Improving prices and demand of cement in the southern states will lead to better profits for cement makers based in the region this year, said Rakesh Singh, president of Indian Cements Ltd.
The Chennai-based cement maker expects demand to rise 8-10 percent for southern companies compared to no growth or a decline in the last five years, he told BloombergQuint in an interview.
A potential recovery in Tamil Nadu, which was hindered by a sand mining ban and water-related issue, could aid the rebound, he said. Andhra Pradesh and Telangana’s irrigation initiatives, too, could lead to incremental demand in the region, Singh said.
The incremental demand would lead to better utilisation levels for the company, which stood at 60 percent in the last financial year compared with 55 percent earlier, Singh said. Plants in Andhra Pradesh and Telangana are expected to have better utilisation than the ones in Tamil Nadu, he said. The company has four plants across both the states.
The company reported a capacity utilisation of 70 percent in the quarter ended March, beating the industry’s 68 percent.
Singh said pricing growth was imperative for profits. India Cements, which has a 65 percent exposure to the south, expects prices, and hence the profits, in the current financial year to be better than the previous one amid higher cost pressures.
Here are the key highlights from the interaction:
- India Cements expects around 37 percent growth from states like Telangana and Andhra Pradesh in the last quarter.
- Tamil Nadu contributed the least due to sand mining issues and lack of water.
- Tamil Nadu clocked around 4 percent growth but those issues are behind.
- If demand revives in Tamil Nadu, south-based cement companies could see a 10 percent or more growth.
- Irrigation projects in Andhra Pradesh and Telengana, affordable housing, upcoming elections aiding growth.
- Demand primarily coming from Tamil Nadu and Kerala has been a dampener due to lack of governance, water and sand.
- As issues get resolved, a low base will lead to better growth.
- Expects to make more profits on better pricing and rising demand going ahead.
Watch the full conversation here: