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Cement monthly–Feb 2011 ; January cement dispatches expected at ~7% YoY…
Cement majors post recovery in dispatches in January 2011
Total cement volume is expected to grow ~7% YoY in January 2011 as
six major companies, holding ~50% of total cement capacity, reported a
6% YoY increase in dispatches for the month. On a MoM basis, overall
volume of the six companies was higher by 6.4%. Positive growth during
the month came on the back of growth in cement demand from the
infrastructure segment as the extreme winter season is nearing its end
and availability of railway wagons to dispatch cement is on schedule.
Among majors, except UltraTech Cement (including Samruddhi) and JK
Lakshmi, all players reported growth in dispatches on a YoY basis. JP
Associates’ dispatches during January 2011 clocked double digit growth
of ~39% YoY while ACC and Ambuja Cement reported a volume growth
of ~7% and ~5% YoY, respectively. However, on an MoM basis, three
major players namely Shree Cement, Jaypee and JK Lakshmi reported a
noteworthy growth in dispatches number by 12%, 14% and ~18%,
respectively. The growth in sales volume was in the wake of a seasonal
pick-up in construction activity as January to March is known as a better
construction period considering the weather.
Apr-Dec’2010 volume growth at ~4%, FY11E growth expected at 5.5%
Total cement volume growth of the industry during April-December 2010
was at 4.2% YoY as against an annual growth rate of ~10% in FY10. The
muted growth was on account of the long monsoon season when the
industry reported negative growth in dispatches during November-
December 2010. We expect ~7% YoY growth in January 2011 and 5.5%
YoY for the full year FY11E as consumption is expected to grow 10% in
February-March 2011.
Cement prices update
Cement prices across regions witnessed an increase of | 10-15 per bag in
the wake of a revival in cement demand, availability of labour and
increase in government spending on housing and infrastructure as the
Eleventh Plan is drawing to a close (by FY12). Cement prices in Delhi rose
by | 13 per bag to | 223 per bag in January 2011 from | 210 per bag in
December 2010. The eastern region also witnessed a price hike as cement
prices in Kolkata rose 12% MoM or | 28 per 50 kg bag to | 270 in January
2011. In the western region, prices in Mumbai increased by | 6 per 50 kg
bag to | 258 per bag in January 2011 from | 252 per bag in December
2010. Cement prices in Hyderabad and Chennai increased around 7% and
2% MoM to | 232 and | 270 per bag, respectively, after a pick-up in
cement demand.
Capacity utilisation expected at 86% in Jan’11 against 77% in Dec’10
Capacity utilisation of the industry is expected at ~86% in January 2011
as against ~77% in December 2010. Growth in utilisation can mainly be
attributed to growth in cement demand from the infrastructure segment
and uninterrupted wagon availability to dispatch cement bags on
schedule. However, the utilisation rate for YTD FY11 stood at 75% as
against 87% in FY10.
Revival in construction activity to push demand in northern region
Cement prices in Delhi increased by | 13 per 50 kg bag to | 223 per bag in
January 2011 from | 210 per bag in December 2010. However, prices are
still down by ~7% from the high of | 240 per bag in April 2010. On a YoY
basis, prices are down ~3% or | 7 per bag. Besides, price sustainability in
Rajasthan is expected to be doubtful till the end of this year as the region
is suffering from overcapacity and lower demand. Overall, per bag rise in
cement prices is on the back of growing demand for the commodity on
revival of construction activity in the northern region. We expect the
demand to improve, going forward, with the end of winter season and
growth in construction activity.
Eastern region witnesses sharp price rise
Cement prices in Kolkata and other parts of the eastern region saw a
sharp rise of | 28 per 50 kg bag to | 270 in January 2011 from | 242 in
December 2010. The sharp rise in prices can mainly be attributed to the
growth in construction activity on end of winter and festival season.
However, prices are still 8% below the high of | 293 per bag made in April
2010. On a YoY basis, prices were up ~2% or | 5 per bag. We expect a
revival in cement demand in February 2011 on post festival pick-up in
construction activity.
Western region witnesses | 8-10 price hike in December 2010
Cement prices in the western region witnessed a rise of | 8-10 per bag
during January 2011 to | 258 per bag as compared to | 252 per bag in
December 2010. Prices have corrected by ~3% or | 10 per bag from the
high of | 267 per bag made in April 2010. However, prices were up ~3%
or | 6 per bag on a YoY basis. The rise in cement prices can mainly be
attributed to the end of the long lasting monsoon and post festival pick-up
in construction activities. In addition to this, availability of railway wagons
also helped cement companies keep up their delivery on schedules. We
expect February 2011 to witness growth in commodity demand on the
back of a rise in construction activity and uninterrupted wagons
availability for commodity dispatches.
Pricing discipline continues in southern region
Cement prices in Hyderabad have increased by around 7% MoM or | 16
to | 232 per bag in January 2011 as compared to | 216 per bag in the
month of December 2010. On a YoY basis, prices per bag are higher by
~45% in Hyderabad from | 160 per bag in January 2010. On the other
hand, cement prices in Chennai increased by 2% MoM or | 5 per bag to |
270 after marginal growth in cement demand. Prices have increased by
~20% YoY or | 45 per bag from its low of | 225 per bag in January 2010.
Industry outlook
The total cement volume is expected to grow at ~7% YoY in January
2011 as the six major companies, holding ~50% of the total cement
capacity, reported a 6% YoY increase in dispatches for the month. We
have assumed that the other players contributed the balance 50% of the
total industry and would have operated at the utilisation level of 83%. On
an MoM basis, the overall volume of the six companies was higher by
6.4%. The positive growth during the month came on the back of growth
in cement demand from the infrastructure segment as the extreme winter
season is nearing its end and availability of railway wagons to dispatch
the commodity is on schedule.
We are expecting total demand growth of 5.5% YoY for FY11E as against
~10% in FY10, assuming ~7% YoY growth for Jan 2011 and 10% YoY
each for February and March 2011 against ~4.2% YoY growth in Apr-Dec
2010. Our expectation of 10% growth for the industry in February and
March is based on the historical trend (shown in Exhibit 9). This suggests
positive QoQ growth in sales volume during Q3 and Q4 of a financial year.
Overall cement demand for the months from January to March is
expected to be higher in the wake of a pick-up in construction activity and
the fact that availability of railway wagons for dispatches is on schedule.
For FY11E, the capacity utilisation rate is expected to come down to 78%
from 87% in FY10 as we expect ~44 MTPA of effective capacity addition
during the year as against ~11 MTPA of incremental demand. However,
utilisation rates are expected to improve to 82% in FY12E on account of
lesser capacity addition during the year compared to an increase in
demand. We expect effective capacity addition of ~13 MTPA as against
~21 MTPA of incremental demand.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Cement monthly–Feb 2011 ; January cement dispatches expected at ~7% YoY…
Cement majors post recovery in dispatches in January 2011
Total cement volume is expected to grow ~7% YoY in January 2011 as
six major companies, holding ~50% of total cement capacity, reported a
6% YoY increase in dispatches for the month. On a MoM basis, overall
volume of the six companies was higher by 6.4%. Positive growth during
the month came on the back of growth in cement demand from the
infrastructure segment as the extreme winter season is nearing its end
and availability of railway wagons to dispatch cement is on schedule.
Among majors, except UltraTech Cement (including Samruddhi) and JK
Lakshmi, all players reported growth in dispatches on a YoY basis. JP
Associates’ dispatches during January 2011 clocked double digit growth
of ~39% YoY while ACC and Ambuja Cement reported a volume growth
of ~7% and ~5% YoY, respectively. However, on an MoM basis, three
major players namely Shree Cement, Jaypee and JK Lakshmi reported a
noteworthy growth in dispatches number by 12%, 14% and ~18%,
respectively. The growth in sales volume was in the wake of a seasonal
pick-up in construction activity as January to March is known as a better
construction period considering the weather.
Apr-Dec’2010 volume growth at ~4%, FY11E growth expected at 5.5%
Total cement volume growth of the industry during April-December 2010
was at 4.2% YoY as against an annual growth rate of ~10% in FY10. The
muted growth was on account of the long monsoon season when the
industry reported negative growth in dispatches during November-
December 2010. We expect ~7% YoY growth in January 2011 and 5.5%
YoY for the full year FY11E as consumption is expected to grow 10% in
February-March 2011.
Cement prices update
Cement prices across regions witnessed an increase of | 10-15 per bag in
the wake of a revival in cement demand, availability of labour and
increase in government spending on housing and infrastructure as the
Eleventh Plan is drawing to a close (by FY12). Cement prices in Delhi rose
by | 13 per bag to | 223 per bag in January 2011 from | 210 per bag in
December 2010. The eastern region also witnessed a price hike as cement
prices in Kolkata rose 12% MoM or | 28 per 50 kg bag to | 270 in January
2011. In the western region, prices in Mumbai increased by | 6 per 50 kg
bag to | 258 per bag in January 2011 from | 252 per bag in December
2010. Cement prices in Hyderabad and Chennai increased around 7% and
2% MoM to | 232 and | 270 per bag, respectively, after a pick-up in
cement demand.
Capacity utilisation expected at 86% in Jan’11 against 77% in Dec’10
Capacity utilisation of the industry is expected at ~86% in January 2011
as against ~77% in December 2010. Growth in utilisation can mainly be
attributed to growth in cement demand from the infrastructure segment
and uninterrupted wagon availability to dispatch cement bags on
schedule. However, the utilisation rate for YTD FY11 stood at 75% as
against 87% in FY10.
Revival in construction activity to push demand in northern region
Cement prices in Delhi increased by | 13 per 50 kg bag to | 223 per bag in
January 2011 from | 210 per bag in December 2010. However, prices are
still down by ~7% from the high of | 240 per bag in April 2010. On a YoY
basis, prices are down ~3% or | 7 per bag. Besides, price sustainability in
Rajasthan is expected to be doubtful till the end of this year as the region
is suffering from overcapacity and lower demand. Overall, per bag rise in
cement prices is on the back of growing demand for the commodity on
revival of construction activity in the northern region. We expect the
demand to improve, going forward, with the end of winter season and
growth in construction activity.
Eastern region witnesses sharp price rise
Cement prices in Kolkata and other parts of the eastern region saw a
sharp rise of | 28 per 50 kg bag to | 270 in January 2011 from | 242 in
December 2010. The sharp rise in prices can mainly be attributed to the
growth in construction activity on end of winter and festival season.
However, prices are still 8% below the high of | 293 per bag made in April
2010. On a YoY basis, prices were up ~2% or | 5 per bag. We expect a
revival in cement demand in February 2011 on post festival pick-up in
construction activity.
Western region witnesses | 8-10 price hike in December 2010
Cement prices in the western region witnessed a rise of | 8-10 per bag
during January 2011 to | 258 per bag as compared to | 252 per bag in
December 2010. Prices have corrected by ~3% or | 10 per bag from the
high of | 267 per bag made in April 2010. However, prices were up ~3%
or | 6 per bag on a YoY basis. The rise in cement prices can mainly be
attributed to the end of the long lasting monsoon and post festival pick-up
in construction activities. In addition to this, availability of railway wagons
also helped cement companies keep up their delivery on schedules. We
expect February 2011 to witness growth in commodity demand on the
back of a rise in construction activity and uninterrupted wagons
availability for commodity dispatches.
Pricing discipline continues in southern region
Cement prices in Hyderabad have increased by around 7% MoM or | 16
to | 232 per bag in January 2011 as compared to | 216 per bag in the
month of December 2010. On a YoY basis, prices per bag are higher by
~45% in Hyderabad from | 160 per bag in January 2010. On the other
hand, cement prices in Chennai increased by 2% MoM or | 5 per bag to |
270 after marginal growth in cement demand. Prices have increased by
~20% YoY or | 45 per bag from its low of | 225 per bag in January 2010.
Industry outlook
The total cement volume is expected to grow at ~7% YoY in January
2011 as the six major companies, holding ~50% of the total cement
capacity, reported a 6% YoY increase in dispatches for the month. We
have assumed that the other players contributed the balance 50% of the
total industry and would have operated at the utilisation level of 83%. On
an MoM basis, the overall volume of the six companies was higher by
6.4%. The positive growth during the month came on the back of growth
in cement demand from the infrastructure segment as the extreme winter
season is nearing its end and availability of railway wagons to dispatch
the commodity is on schedule.
We are expecting total demand growth of 5.5% YoY for FY11E as against
~10% in FY10, assuming ~7% YoY growth for Jan 2011 and 10% YoY
each for February and March 2011 against ~4.2% YoY growth in Apr-Dec
2010. Our expectation of 10% growth for the industry in February and
March is based on the historical trend (shown in Exhibit 9). This suggests
positive QoQ growth in sales volume during Q3 and Q4 of a financial year.
Overall cement demand for the months from January to March is
expected to be higher in the wake of a pick-up in construction activity and
the fact that availability of railway wagons for dispatches is on schedule.
For FY11E, the capacity utilisation rate is expected to come down to 78%
from 87% in FY10 as we expect ~44 MTPA of effective capacity addition
during the year as against ~11 MTPA of incremental demand. However,
utilisation rates are expected to improve to 82% in FY12E on account of
lesser capacity addition during the year compared to an increase in
demand. We expect effective capacity addition of ~13 MTPA as against
~21 MTPA of incremental demand.
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