Low demand, intense competition in Q2: Top cement cos grow, others tumble

UltraTech, Dalmia, and Ambuja Cements are the only companies that reported growth in volumes compared to a year ago

Cement sales volume performance during the September quarter (Q2) may have boosted the impact of consolidation in the sector, with three of the top-four cement manufacturers reporting growth. 

 

This is against a muted industry performance, and a negative show by relatively smaller firms.

 

UltraTech Cement, Dalmia Bharat, Ambuja Cements, Sagar Cements, Nuvoco Vistas Corp, JK Cement and Heidelberg Cement are some companies that have disclosed numbers for Q2 so far. Of these, UltraTech, Dalmia and Ambuja are the only companies that reported growth in volumes when compared to a year ago.

 

Atul Daga, chief financial officer (CFO) of UltraTech Cement, in a call with analysts, noted, “Pre-election slowdown, followed by a slowdown in April, June and during monsoon” were the reasons for a flat-to-marginally-negative demand growth.

 

During the same quarter, UltraTech reported a three per cent growth in volumes from a year ago. Dalmia saw an 8.4 per cent growth and Ambuja Cements also saw volumes rise by 9 per cent.

 

The three companies are also among the top-four cement makers in India. Shree Cement, part of the top-four, is yet to announce its results. 

 

“Volume growth was driven by higher trade sales volume and premium products. Various initiatives on ground have been rolled out to push sales volume and improve realisations,” Ambuja Cements noted in its investor presentation.

 

The estimated negative growth at the industry level has instead played out for those operating outside the top-four ranks. Sagar Cement, Nuvoco Vistas Corp, JK Cement and Heidelberg Cement are some companies that reported a decline in Q2 volumes.

 

Top executives at JK Cement, in a recent call with analysts, said, “Since we had lower volumes, we cut sales in certain not-so-remunerative areas." Analysts noted the company has cut its guidance for volume growth from 10 percent for FY25, to 6-7 percent in the grey cement segment. 

 

Analysts at Nuvama also cut earnings estimates for JK Cement for the current and next two financial years, owing to elevated competitive intensity.

 

Most cement makers share JK Cement’s growth expectations. Executives at Sagar Cements also indicated that the company will end the second half of FY25 with over 9 per cent growth in volumes. The company reported a 12 per cent fall in Q2 volumes.

 

Among the large players, companies such as Dalmia expect the industry to grow at 8 per cent in H2FY25. They see the company outgrowing the industry by 1.5 times.