Delayed Monsoon Assist ACC And Ambuja Cement To Report Better Dispatch In June 2012

ACC and Ambuja Cement, the largest cement producing companies in India, reported their production and dispatch numbers for June 2012 wherein both have shown decent upticks in dispatches which have grown by 2.62 per cent and 7.8 per cent on a YoY basis respectively. The overall growth in cement demand this year remains much better than 2011 which can also be seen from the dispatch numbers reported by the company for the last six months. With the onset of monsoon the demand for cement cyclically tends to decline but the delay in rains this year and better infrastructure activity the dispatches have remained firm during the quarter.

In the March 2012 quarter both the companies reported decent growth in their revenues largely on the back of higher realisation and higher dispatches due to low base effect and some pick-up in demand. And now looking at the dispatch numbers for the June quarter it seems that cement companies will report decent growth in topline and bottomline in the June quarter as well. This is mainly because of the late arrival of monsoon in major parts of the country.

Also, with the scenario looking more conducive for these players, cement companies have not reduced the cement prices significantly as compared to the year 2011. In fact, cement companies in the northern region have gone for a price hike of Rs 10 on a per 50 kg bag just before the arrival of the monsoon at a time when cement companies generally go for a price cut due to slower construction activity.

However, going forward, with the arrival of the monsoon we will see a decline in demand in the coming months. This will also be due to lesser infrastructure activity and a slowdown in economy. The availability of sand in some northern parts of the country is also an issue that may impact the demand. The increase in the power & fuel cost as well as freight charges will hurt the margins as cement companies will not be able to pass on the hike due to the weak demand scenario.