Cement Industry Expected to Recover Marginally in Q4FY14

The top three players, i.e. UltraTech Cements, ACC and Ambuja Cement, which contribute around 52% of the total sales of the sector, have reported negative growth of 2-6% in the realisations per tonne on an yearly basis.

In Q4FY14, we are expecting some improvement in the performance of the cement companies as there are signs of recovery in cement demand along with seasonal price recovery. Cement demand showed signs of recovery in Q4FY14, particularly in February and March, driven by strong rural housing demand. As a result, capacity utilization also improved to some extent. Moreover, the companies have witnessed some seasonal price recovery to reach Rs. 10-25 per bag across the regions except South India. 

So, we expect the cement industry to recover in Q4FY14. The players based in North, East and Central markets will benefit significantly from the sharp price recovery, but the players based in South may see some impact on profitability due to weak pricing.

On the other hand, consolidation of global cement giants- Lafarge SA of France and Holcim of Switzerland in international cement industry has increased the possibility of consolidation in Indian market. We believe that the global merger of the two cement giants under LafargeHolcim will reshape the level of consolidation in the Indian Cement landscape and it will lead to firm pricing power in East, West and North regions in near future.