The cement industry has reported lower than expected numbers in the December 2009 quarter.
Companies with significant exposure to South India have taken a hit on their bottom line as their realisations dipped because of decline in demand in the Southern markets. However, players with exposure in the North witnessed good growth in top line and bottom line.
Companies like UltraTech, Madras Cement, India Cement, Dalmia Cement faced steep decline in realisations on decline in demand due to floods and political uncertainty in Andhra Pradesh. UltraTech Cement?s net profit during the quarter ended December 31, 2009, slipped 17.65% y-o-y. Southern India accounts for about 30% of the company?s sales.
Similarly India Cements’ Q3FY10 performance was also significantly lower than expectations. While top line grew 14.8% y-o-y, the bottom line plunged 69.2% y-o-y on lower realisations and surging freight charges. Likewise, Madras cement’s net profit during the third quarter also dipped 74.5% y-o-y. Dalmia Cements net profit dipped by about 5% y-o-y to 22.60 crore.
According to Fitch, with demand growth expected to increase by 10-12%, and huge capacity additions between FY09-FY11, the overcapacity scenario is expected to get worse from here on and put utilisation levels under pressure.
South India, which has already started feeling the heat of oversupply, will add the maximum capacity of 17.6 million tonne in the next 15 months.
Players with exposure in the North like Shree cement, Binani and JK Lakshmi witnessed a good growth in top line and bottom line due to rising demands for cement in North.
?Although demand conditions are expected to be strong, and prices to stabilise at slightly higher than current levels, cement manufacturers might face relatively higher pressures on cash flow through 2010,? a Fitch report said.