Indian cement makers have done it yet again. Despite the country’s gross domestic product (GDP) growth plunging to a three-year low of 6.1 per cent for the December quarter, the sector continued to cling on a double-digit growth trajectory for the fourth month in a row.
Robust sales from cement majors UltraTech, ACC, Jaiprakash and Shree Cement helped the 330-million-tonne-industry clock a growth of 10.5 per cent (year-on-year) in February. The industry sold 20.4 million tonnes (mt) of the building material against 18.5 mt in the previous corresponding month.
Reasonably good demand from the northern and the western region helped, say analysts. “The southern region could not perform better in February and the region, too, remained a bit subdued,” said the research head at a Mumbai-based brokerage firm. Since the beginning of this year, industry executives were optimistic about the growth prospective in 2012.
ACC and Ambuja, part of Swiss cement major Holcim, reported 7.5 per cent and 12.7 per cent growth, respectively, in February. North-central major JP Associates sold 31 per cent more during the month while the Aditya Birla Group’s UltraTech Cement posted 5.7 per cent growth in its sales.
With high growth in February, the sector’s overall growth so far in the current financial year (April-February) stands at 6.3 per cent, a drastic turnaround in the second half of the year. In the first half (April-September), the sector witnessed a meagre growth of 3.2 per cent.
Industry officials told Business Standard that FY12 was likely to end with a growth of 6.5 - 7 per cent. This is 150-200 basis points up as compared to what players had envisaged during the first half of FY12. They expect further demand revival in the next financial year, on the back of infrastructure push and estimate growth to scale up to eight-nine per cent.
Higher demand has led to price rises as well. In February, the all-India average price of a 50-kg bag was quoted at Rs 270-272, which currently stands at Rs 280-283. Further, with recent increases in railway freight rates, cement players have made their stand clear that they would not absorb such rises in input costs and would pass it on to end consumers.
Sector analysts see an average rise of Rs 4-6 for a 50-kg bag. However, in cases of companies like ACC where transportation of cement through railways has a bigger portion, the impact could be higher. In a statement, ACC says, “The recent increase in railway freight by way of rationalisation of distance slabs will have an impact of over Rs 225 crore per annum on ACC, considering both inward and outward movement of traffic by rail. This will mean a per tonne cost increase of Rs 225 (Rs 11.25 per bag) on rail movement on an all India basis.”
India’s cement sector has met its target for the 11th five-year plan (2007-12) and added fresh capacities of close to 120 mt, taking it to 300 mt from 180 mt. It is the largest capacity addition by the sector in any of the five-year Plans.
According the latest report from the working group on cementthe sector, overall capacity will be required to scale up to 470 mt by 2017, to meet the growing demand for the building material.
