Indian cement profits seen robust on firm prices

Indian cement profits seen robust on firm prices
Published: 21 July 2004

Indian cement makers are expected to report a jump in quarterly profits, boosted by higher prices amid a surge in construction, but analysts say business may pause briefly for the monsoon rains.

Construction demand in India typically peaks ahead of the monsoon season from June to September. Cement prices rose by about 8-10 per cent, to an average of 158 rupees per 50 kg bag, during the quarter.

"It was a good quarter for most companies, and cement prices stayed firm on account of good construction demand," said Jigar Mistry, an industry analyst with local brokerage Prabhudas Lilladher.

Volume growth in the quarter was modest, which some analysts said was due to cement makers deliberately holding back output to push prices higher.

Production growth of 2.5 percent in the past quarter was below analysts’ estimates. But demand was expected to surge as construction revives after the monsoon rains.

Leading cement producers have forecast volume growth to top eight per cent in the current fiscal year to March 2005, buoyed by the new government’s thrust to improve rural infrastructure and upgrade air and seaports.

Profit at Associated Cement, India’s biggest cement maker by capacity, is forecast to have risen about 78 per cent to a median INR788m ($17m) on net sales of INR9.6bn.

Gujarat Ambuja Cements is projected to report a 44 per cent rise in its fiscal fourth quarter net profit to a median INR1.1bn .

Analysts said the near-term outlook for the sector is clouded by monsoon rains, which bring construction to a near halt across the nation.  Prices have already eased this month, and analysts expect commodity prices to remain weak until September.