Cement dispatch data for month of January 2012

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Cement dispatch data for month of January 2012

SPA Research has come out with its report on cement industry.

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SPA Research has come out with its report on cement industry.

Dispatch numbers reported by cement giants were in-line with our estimates with YoY growth of 11.3%, aided by softer base in corresponding period last year. On MoM basis, dispatches grew by 4.7% despite inventory push by companies in Dec 11 (Dec being the last month of CY). We expect this trend to continue, with February also likely to witness healthy volume growth. Given the stability in cement prices witnessed in last month after a sharp decline witnessed in Dec 11, we expect prices to inch up in coming months with pickup in demand. With the Jan-Mar quarter being the peak quarter for construction activity, we expect cement demand to maintain its growth momentum. We maintain our demand growth estimate of 6% and 8% in FY12 and FY13 respectively.

Cumulative volume of top players grew by 11%: The top 4 pan India players recorded a YoY growth of 11.3% in Jan'12 dispatches albeit on a lower base in the corresponding month last year and aided by robust rural demand. The industry had recorded a muted growth of only 1.8% in January last year. On a sequential basis, cement dispatches improved by 4.7% in Jan 12 despite inventory push resorted by them in Dec 11, indicating some recovery in demand. Their cumulative sales during the April- January period improved by 7.8% to 84.69 mt.

Industry dispatches to continue its growth momentum: With country's top cement manufacturers reporting robust sales, we expect the industry-wide dispatches to grow by ~9% in the month of January 12. Q4FY12 being the peak quarter for construction activity, we expect cement demand to continue its growth momentum.

Logs double-digit growth for second consecutive month: As expected by us, the Indian cement industry clocked doubledigit growth for the second consecutive month in Dec 2011 led by demand revival, particularly in the northern and western regions. The growth was also aided by low base effect (contraction of 2.9% in Dec 10). All-India cement dispatches improved to 19.78 mt, registering a YoY & MoM growth of 14.0% & 11.5% respectively. This was the second highest monthly dispatches after the Mar 11 figure of 21mt. The sector has so far (Apr-Dec) clocked a YoY growth of 5.3% to 160 mtpa.

Consumption in the western region grew by 21.4% driven by better demand in Gujarat due to mass housing schemes in light of state elections in 2012. Northern region witnessed a growth of 16.3% owing to increasing rural demand in Punjab, Haryana and Rajasthan. Southern region surprised with a robust growth of 16.7%.

Core industries growth falls to 3.1% in Dec: India's core industries (37.9% weightage in IIP) that include electricity, coal, cement, steel and crude oil, registered a slower 3.1% growth in Dec 11 as compared to 6.8% in Nov 11 and 6.3% in Dec 10. Cement production (2.41% weightage in IIP) however, registered a healthy growth of 13.3% in the same period as against a contraction of 2.2% in Dec 10.

Prices to inch up: Given the stability in cement prices witnessed in last month after a sharp decline witnessed in Dec 11, we expect prices to inch up in coming months with pickup in demand as construction season picks up. Infact historically too, cement prices have generally increased declined In February, with the seasonal revival in demand.
 
ACC : ACC's cement production and dispatches during the month of January 12 increased 9.2% YoY and 8.8% YoY to 2.25 mt & 2.23 mt respectively. Sequentially dispatches grew by 6.7%, which is commendable, given, volumes in Dec 11 grew at handsome pace, aided by volume push by the company as it follows CY. ACC has recorded superlative growth in dispatches during the year till date (Apr-Jan 12) on the back of increased capacity. On a cumulative basis the company registered a volume growth of 11.4% on YoY basis. Capacity utilization improved by 748 bps YoY & 866 bps MoM to 88.5% in Jan 12. Cumulatively it improved by 763 bps to 77.4%. With the commissioning of its Chanda and Wadi plant, the company has also increased its pan-India market share by 50 bps to ~11.5%.

Ambuja Cement : Comparatively Ambuja Cement reported muted performance in last month as its dispatches grew by only 3.8% YoY to 1.91 mt. Sequentially it is the only player to report decline (degrowth of 1.1%) in volumes.  On a cumulative basis (April-Jan12), the company registered volume growth of 4.6% to 17.54 mt. The production for the month improved by 3.3% YoY to 1.90 mt. On a cumulative basis (April-Jan 12) production increased by 3.9% to 17.28 mt. Capacity utilization improved by 268 bps YoY 84.8% in Jan 12. Sequentially it declined by 49 bps. However on cumulatively basis it improved by 290 bps to 77.1%.

Jaiprakash Associates : Jaiprakash Associates witnessed a robust YoY volume growth of 27.3% during the last month and the dispatches stood at 1.96 mt. Sequentially on MoM basis, the company reported an improvement of 12.6% in dispatches. Its cumulative sales during the April-Jan period improved by 18.9% YoY to 15.24 mt.

Ultratech Cement : Ultratech, which derives ~25% of its volumes from southern region, continued to witness a higher growth in its sales volumes for the second consecutive month. This coupled with 16.7% YoY growth in industry-wide dispatches in Dec 11, indicates that situation might be improving in the southern region. Production grew by 11.5% and dispatches growing by 9.7% on a YoY basis to 3.72 mt in Jan 12. Sequentially, it recorded a growth of 2.8% in dispatches. However, on cumulative basis, growth in dispatches has been modest at 2.9%. Capacity utilization too improved by 959 bps YoY & 516 bps MoM to 92.3% in Jan 12. Cumulatively it improved by 214 bps to 79.3%.

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