Brazilian cement demand falls 20% in May
Brazil’s cement market contracted by 20.3 per cent YoY in May from 4.503Mt to 3.588Mt (excluding imports), according to the latest data published by SNIC, the country’s cement association.
In the southeast, the largest market in the country, sales fell 17.5 per cent to 1.729Mt from 2.095Mt in May 2017. In the northeast sales decreased 23.2 per cent from 940,000t in the equivalent year-ago period to 722,000t in May 2018. A 20 per cent decline was recorded in southern Brazil with sales down to 591,000t from 739,000t in May 2017. In the central-western part of the country the drop was the largest at 25.3 per cent YoY to 378,000t while in the north, Brazil’s smallest market, volumes fell 24.7 per cent YoY to 168,000t.
SNIC has attributed the drop in sales on the road transport strike and subdued economic activity. Previously, the sector was anticipating 1-2 per cent growth for the year, but the strike and its repercussions throughout the supply chain combined with weak economic activity has led to predictions of a market contraction, according to Paulo Camillo Penna, SNIC president.
Exports advanced by 60 per cent from 5000t to 8000t in May 2018.
In the first five months of 2018 domestic sales (excluding imports) declined 4.5 per cent to 20.42Mt from 21.379Mt in 5M17. In the southeast and south sales slipped by some 2.4 per cent to 9.827Mt and 3.429Mt, respectively. In the central-western part of Brazil sales fell 5.1 per cent YoY to 2.057Mt in 5M18. The northeast saw volumes sold decrease by 9.4 per cent to 4.191Mt YoY while the north reported the largest decline at 9.8 per cent to 916,000t.
As the domestic market experienced a downturn, cement producers sought solace elsewhere and exports increased by 5.7 per cent from 35,000t in 5M17 to 37,000t in 5M18.
Source: CEMNET
Kenya’s cement consumption falls to 1.4Mta in 2Q18
Cement demand in Kenya has fallen to 1.4Mta in the second quarter of the year, according to a report from the Kenya National Bureau of Statistics (KNBS). The agency attributes the drop to a continued slowdown in real estate activity.
In the first quarter of 2017 domestic cement consumption reached 1.5Mt but has since decreased. Furthermore, the continuing decline was also reflected in a 15.7 per cent drop in cement imports as well as in an eight per cent fall in clinker imports during the first quarter of the year.
The market contraction has affected several cement producers in the country. Athi River Mining (ARM) dismissed 700 staff last year as it noted a US$65m loss. East African Portland Cement reported a US$15m, the first since 2014, while market leader Bamburi Cement’s profit shrunk by a third to US$20m.
Source: CEMNET
Cement cos’ profits likely to crumble under cost pressure
Despite a robust demand, cement companies’ profits are expected to come under pressure in June quarter due to a sharp rise in input costs especially that of pet coke and diesel.
Led by a sustained pick-up in infrastructure spending and firm rural demand, sales volume of top cement producers such as UltraTech Cement, ACC, Ambuja Cement, Shree Cement, JK Cement, JK Lakshmi Cement, India Cement and Ramco Cement are expected to register an average 20 per cent growth in the June quarter.
Input costs rise
However, the average cement prices during the quarter was down five per cent year-on-year even as cost pressures increased due to high energy prices and depreciating rupee.
The all-India average cement prices declined by ₹3 per 50 kg bag to ₹328 in June, after a ₹4-5 increase in the previous two months.
Petcoke prices have been increasing for the last 15 months and cement companies have managed to pass on the incremental cost partially by hiking cement prices.
However, after a certain level they were not able to increase prices due to excess supply in the market. The sector is bogged down by excess capacity.
Binod Kumar Modi, Senior Research Analyst, Reliance Securities, said further hike in cement prices looks imminent to sail through high cost pressure, as any meaningful reduction in fuel prices seems unlikely in the medium term.
To tide over the rising logistics cost, cement companies have changed commercial terms on freight to FOB (free on board) from ex-factory. Under the new terms, cement dealers are made to share logistic costs and this improved cement companies margins in the last quarter.
Monsoon progress crucial
Going ahead, a normal monsoon is important to sustain demand in rural regions which has seen construction activities reviving in the last couple of months.
While progress of the monsoon was moderately below normal last month, it has recovered and has been widespread across the country which bodes well for cement demand, he said.
Capacity addition
Pritam Deuskar, Fund Manager, Bonanza Portfolio, said the industry is expected to add about 126 million tonne production capacity to take the overall capacity to 600 mt by FY20.
The capacity addition is being largely led by UltraTech Cement, Dalmia Bharat, JK Cement and Ambuja Cement.
With the current capacity utilisation hovering at 72 per cent, the new capacity addition may be delayed by a few months but it will add more pressure on cement companies.
Source: THE HINDU BUSINESSLINE
Dalmia Bharat Cement eyes premiumisation; acquisitions on radar
Dalmia Bharat Cement may soon abandon the mass cement segment as it tries to move up the value chain with premiumisation while weighing options on organic and inorganic growth to enter newer markets of North India. “Premium and super-premium cement brands account for 60 per cent of revenues and in the next two years it would rise to at least 80 per cent. Ideally, we will go 100 per cent,” Dalmia Bharat Senior Executive Director Marketing B K Singh said. He was in city to launch a new premium cement brand ‘Dalmia FBC’.
The company is currently present in East, Northeast and South India. “It has been the objective of this company to emerge as a pan-India player and not limit itself to certain geographies,” Singh said.
With the fate of Binani Cement hanging in the balance, Dalmia Bharat Cement had not ruled out options of acquisition of other cement companies or units for the North India foray.
We had been trying to enter north (India) and attempt for Binani was a step towards that, Singh said.
The company, however, declined to divulge alternate plans for foray into the northern Indian market if its bitter legal battle with UltraTech under the Insolvency and Bankruptcy Code to win over Binani Cement fails.
The company’s consolidated production capacity stands at 26 million tonne per annum (mtpa) but is limited to south, east and the northeast.
If Dalmia Bharat Cement wins over Binani Cement, it can open a readily available market comprising Rajasthan and Gujarat for the company giving it a sizeable presence with its 6.25 mtpa cement plant in Rajasthan. Acquisition has been a key strategy for the company in scaling up its business as well as enter new geographies.
Last year, it acquired only integrated clinker capacity in Bihar Kalyanpur Cements, marking its foray into the state.
As of now, Dalmia Bharat is the only cement company which owns at least one plant in each of the four key eastern states of West Bengal, Bihar, Jharkhand and Odisha.
“We command a 15 per cent market share in the east making it the second largest cement company in this zone while its consolidated market share in South India stands at 11-12 per cent,” Executice Director, sales and marketing (east) Indrajit Chatterjee said.
Its bid to enter the west Indian cement market has also been successful after it acquired the three million tonne stressed assets of Murli Cement which is expected to open up the Maharashtra market for the company.
Both the acquisitions could be ready by the third quarter of this year, the company expects.
Source: PTI
Saudi cement sector expected to record revenue decline in 2Q18
Saudi cement sector expected to record revenue decline in 2Q18
10th july 2018
Saudi Arabia’s cement sector is expected to record a fall in revenue in the 2Q18, according to Al Rajhi Capital. The companies monitored by Al Rajhi are expected to announce a revenue decline of around six per cent YoY for the period, while earnings could decrease by approximately 10 per cent.
The sector’s sales volume fell 16.7 per cent in the first two months of the second quarter. Across the country, 15 companies have recorded a decline in sales volume, led by Riyadh Cement (-44.1 per cent) and Cement City (-37.5 per cent). However, both Tabuk Cement (+82.4 per cent) and Hail Cement (+28.7 per cent) recorded an increase, according to Trade Arabia.
Source: CEMNET