The Hindu Business Line : Fall in demand hits cement cos realisation

Mumbai, Oct. 28 A sharp fall in demand from the housing sector due to the financial crisis seems to have restricted the cement companies’ efforts to pass on the rise in input costs to the consumer.

Realisations for most cement companies improved marginally despite the September quarter being considered a dull period when the monsoon peaks in most part of the country.

ACC surprised with a 10 per cent rise in realisation at Rs 190 per 50 kg bag in the quarter ended September 30, against Rs 172 per bag recorded in the quarter ended June 30. UltraTech Cement’s realisation rose 5 per cent to Rs 178 a bag (Rs 170 a bag) when compared quarter-on-quarter.

Ambuja Cement’s domestic realisation fell 3 per cent to Rs 174 a bag, while Shree Cement’s was down 4 per cent at Rs 153 a bag.

“Ambuja Cement exports grew 20 per cent to 0.3 million tonne year-on-year, while the domestic dispatches were up 3 per cent to 3.62 million tonnes.

A demand slowdown in the domestic markets has forced the company to look abroad,” said an analyst.

Madras Cements’ realisation was the highest at Rs 193 a bag, up 4 per cent q-on-q. India Cements, another South-based cement company, will announce its quarterly results on Friday.

The prospects of the cement companies seem to be uncertain given the gloom in economic growth. Mr Sumant Banerjee, Managing Director, ACC, said the global and domestic economic environment was decidedly unfavourable.

While GDP growth targets for the country were being moderated to 6.5 per cent to 7 per cent, ACC is of the view that the growth of cement consumption in the coming months, particularly in the housing sector, may decline.

“Overall, we foresee challenging times ahead of us, in respect of markets, investments and input costs,” he said.

Mr Ajit Motwani, research analyst, Emkay Global Financial Services, said apart from softening demand, the impending oversupply of cement on the back of capacity addition, would lead to a weakening of the pricing power of cement producers.

On a sequential basis, production at the Holcim Group companies — ACC and Ambuja Cement — fell 8 per cent and 9 per cent to 4.86 million tonnes (5.29 mt) and 3.9 mt (4.3 mt), respectively. UltraTech’s output was up 4 per cent to 3.98 mt (3.81 mt).

Cement companies normally shut down some of their units for maintenance in the September quarter as the demand remains lacklustre.

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