Cement demand growth mirrors the country’s GDP growth. However, in the first half of the current financial year, demand grew at 3.1 per cent. Due to relatively weaker demand in the first quarter, the sector is expected to see demand grow at five per cent in FY12, against the estimated seven per cent. Analysts expect demand to remain sluggish till FY13.
Analysts claim the pick-up in demand in recent months, has also helped companies undertake price increases. Average retail prices of cement increased about three per cent month-on-month to Rs 289 per bag, and by almost 17 per cent year-on-year, according to Crisil Research. “Cement demand will continue to gain traction during the remainder of 2011-12. However, in light of the steep rise in prices over the past nine months, the tempo of price increase is likely to slow. We expect prices to stay at current levels in December,” explains Ajay D’Souza, head, Crisil Research.
Given that realisations are up, Deutsche Bank expects large-cap cement companies to report a 14-60 per cent jump in Q3 FY12 interims. The bank’s research team believes Shree Cement is likely to report a 253 per cent jump in earnings, as it not only benefits from the strong demand in northern India but also from the recent fall in petroelum coke prices and higher power sales volumes
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