INDIA: Cement sales slip in August as realty, infra sectors stumble

Cement sales remained lacklustre in August as hopes of revival in demand from the realty and infrastructure sectors with the monsoon entering its end stage were belied. Left with little scope to pass on the increase in raw material cost to end users, companies had to tighten their production to match the fall in demand.

“The recent hike in the lending rate by most banks had forced many realtors to postpone new projects. On the other hand, home buyers have also turned cautious as there is an uncertainty in the rate hike cycle with inflation well above the RBI's comfort level,” said an analyst.

The consistent fall in cement demand in the last six months was well reflected in the GDP numbers — in the first quarter of this fiscal, the construction sector grew just 1.2 per cent against 7.7 per cent in the same period last year. Cement demand is closely linked to GDP performance.

“Given the high interest rate regime and the slowdown in the global economy, the GDP growth rate might not pick up anytime soon. Corporate investments have also slowed while the fiscal deficit situation is not inspiring any confidence,” said Mr Amar Ambani, Head of Research, IIFL.

RURAL MARKETS

A bountiful monsoon has turned all attention to the rural market for cement companies. The agriculture sector, the mainstay of the rural economy, has been one of the star performers in the overall GDP growth in the first quarter.

Though the rising input costs and the supply glut are major concerns, much of the trouble can be sorted out if the rural demand picks up. But the slowdown in infrastructure spending by the Government remains a cause of concern, said a cement company official.

Cost of power and fuel, a major input for cement, is set to increase by about 18 per cent this fiscal, given the soaring coal prices, said a Crisil Research report. In addition, an increase in effective excise duty rates will lower cement manufacturers' net price realisations by 2-4 per cent.

The magnitude of the demand-supply imbalance and cost escalation will halve the cement industry profit margins to about 10 per cent by FY13 — the lowest level in the past 10 years, said Mr Prasad Koparkar, Head, Industry Research, Crisil Research.

AFRICA: NIGERIA: Dangote Cement’s Nigeria Ibese to Start This Month

Dangote Cement Plc, Africa’s biggest producer of the building material, will start production at its Ibese plant in southwestern Nigeria this month, Chief Executive Officer Devakumar Edwin said.

The company will add an additional production line at its Obajana plant in central Nigeria in the fourth quarter, Edwin said on a conference call from Lagos today.

“By the end of the first quarter of next year, both plants will be operating at 90 percent of capacity,” Edwin said. Obajana will have the capacity to produce an additional 5 million metric tons of cement, or twice its current capacity of 5 million tons, while Ibese has a capacity for 6 million tons, he said.

Dangote Cement is the biggest company by market value on the Nigerian Stock Exchange with a capitalization of 1.61 trillion naira ($10.4 billion). The company expects its total annual production capacity to rise to 50 million tons in the next five years, it said on April 13.

The stock was unchanged at 104 naira by the 2:30 p.m. close in Lagos.

INDIA: Binani Cement: Larger than life

Cement major Binani Cement is looking to expand its horizon, literally. The company has come out with a new television commercial (TVC) to highlight its grand plans and a larger than life image. Starting with the first cement plant in Sirohi, Rajasthan, in 1997, the company, under the Braj Binani Group, has expanded into foreign territories like China, Mauritius, Dubai, Sudan and Africa, and wants an image makeover to portray itself as a global brand. That is precisely what the new TVC tries to achieve.

Continuing with long-term brand ambassador Amitabh Bachchan, the ad emphasises the ‘expanding horizons’ part using mountain peaks, vast oceans and the city skyline as a backdrop. Bachchan’s poetic reflections and a ballad by Kailash Kher complete the ad. “The idea behind the TVC was to establish Binani Cement’s steadily expanding presence across the world without limiting the growth as related to any specific country. The topographies (snowy peaks, ocean and cityscape) have been used to create the feeling of expansion across geographies. The narrative and jingle has established how Binani Cement is bringing the world closer together and set for greater heights,” says Bina Verma, MD of Media Magix, the advertising agency.“Given the competitor landscape, when most cement brands are talking only about strength and other product attributes, Binani Cement chose to create a niche for itself by positioning itself as a brand with global ambitions,” adds Kalpana Binani, spokesperson, Braj Binani Group.

Bachchan has been associated with the brand since 2004. The earlier campaigns highlighted different aspects of the brand, from ‘good housing’ to ‘cultural bonding’. The tag-line “sadiyon ke liye” stands for the quality, durability, strength and resilience of the product.

The Rs 1,06,375 crore (FY 2011) cement market in India is dominated by players such as Ultra Tech, Ambuja Cement, ACC, Jai Prakash Associates, India Cements among a host of national and local brands. So product differentiation through branding is important even for a commodity like cement.

Directed by James Ashburn from Australia, the 45-second TVC does just that. The snow-capped mountains symbolise the brand’s mission to achieve new heights while the next frame highlights the brand’s aspiration to go across the oceans and encompass the globe. “Bachchan’s charismatic aura resembles the brand. It also reflects the quality and enduring spirit of the brand,” says Binani.

The year-long campaign will try to reach out the target audience of 25 plus through radio and TV ads as well as outdoor campaigns. “In the long run, we would like to be reckoned as a brand with true global qualities. On the domestic front, we would like to expand our presence across various markets. The new TVC is in line with our business aspirations,” signs off Binani.

SRI LANKA: Pakistani cement cleared without authorisation

COLOMBO: 

Sri Lanka’s Trade Minister Johnston Fernando has said that the cement stock imported from Pakistan that aroused controversy was released by the Sri Lanka Standards Institution (SLSI) without consulting the Consumer Affairs Authority, Customs Department and distributing agents.

Fernando criticised SLSI for not consulting the authorities concerned before approving the distribution of the cement stock, according to Colombo Page, an online newspaper of Sri Lanka.

He said that the imported cement stock was not released at the request of any party.

Fernando said that the matter had been raised with Science and Technology Minister Pavithra Wanniarachchi because SLSI came under her purview.

He said that local cement companies were creating cement shortages to create an artificial price hike.

CHINA: Cement Makers Lead Losers On Chinese Indices

The Shanghai Composite Index dropped 0.33 percent or 8.22 points to close at 2,470.52 points today on transaction value of 50.14 billion yuan.

The Shenzhen Component Index was down 1.61 percent or 176.47 points to close at 10,778.43 points today on transaction value of 45.63 billion yuan.

Both bourses opened lower as a result of the slump in European markets. The Shenzhen bourse hit a new one-year low, while the Shanghai index is approach the 2,437 points level it reached last month.

The average August CPI growth estimate of 22 chief economists from 22 foreign and domestic financial institutions was 6.1 percent.

CICC maintained its 2011 GDP estimate of 9.2 percent. It lowered its 2012 growth estimate by 0.3 percentage point to 8.4 percent.

Led by Chongqing Brewery (600132, 66.73, -5.508%), Jiugui Liquor (000799, 22.28, -4.827%) and Beijing Yanjing Brewery (000729, 15.67, -3.569%), brewers and spirits makers fell today. 

Cement makers, the biggest losers yesterday, continued their bearish performances. The top losers from this sector today were Anhui Conch Cement (600585, 18.69, -5.223%), Tangshan Jidong Cement (000401, 15.85, -4.518%) and Huaxin Cement (600801, 19.65, -4.146%).

Some of the automobile-related companies fell today. Jiangsu Pacific Precision Forging (300258, 31.44, -9.991%), Hubei Aviation Precision Machinery Technology (002013, 20.25, -6.811%) and Harbin Dongan Auto Engine (600178, 8.66, -5.767%) recorded losses.

Financials posted a mixed performance today as some borkerages posted gains, while others companies fell. Anxin Trust and Investment (600816, 21.19, +1.436%), Sinolink Securities (600109, 21.19, +1.436%) and Shaanxi International Trust (000563, 12.26, +0.905%) outperformed.

Industrial and Commercial Bank of China (601398, 4.07, -0.245%), Bank of China (601988, 2.92, -0.341%) and Bank of Communication (601328, 4.64, -0.429%) traded lower.

Gold companies posted gains. Shandong Gold Mining (600547, 47.89, +0.991%), Zhongjin Gold (600489, 27.53, +0.916%) and Zijin Mining Group (601899, 5.34, +2.692%) rose.

A brokerage estimates that 16.7 billion yuan worth of state-owned assets will be injected into listed companies, with the pace of restructuring to pick up in late 2011. This led to the outperformance of some Shanghai-based companies, such as Shanghai Cimic Tile (002162, 9.79, +10.00%), Shanghai Tianchen (600620, 4.96, +5.53%) and Shanghai Lansheng Corporation (600826, 12.3, +3.97%).