Indian Q3 sales set to rise

Indian Q3 sales set to rise
Published: 20 September 2004

The Indian cement sector is poised for growth in the third quarter with increased volumes in the first two quarters, backed by rising prices.  North India will be the growth driver followed by the central region, the east, west and the south. The sector is expected to clock a 12 per cent growth in realisations for the current quarter, compared with the corresponding quarter of the previous year.  The first quarter recorded a 16 per cent rise in realisations, against the first quarter in 2003-04. The last quarter saw double digit growth in volumes, and around 15 per cent increase in average price, on a year-on-year basis. However, the margins have been impacted to the extent of rising fuel and coal prices. Coal and oil cost per tonne of cement, rose by 7 per cent year on year in the last quarter and is likely to remain firm.

In the second quarter, despatches remained flat, with a late monsoon. Analysts attributed the expected decline in the second quarter results to the transport strike in August and the monsoon impact in the North, which kept the situation tight. The despatches of the big four have been mixed during the month of August with ACC, the country’s largest cement manufacturer and Gujarat Ambuja, reporting a 6 per cent rise each in despatches to 12.5 lakh tonne and 10.1 lakh tonne respectively. However, Grasim saw a decrease of 4.92 per cent to 9.4 lakh tonne, and its subsidiary UltraTech Cement reported 11.13 per cent decline in dispatches, at 7.77 lakh tonne.  While prices in the north and west slipped by over Rs 5-7 per bag in August, from the peak levels seen in June, the eastern market has witnessed firm prices. South however saw considerably softer prices, with a decline of around 10 per cent, especially in Andhra Pradesh, due to excess capacities and lower demand.

The latter half of the fiscal is likely to see a pick up in the demand due to expected higher economic activity and an increase in the infrastructure investment in urban as well as rural areas. The north is likely to continue with a firm demand growth and strong prices. Companies based in the northern market are looking at capacity expansion, to cater to this increasing demand. Shree Cement is in the process of setting up its one million tonne plant.  JP Associates has also announced setting up a three million tonne plant, though it has not placed an order for the equipment.