The Hindu Business Line : Cement shares hit 52-week lows

Mumbai, June 30 Slump in the demand for cements due to a rise in interest rates and on aggressive monsoon across the country dragged cement stocks to their new 52-week lows on Monday. Margins of cement companies are getting affected due to the rise in raw material prices, Government intervention and rising inflation, said market men.

As these companies cannot pass on the extra burden to the consumers it is further affecting their margins due to which most broking houses have either given a neutral or a sell order to the clients holding cement stocks, added market men.

ACC and Ambuja Cements were among the worst hit shares in the Sensex in Monday’s market fall. ACC dropped close to 10 per cent or Rs 56.80 from its previous day’s close at Rs 522.50. Ambuja Cements shed 6.83 per cent from its previous close at Rs 75.70.

Both the companies recorded new yearly lows on Monday.

Ambuja Cement hit an intra-day low of Rs 73.50 and ACC Rs 512.

India Cements fell 6.51 per cent due to lower than expected fourth quarter results. The company’s stand alone net profit for the quarter ended March 31, 2008 dropped to Rs 104.44 crore from Rs 169.14 crore in the corresponding year-ago quarter. India Cements also recorded its 52-week low today.

“The sentiment is weak for the cement sector currently and there is hardly any buying happening in these counters now. So when the market is going through a bearish phase, investors are selling their positions in those sectors that are the weakest,” said Mr Pawan Burde, a metal, mining and cement analyst with Angel Broking.

Shares down

Most of the cement shares fell 1-6 per cent on Monday and touched their new year lows.. Among the stocks that took a beating were Binani Cement (down 5.46 per cent), Birla Corporation (down 3.42 per cent), OCL India (down 3.88 per cent), JK Lakshmi Cement (down 5.18 per cent), Burnpur Cement (down 6.61 per cent) and Ultratech Cement (down 4.08 per cent). Market men expect the cement prices to fall in the next month, which will impact the margins of the cement companies further.

“In the last quarter the prices of raw materials such as fuel, coal and transportation have all gone up, while the cement prices have remained almost flat, which is reflected in the EBIDTA margins of these companies. A fall in the price of cement would mean a further fall in the margins of these companies,” said Mr Burde.

Further pressure

There are also capacity expansion plans that could further add pressure to the price of cement due to the disparity that will exist between supply and demand, said analysts. The cement industry will be investing over Rs 50,000 crore to add about 70 million tonne by the year 2010.

According to the Cement Manufacturers’ Association Web Site the total installed capacity of cement industry (large plants) stands at 200.57 million tonnes as on May, 31 2008.

More Stories on : Cement | Stocks

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page