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ACC, Grasim set cement growth trend

NetScribes/Neeta Kolhatkar

Positive third-quarter results posted by ACC and Grasim have made analysts bullish on the cement sector's prospects for the final quarter of the current financial. Higher prices and increased demand are seen helping cement companies sustain the growth trend set in the current quarter.

For the third quarter ended December 31, 2000, ACC has announced a net profit of Rs 146 million, compared to a loss of Rs 198 million in Q3 2000 and net sales of Rs 7.48 billion as against Rs 6.64 billion during Q3 2000. Grasim has reported a 78 per cent rise in net profit to Rs 905.40 million and a 12 per cent rise in net sales to Rs 11.89 billion.

"This is a positive trend and the results herald a good Q4 performance. The fourth quarter will be a real bonanza, and the cement companies stand to do well in the coming months," said an analyst at HSBC Securities.

Higher realisations and a drop in cost of production have helped the two cement leaders. Grasim's cement realisations increased 10 per cent to Rs 2,275 per tonne in Q3 2001 over the previous corresponding period. For ACC, gross cement realisation for a 50-kg bag increased by Rs 11.20 over Q3 2000. ACC's overall cost of production per tonne of cement for the nine months ended December 31, 2000 was 4.3 per cent lower than that in the same period last year. This was achieved despite the inflationary impact on input prices.

In Q3 2001, cement manufacturers had consistently raised cement prices, even as production was strategically slowed down. While this made builders go on a strike in protest, analysts expect little impact from this move. "The strike will not have much of an impact on cement stocks as cement is a relatively price inelastic commodity," said Ramnath S, analyst at Taib Securities.

On Thursday, ACC touched an intra-day high of Rs 176.10 on the Bombay Stock Exchange, and closed at Rs 173.55 compared to its previous close of Rs 174.75. Grasim touched a high of Rs 345, to close at Rs 325.25 against Wednesday's close of Rs 336.90.

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