Cement industry's Q4 may be the best in FY09
Business Standard – Commodity, March 27, 2009, Section II, Page 4
Chandan Kishore Kant / Mumbai
This is the concluding part of the two-part series on the sectoral impact of a revival in demand for commodities.
The over Rs 85,000-crore domestic cement industry is set to see some relief in the March quarter. Industry analysts and market players feel that the current quarter will turn out to be the best in the current financial year in terms of revenues, margins and profitability.
Higher prices, significant despatches resulting from better-than-expected demand, declining input costs, favourable government decisions such as cutting excise duty and re-imposition of counter-vailing duty on imported cement are expected to help the industry come up with a better performance than the past three quarters.
Barring southern market, which saw lower despatches and weak prices, the industry anticipates better results in other parts of the country.
Vinod Juneja, managing director, Binani Cement (a North-based manufacturer), said, “The fourth quarter will be the best in FY09. Prices have improved from Rs 230-235 per bag last year (same quarter) to Rs 245-250 in the North. No company is having any inventory as despatches are good.”
The current quarter saw prices being hiked in two-three tranches by around Rs 8-12 per bag. The eastern and northern markets saw a firm pricing trend. In January and February, despatches grew by 8.26 per cent and 8.73 per cent at 16.13 million tonnes and 16.07 million tonnes, respectively.
Looking at the despatches trend, March is expected to clock despataches of over 17.5 million tonnes, which will be the highest ever for the industry.
On a year-on-year basis, the March quarter might not see a rise in profits, but in sequential terms, margins would be better and so the profitability, said an industry analyst.
He added that in the first three quarters, the industry saw margins getting shrunk by as much as 4-5 per cent compared to the corresponding quarters of the last financial year, whereas in the current quarter, margins will either be flat or shrink by not more than 1-2 per cent.
Hari Mohan Bangur, chairman and managing director of Shree Cement, and president of the Cement Manufacturers’ Association, said, “The industry saw a price rise in February as well as in March. The quarter will be a little better than the earlier quarters. Profitability is expected to maintain pace as far as Shree is concerned.”
When asked about the depreciation impact on new capacity additions, Bangur said that it (depreciation) would not have much effect. He added that despatches growth rate in March was expected to remain above 8 per cent. Along with Shree Cement, UltraTech, Grasim and India Cements too are adding new capacities.
For most of the cement makers, profits in the first three quarters remained low compared with the last year. “The current quarter will not be any different but it will certainly improve on a sequential basis,” said an analyst.
Industry experts are expecting a rise of around 10-12 per cent in revenues on y-o-y basis as prices have gone up by 6-7 per cent in the March quarter. Last year during the same period, the average price of a 50-kg cement bag across the country was Rs 230, whereas now it is ruling around Rs 240-245.
Business Standard – Commodity, March 27, 2009, Section II, Page 4
Chandan Kishore Kant / Mumbai
This is the concluding part of the two-part series on the sectoral impact of a revival in demand for commodities.
The over Rs 85,000-crore domestic cement industry is set to see some relief in the March quarter. Industry analysts and market players feel that the current quarter will turn out to be the best in the current financial year in terms of revenues, margins and profitability.
Higher prices, significant despatches resulting from better-than-expected demand, declining input costs, favourable government decisions such as cutting excise duty and re-imposition of counter-vailing duty on imported cement are expected to help the industry come up with a better performance than the past three quarters.
Barring southern market, which saw lower despatches and weak prices, the industry anticipates better results in other parts of the country.
Vinod Juneja, managing director, Binani Cement (a North-based manufacturer), said, “The fourth quarter will be the best in FY09. Prices have improved from Rs 230-235 per bag last year (same quarter) to Rs 245-250 in the North. No company is having any inventory as despatches are good.”
The current quarter saw prices being hiked in two-three tranches by around Rs 8-12 per bag. The eastern and northern markets saw a firm pricing trend. In January and February, despatches grew by 8.26 per cent and 8.73 per cent at 16.13 million tonnes and 16.07 million tonnes, respectively.
Looking at the despatches trend, March is expected to clock despataches of over 17.5 million tonnes, which will be the highest ever for the industry.
On a year-on-year basis, the March quarter might not see a rise in profits, but in sequential terms, margins would be better and so the profitability, said an industry analyst.
He added that in the first three quarters, the industry saw margins getting shrunk by as much as 4-5 per cent compared to the corresponding quarters of the last financial year, whereas in the current quarter, margins will either be flat or shrink by not more than 1-2 per cent.
Hari Mohan Bangur, chairman and managing director of Shree Cement, and president of the Cement Manufacturers’ Association, said, “The industry saw a price rise in February as well as in March. The quarter will be a little better than the earlier quarters. Profitability is expected to maintain pace as far as Shree is concerned.”
When asked about the depreciation impact on new capacity additions, Bangur said that it (depreciation) would not have much effect. He added that despatches growth rate in March was expected to remain above 8 per cent. Along with Shree Cement, UltraTech, Grasim and India Cements too are adding new capacities.
For most of the cement makers, profits in the first three quarters remained low compared with the last year. “The current quarter will not be any different but it will certainly improve on a sequential basis,” said an analyst.
Industry experts are expecting a rise of around 10-12 per cent in revenues on y-o-y basis as prices have gone up by 6-7 per cent in the March quarter. Last year during the same period, the average price of a 50-kg cement bag across the country was Rs 230, whereas now it is ruling around Rs 240-245.
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