Better realisations polish cement sector fortunes

With cement prices going north, the balance sheet of leading cement companies are looking healthier than ever before.

The cement industry is hoping that the trend will continue for next 2-3 years as the demand-supply mismatch will continue during the period.

Industry leaders have made one of the best ever performances in the first quarter of the current financial year.

Multi-product companies with major contribution from cement too are not lagging behind.

Both the top line and bottomline have grown substantially. Growth in bottomline outpaced the growth in top line.

The cement industry watchers feel that this is largely due to better price realisation in the last two quarters.

According to industry officials, net price realisation per tonne of cement has gone up by Rs 700-800 during June 2006 compared with the price realisation in the same period of the last financial year.

"Price per bag has gone up by an average Rs 40-45 during the quarter," a cement industry official said.

"The price increase in north India is more than that in the south. But the increase is across the board," an official added.

Ultratech Cemco has witnessed the biggest jump in net profit from Rs 60 crore in the quarter ended June 30, 2005 to Rs 210 crore in the quarter ended June 30, 2006, while turnover also increased from Rs 826 crore to Rs 1,193 crore.

Gujarat Ambuja and ACC also came close to Ultratech with ACC net profit jumping from Rs 139.3 crore to Rs 405 crore. The turnover has gone up from Rs 1,169.7 crore to Rs 1,477 crore.

GACL posted a net profit of Rs 303 crore in the first quarter compared with Rs 145.1 crore in the corresponding period of last financial year.

Grasim of the Aditya Birla group where cement contributes over 60 per cent of turnover has also done remarkably well. Its net profit jumped from Rs 250 crore to Rs 311 crore.

Among the small cement companies, Shree Cement has witnessed a three fold jump in net profit in the first quarter of the current financial year. Net profit jumped from Rs 26 crore to Rs 90.3 crore in the period. Turnover rose from Rs 142 crore to Rs 312 crore.

H M Bangur, managing director of Shree Cement, explained that in the cement industry the capacity addition has a time lag of 2-3 years.

"A lot of new capacities are coming but that will take another 1-2 years. Besides, due to high infrastructure spending, demand is also growing for cement. So, I hope that the mismatch will continue for next few quarters," he said.