Cement is bucking the trend
But it is not all gloom and doom, at least not for the cement industry. It continues to outshine its many of its core sector cousins, having trotted up a highly impressive 11 per cent growth year on year for the month of January 2019. And this showing comes back to back with a very good despatch growth numbers notched up in the previous month as well. Analysts and observers of the sector are projecting a very healthy 10 per cent growth for the cement industry in FY 19, as against 8.5 per cent last financial year (which also happened to be on an anaemic low base). The forecast for 2019-20 is now around 7 per cent on the higher base, and one can easily see that these pleasing numbers, caused mostly due to pre-election spends and infrastructure boost from the central as well as state governments, would result in higher capacity utilisation. Inspired by the immediate and the medium term prospects, many cement companies have increased prices significantly. Some say prices have increased by Rs 25 per bag on an average, and some other reports talk about Rs 77 per bag! This price rise has in turn triggered angry reactions from some stakeholders, such as CREDAI, and some governments, among them the Andhra Pradesh State Government, are already responding in one way or the other, given that this matter could become sensitive with elections round the corner.
For the investor community, the price rises together with lower costs of energy/fuel, can only mean better margins for the sector, and therefore, all round ôbuyö suggestions are coming up.
Sumit Banerjee Chairman, Editorial Advisory Board