Cement Update report by Anand Rathi

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Cement Update - Dispatches grow 6.9%; prices rise

n       Sep ’10 volumes grow 6.9%. In Sep ’10, all-India production rose 5.5% and dispatches increased 6.9% yoy. Heavy monsoons in most of the regions led to lower volume growth. Dispatches in the east and central zone grew respectively 14.9% and 11.4% yoy, while those in the west were flat.

n       Utilisation lowest in six years. All-India capacity utilisation for Sep ’10 was 72% (77% yoy, 73% mom). At 67%, the south recorded the lowest utilisation; at 88%, the Central the highest. Capacity additions during the month were 4.8m tons; however, as per the CMA, 2.2m tons of capacity was non-functional and is de-rated, taking installed capacity to 263.5m tons.

n       Top-four post strong volume growth. Combined volumes of the top four companies for Sep ’10 rose 8.7% yoy, boosted mainly by JPA’s strong 51.6% yoy growth. ACC declining 3.1% and UltraTech with 4.6% growth were laggards. Outperformers in volume growth were JPA, Prism, JK Cement, Dalmia and Birla Corp.

n       Price performance mixed. Prices have increased by Rs20-30 in the South and Rs5-15 in the West, East and Central, while they were stable in the North. In the South, price hikes of ~Rs60-70 a bag since Sept first week have been completely absorbed. Demand during Sep-Oct was slow, largely due to shrinking demand from construction at government projects and in real estate. Dealers expect some improvement in demand, post-monsoons.

        Note: Data for ACC and Ambuja for Sep ’10 not available with the CMA. Cumulative figures taken from ACC and Ambuja, and regional figures from assumptions based on the 1QFY10 trend.