Cement monthly-Dec-2011-R K Global

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Cement Monthly | 12th Jan’12

The volume growth for the top three domestic cement

players viz ACC, Ambuja Cements and UltraTech Cement for

the month of December 2011 was mixed on Y-o-Y basis.

Among the companies, UltraTech registered a better

performance with a robust 10.6% growth in its dispatches.

ACC and Ambuja Cements posted a growth in their

dispatches of 5.7% and 5.6% respectively. Hence, the pan

India players have cumulatively registered a 6.2% volume

growth. On M-o-M, all the large players remained improved

slightly. While Jan-Dec 2011dispatches grew 7.7%.

Demand impact:

It appears that the supply discipline that was in place broke

down in Dec’11. Apart from the Southern region, which

maintained supply discipline and hence registered a 6.1% Y-o-Y

growth in Dec, the rest of the country saw 14% Y-o-Y growth in

dispatches. But most of the material went into restocking, and we

are expecting a slight improvement in demand due to upcoming

elections in Uttar Pradesh, Goa, Manipur, Punjab and

Uttarakhand.

Price Scenario: All-India cement prices continue to increase by an average of `9 per bag. On regional basis northern region have witnessed a decrease of ~`6 per bag in Dec’11. With the onset of severe winter during December in Delhi and NCR, construction activity during the month has harshly affected, the average price in the region has decreased by ~`13 per bag to ~`248 per bag in Delhi. On all India basis cement availability has increased and prices have remained constant. Bookings for non-trade sector have commenced and the prices in the segment are higher than that for trade segment. Cement price in the eastern region has sequentially decreased after four consecutive hikes till Nov’11, to `259. Price in western, southern and central region stood at `260, `255 and `240 respectively per bag, with no major price movement during the month of Dec’11. However, the onset of January, southern region have seen an increase in price in the by `5-20 per 50 kg bag.

Stock Performance Scripts Y-o-Y M-o-M Dec-11 Dec-10 Nov-11

UltraTech 7.2 1.4 1160.4 1082.1 1143.9

ACC 5.6 -0.8 1136.3 1075.6 1145.0

Ambuja 8.7 4.7 155.4 143 148.4

Jaypee -50.5 -15.6 52.4 105.9 62.1

Shree 8.2 3.9 2167.4 2003.7 2085.4

JK Lakshmi -32.8 -9.7 37.1 55.2 41.1

All India demand/supply scenario Million tonnes FY’09 FY’10 FY’11 FY’12E

Effective capacity 203.7 228.1 272 290.3

Production 181.4 199.3 208.3 220.8

Capacity Utilization (%) 89.1 87.4 76.6 76.1

Consumption 181.4 199.3 208.3 220.8

Consumption (%) 8.4 9.9 4.5 6.0

Surplus/Deficit 22.3 28.8 63.7 69.5

All- India Average cement price

Source: Dealers, RK Global Research

Research Analyst: Aditya Vikram Jha [email protected]

220

230

240

250

260

270

280

290

300

Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11

` pe

r b

ag

Cement Price per 50 Kg

All India Cement Price increased post mansoon- to maintain margin as demand slow down.. Cement price rose consequently for past four months, with latest increase of `18 on 22, Nov'11.

Industry outlook

All India cement dispatches is expected to remain smooth by ~5% Y-o-Y in Jan’12, as the four major companies,

holding ~65% of the total cement capacity, reported a 5.2% growth in dispatches for the month. On M-o-M basis, the

overall volume of the four companies rose by ~8.2%. In Dec’11 the total sales volume grew ~9% Y-o-Y on the back of

inventory build-up by cement dealers and consumers anticipating price hikes. The demand from the housing and

infrastructure segments to remain under pressure on account of key issues like land acquisition and clearances and

unavailability of key raw materials like coal to the manufacturing industry, the consumption has been subdued during

the year and grew by 3.9% Y-o-Y in April-Dec 2011. However, the slowdown in construction activities would remain a

key concern. For FY13E, we expect the utilization rate to remain at ~75%. However, it is expected to start improving

from H2FY’13E onwards as incremental demand is likely to keep pace with the additions in effective capacities. The

cement industry which offers high visibility of revenue and earnings in phase of high growth typically loses its shine

during the time of economic slowdown.

Monthly cement dispatches- December’ 2011 Sector Update


Cement Monthly

In Million tones Dec-11 Dec-10 Y-o-Y % Nov -11 M-o-M % Apr-Dec FY'12 Apr-Dec FY'11 Y-o-Y %

Dispatches

UltraTech 3.6 3.3 10.6 3.1 17.1 28.5 28.0 1.7 ACC 2.0 1.9 5.7 1.8 10.9 17.4 15.7 10.5 Ambuja 1.9 1.8 5.5 1.8 5.4 15.6 14.7 6.3 JP Associates

1.4

1.6

Top 4 Players 7.6 8.4 -9.5 8.3 -9.1 72.8 69.7 4.5

Production

UltraTech 3.6 3.2 10.8 3.0 17.5 28.6 28.0 2.2 ACC 2.1 1.9 9.4 1.8 14.2 17.4 15.7 11.0 Ambuja 1.9 1.8 6.8 1.8 5.3 15.4 14.8 3.9

UltraTech Cement On a cumulative basis (April-Dec 2011), dispatches of the

company remained flat at 28.5MT on account of low demand

across the country particularly in the southern region, where the

company has good exposure.

UltraTech reported a increase of 17% M-o-M in its dispatches

for December at 3.6 MT. On Y-o-Y basis the company dispatch

volume grew 10.6%.

The production during the month of December has also

increased by 17.5% M-o-M to 3.6 MT. The cumulative

production during the April-December period of this year

remained flat at 28.6 MT, an increase on merely 2.2%.

ACC Cement ACC continued its impressive performance in terms of volume

growth. The company's dispatches for Dec’11 increased 10.9%

M-o-M to 2.0 MT. Its cumulative sales during the April-December

period stood at 17.4MT, improving by 6% compared to same

period last year.

ACC's production in the last month increased by 14.2% M-o-M

to 2.1 MT, while during April- December Period, volume

increased by 11% to 17.4 MT.

The company has postponed its brown field expansions of 5

mn ton to CY12, due to subdued demand in the near-term. It is

expected to incur a capex of `5 bn p.a. for waste heat recovery

plant, wind power and modernization at various plants.

Ambuja Cement After amalgamation of Ambuja Cement with Holcim (India) Pvt

Ltd. Ambuja reported a positive growth in dispatches for the

month of Dec’11. While during the year the company increased

its capacity to 27mtpa as compared to 18.6mtpa last year.

The company has registered a 5.4% M-o-M volume growth in

December 2011 to 1.9 MT. Cumulative volumes (Apr-Dec

2011) improved by 6.3% to 15.6MT.

The production for the month increased by 5.3% M-o-M to

1.9MT. On a cumulative basis (April-Dec 2011) production

increased to 15.4MT, showing an increase of 3.9%.

UltraTech Cement

ACC Cement

Ambuja Cement

Source: Company, RK Global Research

-23

-18

-13

-8

-3

2

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17

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Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 %

In M

T

Dispatches Production Dispatches growth

-15

-10

-5

0

5

10

15

20

0.0

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1.0

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2.0

2.5

Dec-10 Mar-11 Jun-11 Sep-11 Dec-11

%

In M

T


-13

-8

-3

2

7

12

17

22

0.0

0.5

1.0

1.5

2.0

2.5

Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 %

In M

T



Cement Monthly

All-India average cement price picks up by | 10/bag MoM in October

All-India average cement prices have increased by ~| 5-15/bag in October

2011 across all regions and stood at ~| 248/bag. This major hike was

seen in the eastern region where prices increased by ~| 15/bag. In the

north and central region, prices have increased by ~| 10/bag MoM while

prices have increased by ~5/bag in the southern and western regions. We

expect cement prices to recover further in October 2011 on account of a

pick-up in dispatches.

Western Region Cement price in western region stood at `260 per bag, with no major price movement. However, prices are still down by ~`20 per bag from the highs of ~`280 per bag in Mar-Apr’11. The price is expected to increase in the region by `5-15 per bag. Demand from trade segment remains weak. Non-trade segment demand however is reasonable. Eastern Region The region has seen a prices decline of `5-8 per bag during the month on account of slight decrease in demand. This may be due to oversupply and augmented inventory in the system. Cement price in the region has declined after sequentially increase till Nov’11, In December the average price in eastern India decreased to `259. Depleted inventory during November has resulted in restocking demand from market participants, holding prices at high levels. Further price is expected to remain flat in the region. Southern Region Average cement prices in Chennai and Hyderabad stood to ~`255 per bag and ~`262 per bag, respectively, with no major changes in Dec’11. Prices in the region sustained due to supply and pricing discipline. While, with the onset of January, cement price in the region has increased by `5-25 per bag backing good demand from stockiest and Non-trade segment. Central Region Cement prices in central India declined to `236 per bag during Dec’11. The decline is price was due to decrease in construction activity because of severe cold waves running thought the month in the region. Cement dispatches in the region is expected to increase during the month of Jan’11 on account of elections in the state of UP. While on the price would remain even in January. Northern Region Cement prices in the north region have declined by ~`6 per bag in Dec’11. During the month, the average price declined by ~`13 per bag to ~`248 per bag in Delhi. Cement availability has increased and prices have remained constant. Bookings for non-trade sector have commenced and the prices in the segment are higher than that for trade segment. Though cement demand remained sluggish during the period on account of severe cold waves running thought the month in the region, prices which has been showing strength in Sep-Nov’11 has declined during Dec’11 to `253 per bag

Region- wise cement price movement

Source: Dealers, RK Global Research

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Cement price in Mumbai

225

235

245

255

265

275

285

295


Cement price in Kolkata

230

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270

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290

Dec-10 Mar-11 Jun-11 Sep-11 Dec-11

Cement price in Chennai

210

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240

250

260

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Cement price in Lucknow

200

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240

260

280

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Cement price in Delhi


Cement Monthly

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