Cement September 10

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Cement Industry UpdateSeptember 2010


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Executive Summary

During August 2010, the production and dispatches of cement declined by 2.2% and

2.9% on a m-o-m basis, respectively. This was on account of the slowdown in the

cement offtake owing to the heavy rains.

On a y-o-y basis, both production and despatches registered a marginal increase by

1.7% and 2.3%, respectively.

Slowdown in cement dispatches due to heavy monsoon dragged down cement prices

across all the regions during the month of August 2010.

The overall operating rate of the industry declined to a level of 71% in the month of

August 2010, compared to 80% during the same month last year.


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Overall Scenario

Owing to the slack construction season, the production and dispatches of cement

declined by 2.2% and 2.9% on a m-o-m basis, respectively in August 2010.

On a y-o-y basis, both production and despatches increased marginally by 1.7%

and 2.3%, respectively.

15.83 15.8215.56 15.47

8

12

16

20

24

Production Despatch

mntonnes

Aug-10 Aug-09

Source: Cement Manufacturers Association (CMA)


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ParticularsAug-10 Aug-09 YoY (%) YTD 11 YTD 10 YoY (%)

Capacity (monthly) 3.80 3.14 20.86 18.98 15.42 23.09

Production 2.76 2.58 6.98 15.04 13.68 9.94

Despatches 2.77 2.60 6.54 14.88 13.63 9.17

Consumption 2.05 1.98 3.54 11.08 10.27 7.89

Capacity Utilisation (%) 72.73 82.17 - 79.24 88.72 -Price (`/bag) 225 241 -6.64 - - -

North mn tonnesRegion-wise Scenario

Source: CMA

Note:

In order to analyse the regional scenario, the previous years numbers of ACC and Ambuja have been excluded. For all the regions, the consumption numbers of the previous year are toned down, which are equivalent to the

dispatches of ACC and Ambuja.

Considering YTD numbers, the Northern region has witnessed a steep fall in the operating

rate due to notable capacity addition and also slowdown in cement offtake. During the month of August 2010, cement offtake in the Northern region increased

moderately by 3.5% on a y-o-y basis.


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Particulars Aug-10 Aug-09 YoY (%) YTD 11 YTD 10 YoY (%)


Production 5.13 4.88 5.12 26.18 24.72 5.91

Despatches 5.12 4.80 6.67 26.12 24.50 6.61

Consumption 4.45 4.35 2.30 22.56 21.74 3.77Capacity Utilisation (%) 69.51 77.22 - 70.99 79.64 -

Price (`/bag) 217 273 -20.51 - - -

South mn tonnes

Region-wise Scenario

During this fiscal, the Southern region has added about 4.8 mn tonnes of capacity andregistered double-digit growth of 19%.

As a result, on the YTD basis, the Southern region has witnessed a drop in the operating

rate to a level of 71% compared to 80% in the same period last year.

Source: CMA


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Region-wise ScenarioSouth



Production 1.38 1.51 -8.61 8.52 8.23 3.52

Despatches 1.37 1.53 -10.46 8.51 8.23 3.40

Consumption 2.05 1.94 5.67 11.93 10.81 10.36

Capacity Utilisation (%) 57.74 73.66 - 71.42 80.37 -

Price (`/bag) 237 257 -7.78 - - -

West mn tonnes

Source: CMA

The Western region has witnessed a substantial decline in the utilisation rate on a y-o-y

basis compared to the other regions which can be attributed to the notable growth in

capacity.

In August 2010, the cement offtake in the region grew moderately at 5.7% on y-o-y basis.

However, on a YTD basis it recorded a double digit growth.


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Region-wise ScenarioEast mn tonnes



Production 1.61 1.69 -4.73 8.73 8.72 0.11

Despatches 1.60 1.69 -5.33 8.69 8.68 0.23

Consumption 2.06 1.86 10.75 11.31 10.19 10.94


Price (`/bag) 281 280 0.36 - - -

Source: CMA

The Eastern region has continued its robust performance by posting the highestgrowth in cement consumption on yoy basis, considering both, monthly and YTD

numbers.

As a result, prices in the Eastern region were firm and ruling above the level of Rs.

280 per bag in the month of August 2010.


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Region-wise ScenarioCentral mn tonnes



Production 1.97 1.84 7.07 10.54 10.04 4.98

Despatches 1.95 1.76 10.80 10.35 9.72 6.48

Consumption 2.06 2.10 -1.90 11.05 10.73 2.98


Source: CMA

In the month of August 2010, the Central region continued to operate at the highest

utilisation rate above 90% which can be attributed to the comparatively slow growth

in the capacity addition.

During the month of August 2010, cement consumption in the region has shown

decline both on m-o-m basis and y-o-y basis.


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Overall ScenarioAll India# mn tonnes

Particulars Aug-10 Aug-09 YoY (%) YTD 11 YTD 10 YoY (%)Capacity (monthly) 18.00 15.61 15.28 89.92 77.21 16.46

Production 12.85 12.50 2.80 69.01 65.39 5.54

Despatches 12.81 12.38 3.47 68.55 64.75 5.87

Consumption 12.67 12.23 3.60 67.93 63.74 6.57


Source: CMA

During the month of August 2010, most of the regions registered drop in cement

production being the slack construction season. The utilisation rate of the industry has

declined from 74% in the last month to 71%.

The overall monthly cement consumption has shown a moderate growth of 3.6% on a y-

o-y basis. However, on a m-o-m basis the consumption continued to decline by 4.3% in

the month of August 2010.

# Excluding ACC & Ambuja Cement numbers


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Capacity Utilisation Trend#

50

60

70

8090

100

110

120

Oct Nov Dec Jan Feb* Mar Apr May Jun July Aug

(%

)

Region-wise utilisation rate

North South West East Central Overall

# excluding ACC & Ambuja numbers, *adjusting Penna Cement numbers

Source: CMA


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yUeSemb2 Capacity Utilisation Trend

In the month of August 2010, the industry did not register any capacity addition.

During the month of August 2010, the overall operating rate of the industry has

declined to a level of 71% compared to the 80% during the same month last year. The

drop in the operating rate is mainly attributable to the substantial capacity addition

witnessed by the industry during this fiscal.

Even considering the YTD numbers, the overall utilisation rate of the industry

registered a decline to 77% compared to 85% in the same period last year.


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Price Trend

Source: Centre for Monitoring Indian Economy (CMIE)


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Price Trend Cement prices fall across all regions in the month of August 2010. The slowdown in

cement dispatches owing to heavy monsoon dragged down the cement prices.

Cement prices in the Southern region (Chennai market) witnessed the sharpest fall by

notable `18 per bag and reached a level of `217 per bag. Even in the Hyderabad

market prices dropped by `6 per bag.

The prices in the Eastern region (Kolkata market) also decreased by about `9 per bag to

a level of `281 per bag, though are ruling at the highest levels.

The prices in the Western and Northern region (metro cities) continued to drop by `5

per bag each on a m-o-m basis.


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yUeSemb2 Particulars August 10 August 09 Y-o-Y (%) YTD 11 YTD 10 Y-o-Y (%)

UltraTech*Capacity 4.06 1.83 - 13.90 9.13 -

Production 2.93 1.35 - 10.44 7.05 -

Despatches 2.94 1.32 - 10.45 6.99 -

Dalmia Cements

Capacity 0.75 0.75 0.00 3.75 3.33 12.61

Production 0.38 0.35 8.57 1.82 1.72 5.81

Despatches 0.37 0.35 5.71 1.80 1.71 5.26

India Cements

Capacity 1.17 0.99 18.18 5.85 4.93 18.66

Production 0.86 0.85 1.18 4.56 4.17 9.35

Despatches 0.86 0.84 2.38 4.56 4.14 10.14

Shree Cement

Capacity 0.76 0.76 0.00 3.79 3.79 0.00

Production 0.72 0.71 1.41 3.76 3.85 -2.34

Despatches 0.71 0.69 2.90 3.76 3.82 -1.57

Jaiprakash Associates

Capacity 1.43 0.83 72.29 7.15 4.14 72.71

Production 1.08 0.75 44.00 6.20 4.06 52.71

Despatches 1.02 0.70 45.71 5.90 3.82 54.45

Company-wise Scenario

Source: CMA

mn tonnes

* Numbers are not comparable as Grasim has been merged with UltraTech w..e.f. July 2010


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Capacity Addition The capacity of the industry as on August 30, 2010 was 261 mn tonnes (including

capacity addition of ACC and Ambuja). The industry had not witnessed any capacity

addition in the last four months.

The following table shows the details of the region-wise capacity addition in FY11:

Region Capacity (mn tonnes)

South 4.8

North 4.7

Central 1.3

West 1.0Total 11.8

Source: CMA


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All Rights Reserved. No part of this report may be reproduced or transmitted in any form without prior written permission from CARE.

DISCLAIMER

This report is prepared by CARE Research, a division of Credit Analysis & REsearch Limited [CARE]. CARE Research has taken utmost care to

ensure accuracy and objectivity while developing this report based on information available in public domain. However, neither the accuracy norcompleteness of information contained in this report is guaranteed. CARE Research operates independently of ratings division and this reportdoes not contain any confidential information obtained by ratings division, which they may have obtained in the regular course of operations. Theopinion expressed in this report cannot be compared to the rating assigned to the company within this industry by the ratings division. Theopinion expressed is also not a recommendation to buy, sell or hold an instrument.

CARE Research is not responsible for any errors or omissions in analysis/inferences/views or for results obtained from the use of informationcontained in this report and especially states that CARE (including all divisions) has no financial liability whatsoever to the user of this product.This report is for the information of the intended recipients only and no part of this report may be published or reproduced in any form ormanner without prior written permission of CARE Research.

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List of Industry Research reports by CARE Research:

List of publications on the Cement Sector

Detailed Annual Review of Indian Cement Industry, September 2009

Monthly updates on the Indian Cement Industry available from June 2008 onwards.

Aluminium Industry Crude Oil Industry

Indian Auto Components Industry Indian Natural Gas Industry

Indian Sugar Industry Indian Passenger Vehicle Industry

Indian Cement Industry Indian Man-made Fibre Industry

Indian Banking Sector Indian Two-Wheeler Industry

Indian Pipe Industry

Indian Retail IndustryIndian Coal Industry Indian Construction Industry

Indian Commercial Vehicle Industry Indian Shipping Industry

Indian Express Industry Indian Steel Industry

Indian Tyre Industry Shipbuilding Industry

Indian Gems & Jewellery Industry Indian Pesticide Industry

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