The domestic cement makers, post elections, have turned positive on the sector’s growth for the current financial year. The market players say the cement demand scenario will sustain and industry could clock a growth of 8 per cent in FY10.
The positive outlook is in contrast to the earlier projections barely two months ago that industry’s growth may fall to as low as 6 per cent during the present year.
BEGINS TO SET
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Hari Mohan Bangur, president of the Cement Manufacturers’ Association, told Business Standard, “The demand scenario the industry had envisaged before elections has changed. We expect better growth in FY10. The demand growth will be 1.3x factor of the GDP growth.”
Industry experts said in case GDP grows at 6 per cent, cement industry will continue to grow close to 8 per cent similar to that of the previous financial year.
The 218-million-tonne cement industry, which is expected to grow to 250 million tonne by the end of FY10, has been apprehensive about the overcapacity. However, it seems industry players are less worried about the glut.
Domestic cement giant Grasim Industries, part of the Aditya Birla group, had given a firm demand outlook. D D Rathi, whole time director, Grasim, said in his presentation: “There is tremendous optimism. Infrastructure spending will go up and thereby cement demand should go up in FY10. Perhaps, the fear of overcapacity will be mitigated.”
Since, November last the industry’s despatch growth rate (y-o-y) has been over 8 per cent. Moreover, at the start of the present fiscal, the despatch growth rate hit a growth of over 13 per cent in April.
In FY09, the industry witnessed a despatch growth rate of 7.95 per cent at 181.01 million tonne as against 167.68 million tonne in FY08. During FY08, the despatch growth stood at 8 per cent.
Ambuja Cements, part of the Swiss cement maker Holcim, too is hopeful of sustained demand. Amrit Lal Kapur, managing director of the company had told Business Standard earlier he was confident of a growth rate of 8 per cent in FY10 just as seen in FY09.
“Though demand situation seems to be better, the fact remains there will be a surplus cement supply in the market,” said Bangur. On the other hand, Vinod Juneja, managing director of Binani Cement said sustained demand will help absorb the additional supply in the year.
Mumbai-based industry analysts too have reworked the growth scenario to close to 8 per cent in FY10.
They added that the overall domestic cement consumption will reach 195 million tonnes in the year.
