ACC witnesses demand revival, dispatches growth in Dec 2011

Moreover, the MoM performance shows that the dispatches have gone up by 14%, which is mainly due to some revival that has been seen in the construction and infrastructure activity post the monsoons. Also, the cement business is cyclical, and the 2nd half of the financial year typically remains better than the 1st half. We expect further improvement in the coming months.

However, if we look at the YTD performance of all the major cement players, it is quite evident that 2011 has been a tough year for them. Lower demand and higher input costs were 2 major issues that resulted in most of these companies underperforming on the market. With 12% growth, ACC's YTD performance in terms of dispatches has been good. However, this was largely on account of capacity expansion at its plant at Chanda, Maharashtra, which lead to higher production as compared to that in the previous year.

We, at DSIJ, believe that cement companies will see decent growth in their volumes in the current quarter. Moreover, they will witness good growth in revenues on the back of a pickup in demand and an increase in cement prices, which was done to offset the high coal prices and freight charges. However, higher input costs will continue to exert some pressure on the company's margins in the current quarter.