July 2011: Cement dispatches remain muted… ICICI Securities,

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July 2011: Cement dispatches remain muted…
Cement majors report ~3% YoY growth in dispatches
In June 2011, major cement players reported dispatch growth in the range
of 2-7% YoY except Ambuja, which posted a decline in dispatch growth.
ACC reported 7.3% YoY growth in dispatches to 1.91 MT while Shree
Cement reported dispatch growth of 6.5% YoY to 0.84 MT. Also, during
the month, UltraTech reported dispatches of 3.22 MT (2.2% YoY) and
Jaypee reported 1.37 MT (3.5% YoY) while JK Lakshmi reported 0.39 MT
(5.1% YoY). However, Ambuja Cement reported a decline of 1.2% YoY in
dispatches to 1.70 MT. Hence, on an aggregate basis, the volumes of the
major six players have been 3.2% YoY in June 2011.
On an MoM basis, volumes remained subdued as the top 3 players
reported 0.7-4% decline in dispatches. ACC and Ambuja reported 3.6%
and 4% decline in dispatches, respectively, on an MoM basis. UltraTech
and Jaypee reported almost flat dispatch growth on an MoM basis.
Overall, we expect industry dispatch growth at ~5% YoY (1.1% MoM) in
June 2011. Cement demand has been sluggish on account of a slowdown
in construction activities in both the infrastructure and housing segments.
Also, the volumes were impacted on the back of labour unavailability in
most parts of the country.
Cement prices decline by | 5-20 per bag MoM in June 2011
Cement prices have declined by | 5-20 per bag in June 2011 across all
regions as cement demand remained sluggish during May-June 2011. In
the North and Central region, prices have declined by ~| 10-20 per bag
while prices have sustained in the southern region and declined
marginally by | 3-5 per bag. We expect cement prices to remain under
pressure till September-October 2011 on account of the arrival of
monsoons and uncertainty on demand revival.
Industry outlook
All-India cement consumption grew ~4% YoY in FY11 to ~208 million
tonnes (MT) as against ~200 MT in FY10. The utilisation rate declined to
~77% in FY11 from ~87% in FY10 due to the addition of ~44 MT of
effective capacity in FY11 as against incremental demand of ~9 MT
during the period. For FY12E, we estimate the utilisation rate will decline
further to 76% as we expect consumption growth of ~6% YoY
(incremental demand of 12.5 MT YoY) as against supply growth of ~10%
YoY (effective capacity addition of 16.7 MT YoY).