The monsoon in North India, which started unusually early this year, was bad news for cement producers in the region. Their despatches dropped and pressured already low prices in the region.

Shree Cement recorded despatches of 3.17 million tonnes (mt) for the quarter, six per cent lower than the same period last year. Ambuja Cements recorded a drop of close to three per cent in despatches, at 5.38 mt. JK Lakshmi Cements, which operates in North and West India, saw despatches drop 14 per cent.

Realisation, on an average, dropped 5-6 per cent following supply excesses in the market. As cost of production was higher due to the increase in cost of domestically sourced coal as well as limestone, flyash and packaging products, profits took a hit.

Shree Cement saw its cement division record a 72 per cent drop in profits. JK Lakshmi Cements recorded a 69 per cent drop and Ambuja Cements recorded a 30 per cent decline in net profit during the quarter.

The scorecard of cement producers from the south was not much better, going by their profit figures. But, surprisingly they reported better despatch growth.

India Cements reported despatches of 26.49 lakh tonnes in the June quarter, up 11 per cent against three per cent growth recorded in the same period last year.

Ramco Cements, the erstwhile Madras Cements, reported a close to three per cent increase in despatches to 22.1 lakh tonnes despite a high base. Some of that volume growth has come from expansion into newer markets.

For India Cements, it is also thanks to venturing into tier II/III pockets of North and West India. Ramco Cements, too, has increased its focus on eastern India.

A market report says that the eastern region contributed 19 per cent of sales for the company in the past quarter, up from 15 per cent in the March 2013 quarter.

However, despite cement prices being significantly lower than last year, sales growth for most players was muted.

In the June quarter, average prices in Hyderabad were at Rs 248/50-kg bag, down 10 per cent from last year. In Chennai, prices were at Rs 313/50-kg bag, down three per cent. India Cements saw its net realisation in the quarter drop by 10 per cent. Ramco Cements managed with a lower drop in realisation (estimated to be around three per cent) on a 10 per cent exposure to the Andhra Pradesh market.

Profit margins of the two players here shrank by around seven to eight percentage points on higher power and fuel costs.

Net profits were significantly lower: India Cements and Ramco Cements posted a 70 per cent and a 40 per cent decline in profits, respectively.

All eyes are on infrastructural activities in Andhra Pradesh and any pick-up in rural demand after the good monsoons.

These are expected to help cement demand and prices in the region.

> rajalakshmi.sivam@thehindu.co.in

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