ACC And Ambuja Cement Dispatch Numbers For January 2012

ACC and Ambuja Cement, the largest cement producing companies in India, reported their production and dispatch numbers for the month of January 2012. Both the companies have reported decent uptick in the dispatches which have grown by 4.18 per cent and 8.78 per cent on a YoY basis respectively. The growth in dispatches indicates that there has been some revival in the demand during the month. This can also be seen from the dispatch numbers reported by the companies in the last few months.

Moreover, if we look at the MoM performance, the dispatches for ACC have gone up by 7 per cent while for Ambuja Cement they have remained flat. The jump in sales volumes is mainly on account of the revival seen in the construction and infrastructure activity in the December quarter 2011. With the RBI having announced a cut in the CRR by 50 bps, this indicates that the interest rate cycle has peaked out and we may not see any other rate hike going forward.

In fact, by reducing the CRR the RBI has infused liquidity in the system to boost expenditure in the economy. With this the infrastructure and construction companies will get some relief on raising funds for their new and ongoing projects. Also, cement is a cyclical business and generally the second half of the financial year remains better than the first half. We therefore expect further improvement in the coming months also.

The year 2011 for cement companies has remained quite challenging. Lower demand, high input cost, high interest regime, tighter liquidity situation and slower economic growth has dampened the performance of this company in the last one year. For instance, the dispatches for Ambuja Cement from January to December 2011 have grown by a mere 4.8 per cent on a YoY basis. For Ultra Tech the dispatches in the last one year have grown by just 2.3 per cent on a YoY basis.

However, now the scenario looks more conducive for these players and we believe that both Ambuja Cement and ACC will witness a decent upward movement in the sales volume in the coming months. Both the companies have not yet declared the date for announcing the results of the December quarter but we believe that these will reflect good growth in their revenues largely due to two reasons: first, they have increased cement prices in the December quarter which will lead to higher realisation and second, higher dispatches due to low base effect and some pick-up in demand will lead to an increase in revenue. However, pressure on the margin may continue due to higher freight charges and interest expenses.
 
For instance, Ultra Tech Cement, India's largest cement producing companies, has reported robust QoQ and YoY performance. The revenue of the company has improved by 23.1 per cent on a YoY basis to Rs 4,572 crore. This was mainly on account of the increase in demand and higher realisation during the quarter. The dispatches during the quarter grew by 6 per cent on a YoY basis and the realisation improved by 16.1 per cent on a YoY basis to Rs 4,623 per tonne.