Cement sales were bogged down by the marked slowdown in infrastructure and realty projects, and the timely onset of the South-West monsoon.
The development has happened despite most cement companies cutting their output to match the slowing demand.
The three major cement producers — ACC, Ambuja Cements and UltraTech Cement — with pan-India presence have reported a fall in sales in June over the previous month. However, ACC's production and sales are higher compared to last year as the company had added substantial capacity in the December quarter of last fiscal.
The output and sales of Ambuja Cement and UltraTech Cement were almost flat when compared year-on-year.
The industry is expected to added 50 million tonnes in the next two years, taking the cumulative production capacity to 340 million tonnes by FY13. With the new capacity addition, the industry capacity utilisation may remain range bound at the current level of 75-80 per cent, said an analyst.
“With the capacity growth outstripping demand in the southern region, prices would continue to be under pressure. The cement industry would experience lower capacity utilisation levels. Inflation would also affect the costs of various inputs of production and distribution, thereby affecting realisation,” said Madras Cements in its annual report.
PRICE CUTS
A bout of price cuts announced by the cement companies in June had failed to stem the falling demand. Cement companies had cut prices by Rs 10-15 a 50-kg bags in two instalments.
“Cement prices have fallen sharply in Andhra Pradesh, Tamil Nadu and Karnataka. The increase in petrol and diesel prices has more than made up for the recent marginal fall in coal prices,” the analyst added.
Launch of new real estate projects were delayed due to increase in loan rates for the buyers and builders.
Typically, a housing project requires 40 to 45 bags of cement for developing 100 sq.ft.
Many infrastructure projects were also delayed due to labour shortage and high cost of funds.
Though many greenfield projects in various sectors were announced, there have been problem in implementation the project as availability of land and obtaining Government approval for utilising the land for industrial purposes have been issues, said a cement company official. In fact, most of the new cement capacity additions have been through brownfield expansion, he added.
Shares of cement companies were mixed on the BSE on Monday.
ACC and Ambuja Cements lost 0.06 per cent and 0.27 per cent at Rs 954 and Rs 129.55, respectively, while Madras Cements fell 1.40 per cent to Rs 80.75. Shree Cement gained 1.39 per cent to Rs 1,744.95 and UltraTech Cement was up 1.16 per cent to Rs 945.15.