INDIA: We expects all-India cement consumption growth at 7.5% in FY12E: ICICIdirect

ICICIdirect while commenting on Cement sector report, ``With expectations of 10% YoY (12% MoM) growth in March 2012, we expect all-India cement consumption growth at 7.5% in FY12E against 4.4% in FY11 and 10.2% in FY10. Cement dispatches have grown 7% during April 2011-February 2012 mainly led by 15% YoY growth during the November-December-January period. The cement demand picked up during the period mainly on account of a low base and increase in off take from construction activities post monsoon.``

However, demand has been subdued during April-October 2011 and grew by just 3.5% YoY as the consumption from the housing and infrastructure segments remained sluggish on account of key issues like rising cost of capital, land acquisition & clearances and unavailability of key raw materials like coal for the manufacturing industry.

The capacity utilization rate is expected to get restored to 77% in FY12E from 87% in FY10. This was on account of 19 MT addition in effective capacity as against incremental demand of 14 MT during the period.

It expect demand growth of 10% YoY in FY13E and utilisation rate to remain at 77% as the incremental capacity of 26 MT would likely to negate the impact of incremental demand of 22 MT.

However, it is expected to start improving from FY14E onwards as incremental demand is likely to keep pace with additions in effective capacities. We expect the utilization rate to be at 80% in FY14E (incremental demand of 27 MT as against incremental capacity of 21 MT).