Home > Cement > Cement:December 2010 Quarter Updates

Cement:December 2010 Quarter Updates

Demand for cement has been weak during the December 2010 quarter. Demand was poor at 5.3% in the December quarter with the exception being October at 18 per cent. This, in turn, was largely due to restocking by agents following poor sales in the preceding four months.

 Demand was weak across the nation due to unseasonal rains during the quarter. Consumption was particularly low in the Northern and Southern regions while speedy completion of infrastructure projects in Bihar —on account of elections next year— was high.

 India Cements recorded a sharp increase in sales on account of additional capacity of 1.5 million tonnes added in Rajasthan in August 2010.

Lower demand also resulted in a fall in capacity utilisation of most cement plants given that capacity rose substantially last year.

that cement companies are expected to face a decline in profitability during the current financial year 2010-11. While volumes are slightly higher than the year-ago level, muted price increase is expected to restrain sales growth.

 Higher prices of coal and increase in freight costs are likely to mar profits. This will adversely impact profitability for the cement companies.

 Cement prices across India witnessed a weak trend during the current financial year. This is because of a continuation in the demand-supply imbalance.

 While this imbalance has been adversely affecting cement prices—with southern region being the most affected, the resurge in its price was a surprise.

 The south-based companies increased prices in October on account of re-stocking by dealers. This indeed resulted in an erosion in its sales volumes. However, they curtailed production volumes to safeguard their sales realisations.

 The south-based cement companies include India Cements, Madras Cements, Dalmia Cements and Chettinad Cements.

 In the year 2010-11, cement was affected due to the following:

  • withdrawal of the stimulus package by the government
  • completion of Commonwealth Games-related construction activities in Delhi-NCR region
  • slow pace of infrastructure development

Topline of the cement companies in the December 2010 quarter recorded a robust growth on account of rising sales volumes, backed by higher production capacity. As expected, net profit of the cement companies declined year-on-year. Profit margins of the cement companies contracted sharply. This trend is expected to continue till the end of the current financial year 2010-11.

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