At at a time when car sales growth for May disappointed with less than 3 per cent, year-on-year growth, the Indian cement industry has brought cheer to the markets.
With robust sales from industry majors Aditya Birla group's UltraTech Cement, Swiss major's Ambuja and Jaiprakash Associates, the country's cement sector is back on double digit growth trajectory after a gap of two months.
The 330-million-tonne industry, the world's second largest after China's, posted a rise of close to 13 per cent in its sales in May. The industry sold 20.25 million tonnes of the building material during the month compared with 17.9 million tonnes in the previous corresponding month.
Business Standard reported it earlier this month.
The sector's stocks reacted positively and beat benchmark indices. On the Bombay Stock Exchange, shares of ACC were trading at Rs 1,183.55, up 2.93 per cent, while those of Ambuja and UltraTech were up 4.25 per cent and 1.15 per cent, respectively at 1445 hours IST. BSE Sensex was up 1 per cent.
Industry analysts pointed out that demand picked up in several regional pockets of the country and cement makers used the opportunity to liquidate their piled up inventories before monsoon spreads across the country. In April, several northern states and Andhra Pradesh were hit hard due to sand shortage which lead to decline in construction activities.
The industry's production too rose to 11.6 per cent (year-on-year) in the month to 20.1 million tonne against 18.01 million tonne in the corresponding month last year.
The rise in cement sales came at a time when prices of the building material have been weakening. From its peak all India average of Rs 306 for a 50 kg bag, the prices currently are hovering around Rs 290. Industry experts believe it to slide further by 5-10 per cent during the monsoon period.
Cement makers avoid keeping inventories during rainy season as it spoil the quality. Normally, the factory life of cement is 40-50 days. Moreover, companies shut down their plants for two-three weeks during monsoon for maintenance and repair task.
In FY12, industry had managed to excel better than experts' growth expectations. Industry officials had earlier estimated the year to end with 5.5-6 per cent growth. But, thanks to the pouring demand in the second half of FY12 which uplifted the growth to 6.4 per cent.
