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Fundamental Research Disappointing performance by top 3 cement
Trading Products
makers
Mutual Fund

Cement Products

After posting a robust volume growth in October 2010, the top three domestic cement play
ACC, Ambuja Cements and UltraTech Cement registered disappointing volumes for Novemb
2010.

After posting a robust volume growth in October 2010, the top three domestic cement players
Ambuja Cements and UltraTech Cement (including Samruddhi Cement) registered disappointing
volumes for November 2010. On a cumulative basis the volume of these three leading domestic cement
players declined by 5.2% on a year-on-year (Y-o-Y) basis to 5.8 million metric tonne (MMT). On a
sequential basis the cumulative dispatches have declined even more sharply by 17.9% on account of
the high base effect. The poor performance of these players is on account of a slow down in the
construction activity due to non availability of river sand particularly in the state of Maharashtra and
Gujarat. Further due to the transporters’ strike, Ambuja Cements’ two plants located at Himachal
Pradesh had to remain shut, thereby restricting the company’s dispatches during the month.

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Post festive lumpiness se
01-Dec-2010
Automobile volumes for
November 2010 remained
upbeat on a year-on-year
basis with an average
growth of 17

ACC’s dispatches for November 2010 increased by 4.8% to 1.7MMT compared to that in November
2009. After posting de-growth in the past few months the company has successfully posted positive
volume growth for the second consecutive month (October and November 2010). Further the
company has posted a better performance than that of Ambuja Cements and UltraTech Cement
(including Samruddhi cement). The production for the month increased by 4.8% year on year (YoY) to
1.8MMT. However on a sequential basis the dispatches have declined by 9.4% due to the high base
effect. During the month the company operated at 81.2% capacity utilisation ratio as against 90% a
year ago. The drop in the utilisation ratio is on account of capacity addition. On a year till date (YTD)
basis (January 2010–November 2010), the company’s volume declined by 1.2% to 19.2MMT. As per
the ongoing capacity addition plan, the overall capacity by the end of CY2010 is likely to reach
30.6MMT. Going ahead we expect the volume of the company to improve due to stabilisation of its
new capacity.

UltraTech Cement (including Samruddhi cement) delivered a poor performance during the month
and for the first time (during the period of April - November 2010) the company has posted de
in its monthly volume. The dispatches stood at 2.7MMT which declined by 9.2% on a Y-o-Y basis. On a
sequential basis the dispatches have declined even more sharply by 22.2%. The performance of the
company during the month was poor compared to other large players like ACC and Ambuja Cements.
The utilisation ratio dropped to 66% as against 83% a year ago. The drop in the utilisation ratio is on
account of capacity addition. The combined capacity as on November 2010 stood at 48.75 million
tonne per anum (MTPA).

Ambuja Cements’ dispatches for the month declined by 8.4% on a Y-o-Y basis to 1.4 MMT and by
18.9% on a sequential basis. The de-growth in the dispatches is mainly on account of two of its plants
in Himachal Pradesh getting shut due to transporters’ strike. Moreover, non availability of river sand in
Maharashtra and increasing price gap between large players and small players also restricted the
dispatches of the company during the month. On an YTD basis (January 2010 –November 2010), the
company has registered a volume growth of 7%, which is below the management’s outlook of 9% for
FY2011. The capacity for the month has increased to 25MTPA as compared to 18.5MTPA in the
previous year.

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