>CEMENT SECTOR (JAYPEE CAPITAL)

Demand in Q1FY’11
Despite moderate demand, cement sector has managed to record 8.5% y/y growth in Apr‐May’2010 to 36mt. Cement Industry has seen slowdown in demand due to lower off take in government’s infrastructure projects and lackluster demand from housing projects on account of heat wave across India.

Pricing scenario
Realizations in the first half of the quarter were ruling high by Rs.5‐15/bag across India on account of transportation woes. However, from second half of the quarter, cement prices started to correct due to slowdown in demand and stabilization of newly commissioned capacities. Southern region has again seen highest fall in cement prices by Rs.25‐35/bag. Prices in other regions have also come down by Rs.7‐15/bag.

We are expecting cement prices to come down further in coming quarter due to onset of monsoon and supply glut.

Capacity utilization at 82%...
Capacity utilization of the sector remained at 82% in Apr‐May’10. Capacity utilization remained high in Central region at 102%. Southern region has seen lowest capacity utilization of 73% due to oversupply and lower volume growth.

Our Cement Universe….
Our cement universe comprises of ACC, India Cements and UltraTech Cement, is expected to record volume growth of (2%)‐8%. Top‐line of the companies are likely to register de‐growth of 1‐7% y/y mainly on account of lower realizations and muted volume growth. EBIDTA margin is likely to come down in the range of 8‐17% y/y due to lower realizations and increasing input costs.

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