Lower demand, fresh supplies from newly commissioned plants and the resultant drag in prices besides the monsoon all acted as dampeners to the September quarter results of cement companies.
At 3.4% despatches grew at the slowest pace in several quarters. Sales growth slowed and profits dropped sharply in the July to September period.
Construction activities came to a standstill in monsoon prone pockets, disrupting offtake. It may be recalled that last year, cement manufacturers saw unusually high despatches in the same period due to scanty rainfall.
Prices too weren't supportive to the manufacturers in this season. Lower demand and the newly commissioned capacities resulted in all India average prices declining by close to INR 15 to INR 20 for 50 kg bag compared with a year ago. In the Southern region though there was a price increase by manufacturers in the later half of the September month, it didn't help.
All major players Ambuja Cements, ACC, UltraTech Cement, Shree Cement and Madras Cement saw their net profits fall by over 50% in the September quarter on a YoY basis. Higher coal, fly ash and transportation costs too hurt profits.
Lower realisation and poor offtake impacted sales growth. ACC saw sales drop by 17% even as the southern cement major Madras Cement saw a decline of 21%.
While demand was lower than a year ago, players such as Ambuja Cements and Jaiprakash Associates bucked this trend and managed good volume growth on early commissioning of their new capacities ahead of the others thus capturing a higher share of the market.
However, Shree Cement, which too had recently added a total of 3.6 million tonne per annum capacity (clinker units in Uttarakhand and Rajasthan) couldn't manage higher volumes.
Even as few players managed limited volume growth, the steep price correction spoiled the overall growth picture. Prices in the South fell sharply by INR 40 to INR 45 a bag compared to a year earlier.
In Northern pockets, price was down by around INR 15 to INR 20 a bag
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