Indian producers - good quarter

Indian producers - good quarter
Published: 15 January 2004

Cement makers are set to report largely solid quarterly earnings despite disappointing volume growth, helped by cost savings on power and materials, and analysts expect the profitable trend to extend through 2004.  An upswing in prices, the government¹s emphasis on infrastructure projects and a booming economy would spur further demand for the commodity this year in the world¹s second-biggest producer after China, analysts said. ³The volume growth has been fairly good, though lower than one would have expected,² said the head of research at StratCap Securities.
Cement prices have been under pressure for most of the past quarter as extended rains hurt demand. Although the industry association expects growth for the financial year to March to top nine per cent, shipments in October-December rose just 4.5 per cent from a year earlier to 28.14Mt.  Quarterly earnings were likely to be boosted by a lower interest rate burden, savings on power costs and increased sales of higher-margin blended cement. Analysts are also betting the sector will ride the boom in Asia¹s third-biggest economy, which is forecast to grow in excess of seven per cent this fiscal year.
The top four cement makers, which account for only 42 per cent of total installed capacity of 143Mt, are expected to post quarterly earnings by the end of this month. Diversified Larsen & Toubro Ltd, the industry leader, is expected to report a median net profit of Rs 1.01 billion for the third quarter, up 25 per cent from a year ago, according to a Reuters poll of 12 brokerages. But pure cement play Gujarat Ambuja Cements Ltd, the fourth-biggest maker and the first in the industry to unveil earnings on Friday, is forecast to post a 14 per cent drop in second-quarter earnings to a median Rs 485 million rupees. Analysts said it was hurt after rival Sanghi Industries Ltd¹s long-delayed 2.6Mta plant began production in Gujarat, Ambuja¹s biggest market.