Some of the biggest cement companies in India expect demand to grow at about 6-8 percent during the current financial year (2016-17). The companies have based their expectations on the basis of growth in infrastructure projects backed by the central government, Mint reports.
Companies such as UltraTech Cement, Ambuja Cement and LafargeHolcim-controlled ACC Ltd, recently reported their Q4 earnings. The companies clocked a growth of around 3 percent in the previous fiscal year.
"A significant component of infrastructure demand is driving growth. Pay commission disbursements would happened (and that) will also trigger housing growth. Roads, hydel projects, metro projects, and low income housing projects in the infrastructure segment are doing good," Atul Daga, chief financial officer, Ultratech Cement was quoted as saying by the publication.
Daga estimates the cement demand to grow at 7-8 percent in the FY2017.
On the other hand, Harish Badami, CEO and MD of ACC Ltd during the company's annual general meeting, said the demand growth is expected to reach 6 percent in this calendar year. His estimation was based on advancement in the infrastructure sector, housing and sanitation, Mint added.
Voicing similar opinion, NS Sekhsaria, chairman for Ambuja Cement Ltd in a letter to the shareholders in the company's annual report said "it is not unreasonable to forsee cement demand enjoying a compounded growth rate of 6-7 percent over the next five years."
A season trend?
Not everyone believes the demand to be an upward trend. An analyst quoted by the financial daily goes on to explain that the first quarter and the last quarter of a financial year are considered good quarters for the cement sector due to an increase in construction work before the onset of the monsoons.
"Expecting demand growth over 6% would be aggressive. The demand uptick seen in the January-march period is more seasonal and not a trend yet," Amey Joshi, associate director (corporate) at India Ratings and Research told Mint.
Quarterly results, share price
UltraTech Cement, India's biggest cement company, reported higher capacity utilisation of 84 percent for the fourth quarter ended March 2016. Consolidated net profit rose 10 percent to Rs. 722.56 crore, while net sales increased 5 percent to Rs. 6,850.45 crore.
Ultratech Cement Ltd shares were trading at Rs. 3,174 apiece, at around 10.45 a.m. on Monday, up 0.37 percent on the BSE.
On the other hand, Ambuja Cements posted a net decline to Rs. 304 crore for the March 2016 quarter. The stock was down 0.23 percent to Rs. 220.
Shares of ACC Ltd were trading at Rs. 1,422 apiece, down 1.42 percent.
