Cement prices rise despite duty cut

Supply constraints, transportation problems.

Outlook
The all-India cement price is likely to reach Rs 245-248 by the month-end.
Further hikes have been ruled out as the demand is decelerating compared to January-February period.

Cement prices have gone up by about Rs 10 a 50-kg bag in March owing to an increase in demand and transportation constraints. However, dealers expect demand to plateau at the current level, indicating that there will not be any further price increase for some time in major markets. The Centre cut excise duty by four percentage points to eight per cent in February.

Prices were hiked by Rs 3-5 a bag in the first week of March and again by Rs 5 a bag between March 16 and 20, said a city-based dealer. Together with the hike in March, cement prices in the last 6-8 weeks have gone up by Rs 12-15 a bag.

On an average, the all-India cement price, which touched Rs 239 a bag in last week of February, may reach Rs 245-248 by the month-end.

Though there was a marginal uptake in demand across regions, supply constraints and transportation problems have paved the way for the rise in prices.

Demand decelerating
In western regions including Mumbai, prices were increased twice by Rs 5 each in March to Rs 256-260 a bag. However, further hikes have been ruled out as the demand is decelerating compared to January-February period.

“Government-sponsored projects contributed for the major cement demand which is not stable. Many real estate companies have announced new projects, but we do not see any further rise in prices,” said a dealer.

Many projects, which were put on hold due to high cement prices, are being revived in the eastern region. In fact, in north-eastern region prices ruled firm at Rs 285 a bag after it was revised twice in March due to shortage in supply on the back of increase in demand.

Mr Vinod Juneja, Managing Director, Binani Cement, said, “Many railway wagons which were used for transporting cement have been diverted for food grain procurement. Of late, the problem has eased a bit.” Binani Cement had recently entered the Eastern markets.

Power cuts in South
Except for Bangalore, prices remained strong in the southern region including Tamil Nadu and Andhra Pradesh. Power cuts (one day a week) in Andhra Pradesh and Tamil Nadu has led to disruption in production schedules, said Mr Ajit Motwani, Research Analyst, Emkay Global Financial Services.

In the northern region, prices have gone up by Rs 5-15 a bag to Rs 235-Rs 240 in last two months with the pick up in demand from infrastructure projects such as Delhi Airport, Delhi Metro, besides preparation for the Commonwealth Games.

Prices are expected to remain stable at the current level despite softening of demand in the North (excluding Delhi and adjoining regions) and few parts of western region. It may go up marginally in the eastern and central region on the back of strong demand, said a dealer.

Mainline cement company shares showed a mixed trend on the BSE on Wednesday. While ACC and India Cement were up 2 per cent and 6.85 per cent at Rs 562 and Rs 103, Ultratech Cement and Grasim Industries closed almost flat at Rs 513 and Rs 1,552. Shree Cement and Ambuja Cement lost 4 per cent and 0.36 per cent to Rs 611 and Rs 70. (The Hindu – Mumbai)

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Shree Cement expects Rs 3,000 crore turnover in 2009-10

Shree Cement is expecting to touch a turnover of Rs 3,000 crore by the next fiscal for which it had commissioned a new clinker manufacturing unit in Rajahsthan. The company commissioned a new clinker unit with a capacity of one million tonne per annum.

"This will help to touch a turnover of Rs 3000 crore in 2009-10," Shree Cement Managing Director said in a statement.

Shree Cement had also lined up an investment plan of Rs 1000 crore for expanding its cement and power plant capacity in Rajashthan. (Business Standard – Mumbai)

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Jaiprakash’s Profit Margins May Be Little Changed

Jaiprakash Associates Ltd.’s profit margin may be little changed this year, Chairman Manoj Gaur said, as electricity and construction costs increase at India’s biggest dam builder.

Margins on profit before interest, tax, depreciation and amortization will “at least match last year’s,” Gaur said yesterday in an interview at his office in Noida, near New Delhi. Sales for the year ending March 31 may climb 34 percent as public works spending revives local cement demand, he said.

The full-year margin is estimated at 25.3 percent, compared with 27.5 percent the previous year, Systematix Shares & Stocks (India) Ltd. analysts Binod Modi and Basanth Patil said in a client note last month. They have a “buy” rating on the stock.

India’s electricity costs are rising as demand exceeds supply, prompting companies such as Jaiprakash to build their own generation plants to feed cement factories. NTPC Ltd., India’s biggest utility, increased its average tariff by 12.5 percent in the quarter ended Sept. 2008 from a year earlier, according to its Web site.

Jaiprakash rose 8.9 percent to 85.50 rupees at the close of trading today in Mumbai. The stock has fallen 63 percent in the past year, compared with a 40 percent drop in the key Sensitive Index of the Bombay Stock Exchange.

Roads, Ports
Jaiprakash gets about half of its revenue from building dams and highways and 43 percent from producing cement. Prime Minister Manmohan Singh’s administration, which has approved 700 billion rupees ($14 billion) of infrastructure projects since August, is focusing on building roads, ports and irrigation and electricity networks to spur a slowing economy.

“Given the expansion in the cement industry, the construction of expressways and the completion of hydropower projects, growth is likely to continue,” Gaur said. “The reduction in gross domestic growth has been overstated. The fourth-quarter numbers will surprise most of the analysts predicting doomsday in January,” he said, referring to profits of Indian companies for the quarter ending March 31.

India’s economic growth will slow to 7.1 percent this year, the government has estimated, as the global recession cuts demand. Industrial production in the country fell for the third time in four months in January.

Utility Dividends
Jaiprakash will benefit from dividend payments by its two utilities, Gaur said. Jaiprakash Hydro Power Ltd. operates a 300 megawatt hydropower plant in northern Himachal Pradesh state, while Jaiprakash Power Ventures Ltd. runs a 400 megawatt hydropower plant in the northern province of Uttarakhand.

The company has the capacity to produce 14 million tons of cement a year, Gaur said. It will add 6 million tons of capacity in the year starting April 1, with new factories located in the central state of Madhya Pradesh, the western state of Gujarat and northern state of Himachal Pradesh, he said.

Jaiprakash will have power generating plants totaling 300 megawatts to feed its cement factories in the next two years, Gaur said.

Unit Jaypee Ganga Infrastructure Corp. is surveying the location for a 1,047-kilometer (651-mile) highway connecting Greater Noida with Ghazipur-Ballia in the eastern part of Uttar Pradesh state. The alignment work is underway, Gaur said, without giving specific funding details.

Jaiprakash will seek shareholder approval this week to absorb units Jaypee Hotels Ltd., Jaypee Cement Ltd., Jaiprakash Enterprises Ltd. and Gujarat Anjan Cement Ltd., Gaur said. This will result in an additional 200 million shares, or 14 percent of equity, that will be held in a trust, he said.

“The shares can be used by the company,” Gaur said. “Whenever the market is good, that is a holding available for the company’s growth.”

On March 16, Jaiprakash repurchased and extinguished $32 million worth of overseas convertible bonds, Gaur said. The company in September 2007 had raised $400 million through sale of bonds convertible into shares that mature in September 2012.

The company bought back some of the convertible bonds at almost 50 percent discount, Gaur said. “We thought it prudent because that much amount of the liability is reduced.” (Bloomberg)

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PPC says cement sales fall in 5 months to Feb

* Infrastructure projects to boost sales beyond 2010
* PPC says has cash to explore acquisitions


Africa's biggest cement maker, PPC (PPCJ.J), said on Tuesday regional industry cement sales fell 9.7 percent in the five months to February due to a slump in the residential housing market.

Despite the drop in sales between October 2008 and February 2009, PPC said in a presentation on its website that cement demand from infrastructure projects would boost sales beyond 2010.

South Africa has set aside 787 billion rand ($83.23 billion) to build the 2010 Soccer World Cup stadia and power generation plants, including state utility Eskom's ESCJ.UL new Medupi power station.

PPC, whose full name is Pretoria Portland Cement, said it had the financial strength to explore acquisition opportunities, but gave no further details.

PPC reported 2.3 billion rand in operating profit for the year to end-September. (Reuters – Johannesburg)

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Cement company exports 12,500 tonnes to Africa

The Cam Pha Cement Joint Stock Company, under the Vietnam Construction and Import-Export Corporation (Vinaconex), on March 25, exported 12,500 tonnes of cement to Mozambique, Africa for the first time.

This was thanks to its efforts to seek export markets right after a series of factories officially went into operation. A contract for the first shipment to Mozambique was signed on January 6.

Along with finalizing procedures for exporting the first shipment, the company focused on stepping up production to fulfill the contract.

The brand name of Cam Pha cement has become popular not only in the domestic market but also in foreign markets such as Europe, the Middle East, Africa and South America.

The Cam Pha Cement JSC which has an investment capital of over VND6,000 billion and a capacity of 2.3 million tonnes of PCB 40 cement per year is considered the largest in Vietnam. (VOV News)

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