Key Sector Data   Market Cap (Rs Crore) 219809 Market Cap (USD million) 33342 P/E        31.6 P/BV          3.5 Debt/Equity          0.5 ROA (%)          6.9 ROE (%)        11.2 EV/Sales          2.8 EV/EBITDA        15.2

CEMENT
Period	Sales % Chg YoY	Operating Profit	PBIDT % Chg YoY	Adjusted PAT % Chg YoY	OPM (%)	PBIDT Margin (%)	PBT Margin (%)	PAT Margin (%)
201406	12.2	7.4	9.5	12.4	17.2	19.4	11.7	8.5
201409	15.4	46.4	43.1	114.0	14.9	17.9	8.9	7.1
201412	10.3	11.6	8.6	12.3	13.5	14.5	5.5	5.9
201503	1.7	11.8	8.7	-6.8	17.9	19.8	10.9	8.6
201506	0.3	-9.7	-13.3	-26.4	15.5	16.8	8.2	6.3
2011-12	28.4	34.7	36.5	45.1	20.1	22.1	10.9	10.1
2012-13	12.4	9.2	10.7	16.3	19.6	21.8	13.8	10.4
2013-14	-0.1	-24.4	-21.9	-31.8	14.8	17.0	8.4	7.1
2014-15	-1.0	2.2	3.1	7.3	15.3	17.7	9.7	7.7

The Indian cement sector posted a dismal performance in the first quarter (Q1) of the fiscal ending March 2016 (FY2016) due to poor demand and subdued pricing environment, particularly in the north.

Cement demand was mostly hurt because of delays in government spending on infrastructure and slowdown in rural economy. Further, unseasonal rains in many pockets affected winter crops and, hence, rural cement demand.

Domestic cement production, as reported by the Office of Economic Advisor, the Ministry of Commerce and Industry, grew a mere 0.9% to 71.25 million tonnes (mt) in the June 2015 quarter as against 9.6% growth in Q1 of FY 2015.

The all-India average cement prices decreased 3% in Q1 of FY2016 over Q4 of FY 2015, led by the western region (down 8%), followed by the northern (down 3%) and central regions (down 2%). However, prices remained flattish in the east region but increased 2% in the southern region over the March 2015 quarter. Prices in the north declined 18%, central region 10% and west 6% in the June 2015 quarter over a year ago. Prices were significantly higher by 32% in the south due to pricing discipline by the producers in the region.

Net profit of 35 major cement companies decreased 25% to Rs 1396 crore, with net sales growth a marginal 2% to Rs 21856 crore over Q1 of FY 2015. The operating profit margins (OPM) squeezed 150 basis points (bps) to 15.7% due to increase in rail freight, royalty-linked provisions, and wage board revision, which were partially offset by declining pet coke prices and lower gypsum and packaging costs. Further, the rise in interest cost and depreciation but a drop in taxation dragged down profit after tax (Pat) 25% to Rs 1396 crore in the quarter.

Pat of north Indian cement players (22 listed entities, accounting for 79% of the aggregate profit) declined 25% to Rs 1396 crore despite 2% incline in net sales to Rs 21856 crore. South Indian players (13 listed entities accounting for 21% of the aggregate profit) posted Pat of Rs 295 crore compared with Pat of Rs 10 crore in the corresponding previous quarter on net sales gaining 7% to Rs 3333 crore.

The strict price discipline resulted in the OPM of south Indian players expanding to 21.8% from 13.4%, while north Indian players' OPM trimmed 330 bps to 14.6% over the year. Profit before interest and depreciation and tax of south-based players surged 73% to Rs 740 crore while that of northbased players declined 20% to Rs 3036 crore.

Among the top Indian companies, revenues of India's biggest cement maker Ultratech rose 7% to Rs 6432.15 crore due to both sales volume and realization improvement.

The combined domestic cement and clinker sales improved 4.8% to 13 mt, while realizations advanced 1.5% to Rs 4901 per tonne. The OPM escalated 80 bps to 18.7%. But the drop in other income along with increase in interest and depreciation pulled down Pat 6% to Rs 591.13 crore.

Pat of India's second largest cement maker ACC declined 45% to Rs 133.46 crore on net income falling 1% to Rs 3015.29 crore due to challenging market conditions and subdued demand. The combined domestic cement sales slipped 2.4% to 6.20 mt but realizations rose a marginal 0.8% to Rs 4776 per tonne. The OPM trimmed by 370 bps to 11.1%. Thus, operating profit (OP) was down 26% to Rs 335.16 crore.

The strong cement realisations and all round cost reduction initiatives aided south based Ramco Cements to post 167% surge in Pat to Rs 94.67 crore despite 1% drop in revenues to Rs 952.78 crore. The OPM expanded 850 bps to 26.5%.

Cement firms hike price again in Sept

Cement manufacturers have hiked prices yet again by Rs 20-30 per bag of 50 kg in Northern region in September 2015, while the prices have been flat to negative in other regions. South & Western regions have seen a marginal decline in prices during the period while it has been flattish in Central and East regions.

The average cement price in North region stood at ~Rs 291/bag in September 2015, while it stood at ~Rs 286/bag in Central region, ~Rs 293/bag in west region, and ~Rs 370/bag in south region.

The near term recoveries in cement demand remain cautious because of weakness in rural economy (which consists of ~40% of the total country's demand). The slowdown in rural areas is primarily on account of unseasonal rains in North+Central regions and subdued MSPs (Minimum Support Prices) of crops. Other factors which are playing a key role in sluggish demand are oversupply in urban real estate market, labour shortage and onset of South-West monsoon.

The Indian Cement Industry has an installed capacity of ~360 million tonnes and the domestic consumption in the calendar year 2014 was ~264 million tonnes. Cement and cementitious materials are critical for meeting society's needs of housing and basic infrastructure such as bridge, roads, water treatment facilities, school, hospitals, airports, ports, factories and many other facilities.

The operating environment for the cement industry was no different from that of the macro economy. For the cement industry, 2014 was year of consolidation. Most companies continued to struggle with weak demand, excess capacity and falling prices. Cement consumption grew at the rate of ~6% in the calendar year 2014.

The overall cement demand is estimated to grow at the rate of 6% in CY 2015 with the beginning of an economic turnaround. The consumption growth expected to go beyond 6% if investment is made in the infrastructure segment. With the gradual reduction in fiscal deficits and Consumer Price Index, it is expected that the interest rates would gradually come down which would stimulate demand in the housing sector.

Groundwork to expedite the growth prospects of all end-use segments of cement-housing, infrastructure, commercial-are being worked upon by the Central Government. All these along with the policy push for good governance augur well for the future of the cement industry.

The future for the cement industry looks positive with the new government's focus on development of infrastructure and housing. Moreover, a rise in GDP from these initiatives would provide an additional impetus for the cement industry, given the strong correlation between GDP growth and India's per capita cement consumption, which still ranks below the world average.

Cement WPI ups

The Cement & Lime Wholesale Price Index (WPI), with a weight of 1.39 in the WPI, increased 1.2% to 168.3 in July 2015 over a year but down by 2.2% over June 2015. The Cement & Lime WPI grew 4.5% in April-July 2015 compared with over a year ago period. The average Cement & Lime WPI rose 1.6% in FY 2015 compared with FY 2014.

Meanwhile, the Grey Cement WPI, with a weight of 1.26 in the WPI, gained 1% to 167.5 in July 2015 over the year but lower by 2.8% over the month. The Grey Cement WPI grew 4.9% in April-July 2015 compared with over a year ago period. The average Grey Cement WPI rose 1.7% FY 2015 compared with FY 2014.

Output ups in July

All-India cement production (proxy for demand), as reported by the Office of Economic Advisor, Ministry of Commerce and Industry, rose 1.3% to 229.95 lakh tonnes in July 2015 over a year, but down by 2.4% over June 2015

Cement Production Month FY16 FY15 FY14 Apr 23420 23984 22353 May 24261 23654 21822 Jun 23567 22963 20244 Jul 22995 22697 19478 Aug   20576 18656 Sep   21704 21028 Oct   20385 20598 Nov   20920 18789 Dec   23151 22305 Jan   23809 23700 Feb   22556 21945 Mar   23838 24797 Apr-Jul 94243 93298 83897 Apr-Mar   270237 255715 Numbers in Th. tonnes

Cement production gained 1% to 942.43 lakh tonnes in April-July 2015 compared with over a year ago period. Cement production increased 5.7% to 2703.17 lakh tonnes in the fiscal ended March 2015 (FY 2015) from FY 2014.