Despite price rise, cement sales up in March

Cement dispatches by major manufacturers improved in March on the back of a strong pick up in demand across regions.

Owing to the revival in demand, cement companies hiked prices by Rs 10-25 a bag in March. The revision follows a similar hike in February due to the surge in input cost.

Demand firmed up in March with many real estate companies putting some of their projects, which were close to completion, on fast-track to meet the financial year deadline, said an analyst.

Going ahead, the demand growth remains uncertain unless infrastructure activities gather steam. Infrastructure projects in five States – Tamil Nadu, Kerala, Puducherry, Assam and West Bengal – have come to a standstill after Assembly elections were announced, he added.

Cement companies are betting on real estate projects, especially in rural areas, for demand to hold up in the coming months. “Besides the rising raw material cost, transportation and fuel expenses for cement companies have jumped sharply. If the demand continues to remain strong, we will not have a problem in passing on the increase in cost,” said a cement company official.

Demand for cement grew 4.5 per cent in April-December 2010 and capacity utilisation was at 75 per cent.

Real estate companies, which are already reeling under rising cost of funds, had recently protested against the volatility and consistent increase in cement prices despite supply exceeding demand.

The Builders Association of India had said it will set up cement plants if the manufacturers continue to increase prices under the pretext of rising input cost, it said.

The recent rise in retail prices seems to have pushed up investor interest in cement company stocks. Cement companies have underperformed the stock market in the last 15 months due to the supply overhang fears, rising inflation and sluggish volume growth. However, with the surprise increase in cement prices after the first quarter of this fiscal, cement stocks have witnessed a mixed trend.

Larger players such as ACC, Ambuja Cements and UltraTech Cement have marginally outperformed the market whereas the mid-sized companies such as Shree Cement, JK Lakshmi Cement, JK Cement, India Cements, Madras Cement and Orient Paper & Industries continue to lag.

On Monday, shares of Jaiprakash Associates and JK Lakshmi Cement jumped 3 per cent each to Rs 98 and Rs 53, Ambuja Cement and UltraTech rose one per cent each to Rs 148 and Rs 1,120 while ACC's were up 2.33 per cent at Rs 1,117 on the BSE.

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