Cement sector regains double-digit growth

Chandan Kishore Kant / Mumbai Jun 13, 2012,
Business Standard
With robust sales from industry majors — Aditya Birla Group’s UltraTech Cement, Swiss major's Ambuja and Jaiprakash Associates — he country's cement sector is back on a double-digit growth trajectory after a gap of two months.

Demand surge in housing activities, especially from semi-urban and rural regions helped the industry post better growth.

On a day when the Index of Industrial Production (IIP) figure for April at 0.1 per cent came as a disappointment and car sales growth for May had already shown sluggishness with less than three per cent year-on-year growth, the industry has brought cheer to the markets.

The 330-million-tonne industry, the world's second largest after China, posted a rise of close to 13 per cent in its sales in May. The industry sold 20.25 mt of the building material during the month compared with 17.9 mt in the previous corresponding month.

Analysts said demand picked up in several regional pockets and cement makers used the opportunity to liquidate their inventories before the monsoon spread.

"There is a clear pick-up in demand in housing in semi-urban and rural regions. However, infrastructure has not yet become a part of it," said a research head at a Mumbai-based brokerage house.

In April, several northern states and Andhra Pradesh were hit by a sand shortage, which led to decline in construction.

Production, too, zoomed 11.6 per cent (year-on-year) in the month to 20.1 mt against 18.01 mt in the corresponding month last year.

The rise in 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 at Rs 290. Industry experts believe it would slide by 5-10 per cent during the monsoon.

Cement makers avoid keeping inventories during rainy season as it spoil the quality. Normally, the factory life of cement is 40-50 days. More, companies shut their plants for two-three weeks during monsoon for maintenance and repair.

In 2011-12, the industry had managed to excel experts’ growth expectations. Industry officials had earlier estimated the year to end with 5.5-6 per cent growth. But, due to pouring demand in the second half of 2011-12, which uplifted the growth to 6.4 per cent.