This week has seen the start of what is likely to become a string of positive financial results from the Indian cement industry. UltraTech Cement, Shree Cement and Hyderabad Industries have already seen massive improvements in their profits for the final quarter of 2011, up in one case by over 100 per cent compared to 2010.

On the face of it such results do not chime with a recent report by Fitch Ratings, which predicts a 'negative outlook' for the Indian cement industry in 2012. Fitch's report says that based on expected growth of 2-5 per cent, overcapacity and an increase in interest rates will prey on margins in 2012, making any mini-boom short-lived. The impressive profits may well evaporate come the end of March.

India's capacity utilisation rate dropped to just 65 per cent in the last quarter of 2011. This is not a statistic indicative of a booming cement industry and, coupled to reports of increased profits from the sector, indicates that higher prices are being used to maintain margins.

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