices and enabled companies to operate at higher capacities. Average cement prices in October-December were about 8 per cent higher than a year earlier, but down about 6 per cent from the preceding quarter due to severe competition in Gujarat. Prices have climbed further this month and are expected to rise more, cement traders said.