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August dispatches decline MoM; higher on YoY…
Cement majors report ~10% YoY growth in dispatches, decline ~6% MoM
In August 2011, the major cement players reported an aggregate dispatch
growth of 10.5% YoY on the back of lower base, capacity additions during
the year and inventory build-up by dealers anticipating price hikes after
the monsoon. ACC reported ~20% YoY growth in dispatches on account
of Chanda capacity expansion coupled with a lower base in August 2010.
Jaypee and Shree reported ~19-21% YoY growth in dispatches during
the month. JK Lakshmi reported ~11% YoY growth while Ambuja cement
and UltraTech reported muted dispatches growth of ~2-3% YoY.
On an MoM basis, cement volumes remained subdued and the aggregate
dispatch growth of the six companies has declined ~6% in August 2011.
In July 2011, overall industry dispatches grew ~11% YoY on the back of a
lower base and lower rainfall. However, it remained flat on an MoM basis
due to a slowdown in construction activities.
CCI investigation on cement prices intensifies
Competition Commission of India (CCI) has been investigating the steep
increase in cement prices by cement companies. It sustained at higher
levels from August 2010-March 2011 given the cement demand has been
low during the period. According to Section 27 of the Competition act, CCI
has the power to levy penalty of up to 10% of the average annual revenue
in the past three years, which can cost the cement large cap companies
(ACC, Ambuja and UltraTech) in the range of ~| 600-900 crore. However,
as there is no clarity regarding the penalty in terms of amount or
percentage, we are awaiting clarity on the issue. Thus, we have kept
unchanged our estimates of cement companies in our coverage.
Industry outlook
We expect all-India cement consumption to grow ~6% YoY in FY12E as it
is likely to remain muted on account of key issues like rising cost of
capital, land acquisition, clearances and unavailability of key raw
materials. The utilisation rate is expected to decline to 76% in FY12E as
the incremental demand of 12.5 MT is likely to be negated by ~18 MT of
capacity additions. However, we expect the utilisation rate to start
improving from FY13E (79%) as the incremental demand (~20 MT) will
keep pace with effective capacity addition (~23 MT). Cement prices have
declined further by | 5-10 per bag in August 2011 across all regions
(except south) as cement demand remained sluggish during July-August
2011. We expect cement prices to recover from October 2011 as the
monsoon season will end in most parts of the country.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
August dispatches decline MoM; higher on YoY…
Cement majors report ~10% YoY growth in dispatches, decline ~6% MoM
In August 2011, the major cement players reported an aggregate dispatch
growth of 10.5% YoY on the back of lower base, capacity additions during
the year and inventory build-up by dealers anticipating price hikes after
the monsoon. ACC reported ~20% YoY growth in dispatches on account
of Chanda capacity expansion coupled with a lower base in August 2010.
Jaypee and Shree reported ~19-21% YoY growth in dispatches during
the month. JK Lakshmi reported ~11% YoY growth while Ambuja cement
and UltraTech reported muted dispatches growth of ~2-3% YoY.
On an MoM basis, cement volumes remained subdued and the aggregate
dispatch growth of the six companies has declined ~6% in August 2011.
In July 2011, overall industry dispatches grew ~11% YoY on the back of a
lower base and lower rainfall. However, it remained flat on an MoM basis
due to a slowdown in construction activities.
CCI investigation on cement prices intensifies
Competition Commission of India (CCI) has been investigating the steep
increase in cement prices by cement companies. It sustained at higher
levels from August 2010-March 2011 given the cement demand has been
low during the period. According to Section 27 of the Competition act, CCI
has the power to levy penalty of up to 10% of the average annual revenue
in the past three years, which can cost the cement large cap companies
(ACC, Ambuja and UltraTech) in the range of ~| 600-900 crore. However,
as there is no clarity regarding the penalty in terms of amount or
percentage, we are awaiting clarity on the issue. Thus, we have kept
unchanged our estimates of cement companies in our coverage.
Industry outlook
We expect all-India cement consumption to grow ~6% YoY in FY12E as it
is likely to remain muted on account of key issues like rising cost of
capital, land acquisition, clearances and unavailability of key raw
materials. The utilisation rate is expected to decline to 76% in FY12E as
the incremental demand of 12.5 MT is likely to be negated by ~18 MT of
capacity additions. However, we expect the utilisation rate to start
improving from FY13E (79%) as the incremental demand (~20 MT) will
keep pace with effective capacity addition (~23 MT). Cement prices have
declined further by | 5-10 per bag in August 2011 across all regions
(except south) as cement demand remained sluggish during July-August
2011. We expect cement prices to recover from October 2011 as the
monsoon season will end in most parts of the country.
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