Cement sales in India for the quarter gone by are estimated to have grown at 11-12 per cent mostly due to increased construction activities and higher government spending, but the gains spread unevenly among manufacturers with some leading players reporting single-digit growth. For multiple makers, cement volume growth took a hit due to floods, failed pricing strategies and, in some cases, a lack of working capital.
Miren Lodha, Director - Research, Crisil Market Intelligence and Analytics estimates a robust on-year demand growth of 11–12 per cent growth for the September-23 ended quarter (Q2FY24).
“With demand firing on all cylinders, primarily due to increased construction activities amidst drier monsoon season and higher government spending ahead of Lok Sabha elections,” he said. Amongst the large cement makers, those who managed to outperform industry growth numbers in the quarter include UltraTech Cement, JK Lakshmi and Heidelberg Cement, registering a growth higher than 12 per cent.
Of the top producers, ACC-Ambuja Cements and Dalmia Cement saw growth restricted to single-digit at 2 per cent and 6.6 per cent respectively. In a call with analysts regarding the Q2FY24 earnings, ACC-Ambuja Cements senior management attributed the weak growth to floods in certain north Indian markets.
“We did not have a very good July month a large part of our capacity north in Himachal, was seriously flooded. It had some supply chain impact in the month of July. I think we also had very heavy monsoons in central India,” senior executives said, adding these are two very big markets for ACC and Ambuja combined.
Lodha from Crisil explained, “The eastern region was adversely impacted by heavy downpours in September, which led to single-digit growth for the region during the quarter. Also, chunky price hikes were taken in the region, which further limited volume growth.”
Dalmia Cement, a dominant player in the East Indian market attributed its lower growth volumes to the lingering impact of a failed strategy tried in the June-23 ended quarter.
“We took certain pricing decisions in the East which we think did not work out as we had planned. We have already made corrections and I think we are going to start seeing results of that from Q4 onward,” said Puneet Dalmia, managing director and Chief Executive Officer of Dalmia Cement in a post-earnings call with analysts. For others such as India Cements, volume growth took a hit owing to working capital concerns. The company recorded a 5 per cent rise in its sales in the quarter compared to a year ago. The company’s senior management informed analysts that growth would have been higher if they had better working capital.
