Indian cement companies reported strong sales growth in September as exports surged and demand at home grew owing to the government’s infrastructure projects. The robust numbers, which showed average growth of 14% from a year earlier, caught the market by surprise. Sharad Jain of Cholamandalam Securities said he expected a sales rise of between 6% and 7% (reports the Asian Wall Street journal).
"I think the main reason is good demand from the northern and eastern markets," he said. Major government projects are under way in both regions. Gujarat Ambuja Cements Ltd. said September sales grew 23% from a year earlier to 1.18Mt from 962,000t.
"Although our local sales have been good, there has been a robust jump in our exports. That has contributed to the sales rise," Executive Director Anil Singhvi said. Gujarat Ambuja, India’s largest exporter at 600,000 metric tons a year, is located in western India near a port, which makes it easier to serve local and foreign markets.
India’s cement industry, the world’s second largest after China, has received a healthy boost from exports, mainly to the Middle East. The rebuilding of Iraq is one factor, analysts said, adding that the region as a whole is witnessing a boom in infrastructure development. There is a similar boom at home, fueled by government projects.
September sales at Grasim Industries Ltd., India’s dominant cement maker, grew 13% from a year earlier to 1.16Mt. State-sponsored projects also improved monthly sales numbers at Associated Cement Companies Ltd., where sales rose 6.5% from a year earlier to 1.33Mt.
"Road building and highway projects have been going on in full swing. This apart, the government has also initiated several food-for-work programs in various states. This has improved cement consumption substantially," said ACC’s president for finance, Nash Italia.
ACC, which has a strong market in eastern India, has benefited from the government’s so-called Golden Quadrilateral project, which aims to connect New Delhi, Bombay, Madras and Calcutta through a network of highways.
Local demand for cement is estimated at about 121Mta, while the total capacity is at 148Mta. Grasim Industries, ACC and Gujarat Ambuja account for over 40 per cent of India’s cement production. Traditionally, cement consumption in India tends to be flat in September, with sales picking up again after October. The September numbers have raised optimism.
"Going by the current trends, I think this fiscal year the industry may see good sales," said Mr. Italia of ACC. "All the indicators for the economy look good. And I’m sure industry-related activity and infrastructure projects will boost consumption further."
