BackHigh base effect dampens April cement production growth
High base effect dampens April cement production growth
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The top four domestic cement manufacturers (ACC Ltd, Ambuja Cements Ltd, Grasim Industries Ltd and UltraTech Cement Ltd) have posted mixed performance for April. The cumulative volume growth of the four leading domestic cement firms for the month came in at 6.7 million tonnes (mt) year-on-year (y-o-y) to 7.1 mt.
Also See Mixed Trend (Graphic)
However, on a sequential basis, the dispatches declined by 6.4% mainly due to the high base effect. The cumulative dispatches of 7.1 mt were mainly consumed by government infrastructure projects and the demand from urban residential real estate market and rural areas.
ACC’s dispatches for April declined by 0.6% to 1.8 mt y-o-y. This is the third consecutive month in which the company has posted a decline in its volume.
Further, the company has posted poor performance compared with Ambuja Cements and the Aditya Birla Group, including Grasim Industries and UltraTech Cement. The production for the month decreased by 2.7% y-o-y to 1.8 mt. On a sequential basis, the dispatches declined by 7.7%. During the month, the company operated at 96% capacity utilization ratio against 98.5% a year ago.
On a year-till-date (YTD) basis (January–April), the company’s volume declined by 1.3% to 7.34 mt. The firm has commenced a new plant at Karnataka with a capacity of 1.2 mt and the production is stabilizing. As per the ongoing capacity addition plan, the overall capacity by the end of 2010 is likely to reach 30.6 mt. Going ahead, we believe the volume growth of the company will improve due to capacity addition.
The Aditya Birla Group comprising Grasim Industries and UltraTech Cement registered a volume growth of 6.2% y-o-y. The dispatches stood at 3.4 mt and the production increased by 6.8% y-o-y to 3.4 mt in April. The capacity utilization for the month stood at 98.1%. The volume growth was achieved on the back of the company’s larger exposure in the northern region and capacity addition. On a sequential basis, the group’s dispatches declined by 8.5%. The combined capacity as on April stood at 46 mt.
After a long time, Ambuja Cements registered a strong double-digit volume growth of 15.6% y-o-y. The dispatches for the month under review stood at 1.9 mt. The company also registered the highest volume growth compared with other big manufacturers. The capacity utilization ratio stood at 92%. On a sequential basis, the dispatches of the company were lower by 1.1%. On a YTD basis, the company registered a volume growth of 9.2%.
During April till date, cement prices have moved north as well as south due to factors such as logistics and power availability. In the beginning of April, the domestic industry was able to maintain the upward trend in cement prices with an average price hike of about Rs5 per bag (in case of the southern region, the price hike was as high as Rs10-15 per bag).
However, in the beginning of May, cement prices in most regions came under pressure and declined by Rs7-10 per bag of 50kg. The north and east saw a drop of Rs5-7 per 50kg bag, while the central region recorded the maximum decline at Rs15-20 per bag. The southern region, which was witnessing a strong price rise in March-April, has ended the positive streak with prices slipping by Rs10-15 per bag.
Cement prices in Mumbai, Pune and other major cities of Maharashtra increased by Rs2-3 per bag from 1 April and remained unchanged, thereafter. At present, the average price of cement in Mumbai is Rs265-267. As per the dealers, cement offtake in Mumbai and nearby areas has contracted compared with that observed in March and, hence, by the end of May, the prices may decline.
In case of Gujarat, cement prices in major cities, such as Ahmedabad, Baroda, Bharuch, Mehsana and Surat, have increased by Rs10 with effect from 1 April to Rs230-235 per bag. However, due to increased supply on account of the introduction of two new brands, Coromandel (from India Cements Ltd) and Jaypee Cement (from Jaiprakash Associates Ltd), the average cement price in major cities of Gujarat has declined by Rs10-15 and is quoting at Rs220 per bag.
The southern region has witnessed the highest price hike in the past couple of months on account of various issues, such as supply shortage due to unavailability of wagons and production cut. However, in the absence of any regional demand, the prices in recent times have declined sharply by Rs15-20 per bag and are now quoting at Rs190-195 per bag in Hyderabad.
Due to slowdown in cement offtake, dealers expect prices to remain under pressure in May and see seasonal weakness with the beginning of the monsoon.
Graphic by Yogesh Kumar/Mint
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