Muted demand and fall in prices have taken a toll on the performance of the cement manufacturers during the fourth quarter of the last fiscal in the southern part of the country.
Cement majors including UltraTech, Grasim and India Cement, witnessed a fall in realisations, resulting de-growth in their bottom line during fourth quarter in FY 2010.
India Cements? Ebitda during the period under review declined 42% y-o-y to Rs 140 crore due to a 20% drop in net cement realisation, negating the positive impact of 25% volume growth. The company’s net profit plunged 59.2% y-o-y to Rs 38 crore on account of poor operating performance.
Similarly, Aditya Birla Group’s UltraTech Cement registered a 26% y-o-y fall in its net profit to Rs 230 crore in 4QFY10. “Net profit during the quarter was lower due to fall in prices in the southern region where UltraTech holds 27% market share,” UltraTech executive president (finance) Jagdish Bajaj had told FE. Moreover, the company’s domestic and export realisation was also lower, impacting its profitability during the quarter.
According to industry experts, Andhra Pradesh, Tamil Nadu and Karnataka had been witnessing low demand in recent months. The aggressive inter-regional stock movement has also exerted pressure on prices and profitability of the cement companies during the quarter.
Grasim Industries has said its standalone net profit during Q4 dipped by 24.79%. However, on consolidated basis, its net profit rose 15% y-o-y. The company’s realisations during the quarter were lower by 4% y-o-y due to fall in prices in South India.
However, Holcim group company’s Ambuja Cement posted a net profit growth of 38% y-o-y along with 7.8% growth in net sales in January-March quarter. This was was aided by a 4.4% y-o-y increase in sales volume and 3.3% y-o-y increase in realisations.
“Overall, the cement companies have been reporting strong sales volume on the back of new capacities coming on stream, which has enabled most of the cement manufacturers to increase their total cement production,” said a Mumbai-based analyst.
However, the Swiss cement major’s other group company ACC Ltd posted a muted 2.3% y-o-y growth in standalone top-line during first quarter of 2010. The company faced despatch constraints due to non-availability of railway wagons, impacting its top line. ACC’s bottom-line remained flat on a y-o-y basis at Rs 405 crore. ACC Ltd and Ambuja Cement follow calendar year ending December 31.
Cement capacity addition in India during FY2010 stood at 27 million tonne, taking the total capacity of the sector to around 252mtpa at the end of FY2010. The industry is set to add another 45-50 million tonne by March 2011.