Cement demand may grow at 8 p. c. in FY13
Analysts expect that the cement business for major players in the country is expected to be profitable in the first quarter of this financial year, backed by an increase in cement prices and higher volume growth on a low base. Pan India, demand for cement is estimated to grow at eight per cent in FY13. The utilisation rate is estimated to remain at 77 per cent, as the capacity addition of 21 million tonne (mt) is expected to negate the impact of incremental demand of 19 mt during the period.
The cement sector (only integrated cement players are considered for Q1 preview) to report an 18 per cent growth in sales and a significantly high growth of 20 per cent in profit. The operating margins are expected to be under pressure, down 25-50 basis points, mostly due to increase in freight costs. The decline in prices of petroleum coke is expected to benefit those using this fuel.
Nevertheless, strong sales profit growth is expected from Madras Cement, Mangalam Cement, Shree Cement, JK Cement and JK Lakshmi Cement. ACC and UltraTech Cement might also do well, while Ambuja Cements might witness a good growth in profit. The impact of higher realisations, thanks to double-digit rise in cement prices, would get diluted by a rise in rail freight rates and less capacity utilisation. However, the benefit of softening imported coal prices would reflect in the second quarter of the current financial year.
The industry is expected to report a nine per cent growth in volume in the first quarter due to lower base, delayed monsoon and strong demand in the northern region. However, on sequential basis, cement volumes are likely to be down by around eight per cent due to seasonal factors.