Cement dispatch data for the month of February 2012

SPA Research has come out with its report on cement dispatch. The research firm expects cement prices to remain stable to slightly negative in the current month as cement players are likely to offer marginal discounts in the range of 2-5% on account of year-end stock clearance.

Cement companies continued their upbeat performance mainly on account of increase in offtake from construction activities post monsoon. Demand is improving in rural housing, semi-urban housing and infrastructure segments in the western, northern and most importantly southern regions. Major cement players reported a growth of 12.1% YoY in the last month. Though the low base effect will fade off in March, we expect the growth to be in double digits. We expect cement prices to remain stable to slightly negative in the current month as cement players are likely to offer marginal discounts in the range of 2-5% on account of year-end stock clearance. 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 8% in FY13.

Cumulative volume of top players grew by 12%: Major cement players reported a growth of 12.1% YoY in dispatches in the last month aided by robust rural demand and pick-up in construction activities across regions. The cumulative sales of top 4 players in April-February 2012 period has improved by 8.2% to 94 mt. Jaypee outperformed other players with 30.9% YoY growth in dispatches mainly due to softer base in corresponding month previous year.

Industry wide growth to be close to double digits: With country's top cement manufacturers reporting robust sales, we expect the industry-wide dispatches to grow by ~10% in the month of February 12.

+9% growth for third consecutive month: The cement industry continued its robust performance by registering a growth of more than 9% for the third consecutive month aided by strong demand in the western & northern region. The growth was also aided by low base effect (growth of 2.4% in Jan 11). The industrywide cement dispatches improved by 9.7% to 20.4 mt (SPA expectation ~9%) in January 2012. Even on MoM basis cement dispatches have improved by 3.1%. Capacity utilization levels in January declined to 79% as against 80% in January 2011.

The sector has so far (YTD basis April- Jan12) clocked a decent YoY growth of ~5.8% to 180.1 mt and operated at a capacity utilisation of 73% this fiscal as against 77% in the same period last year. While western region is experiencing accelerated growth rates owing to mass housing schemes in Gujarat ahead of its election in 2012, increasing rural demand in Punjab, Haryana and Rajasthan is leading to double digit growth in northern region.

India's Jan Eight Core Sector Growth Slips: Growth in India's eight core industries having a combined weight of 37.90% in the IIP slowed to 0.5% in January 2012 as compared to 3.1% in December 2011 and 6.4% in January 2011. Cement production (2.41% weightage in IIP) however, registered a robust growth of 10.6% in the same period as against a growth of 1.8% in January 2011.

Situation in southern region improving: Although three months is short span of time to study revival of demand in a particular region, we still believe that demand scenario is improving in South. Dispatches have increased by 14% each in November and December and by 10% in January. Although a major part of this is aided by low base effect, government too has started allocating fund for infrastructure projects in the region. Slowdown in the Telangana agitation and increased demand from the housing segment seems to have revived the overall demand in the southern region. According to India Cements, one of the largest players in the region, AP government has started taking up some rural projects, which will lead to good demand of cement. Also, the Tamil Nadu government has taken up a housing project which is going to see a lot of cement consumption in the months to come.

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