Ambuja Cements posts strong dispatch numbers in Nov 2011
Chandrakant / 05 Dec 2011
Ambuja Cements, which is one of most cost efficient cement companies in India, released its Nov 2011 dispatch figures. The company witnessed a strong recovery in its sales figures during the month, with production growing by 27% and dispatches growing by a strong 30% on a YoY basis to touch 1.83 MT. However, the base effect in the same period last year cannot be ignored, which is also one of the reasons for the higher growth rate in Nov 2011.
| Dispatch in Last 3 Quarters | |||
| 2010 | 2011 | YoY | |
| Jan-Mar '11 |
5.35 | 5.65 | 5.6 |
| April-June '11 |
5.5 | 5.32 | -3.3 |
| July-Sep '11 |
4.46 | 4.75 | 6.5 |
| Dispatch Numbers For Q4 CY11 | |||
| Oct '11 | 1.75 | 1.78 | 1.7 |
| Nov '11 |
1.41 | 1.83 | 29.8 |
| Dec '11 |
1.82 | ||
| Total | 4.98 | ||
Moreover, the MoM performance of the company has also remained quite good, overriding concerns that are prevailing in the economy. On a MoM basis, the dispatches grew by 3% during the month to 1.83 MT, which is also the sign of a slow recovery in sales for the coming months.
Cement is a cyclical business, and the second half of the FY typically remains better than the first half. It has been seen that post the monsoons, the demand has a propensity to get better and continues to be higher in the second half of the year due to a pickup in construction activity. However, the pickup may remain at a slow pace in the current quarter, and is expected to gain momentum in Q4 FY12.
On the pricing front, cement companies have raised the prices across the country from October 2011 onwards. These have shot up by Rs10-l5 per 50-kg bag in most of the regions. Even the southern cement players increased the prices in Nov, after maintaining them in the previous quarter. However, we believe that this increase in price may not sustain, due to a weak demand in the region.
We, at DSIJ, believe that Ambuja Cements will witness a decent growth in volumes in the current quarter, mainly due to a low base effect, as the pickup in demand will remain subdued. However, it will try to augment its revenues by increasing the cement prices and cutting down production in order to offset the high coal prices and freight charges, which constitute 50% of the total costs. Higher input costs will put some pressure on the company's margins in the coming quarter.
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