Cement manufacturers are facing problems on all fronts it seems. There has been lower demand on the one end and oversupply on the other. The companies are expected to face a torrid time this fiscal as there is already a capacity of 100 million metric tonnes, and with capacity additions continuing, the industry surplus is expected to rise till 2013.
Madras Cements, a mid-level cement firm in India, is in a tight spot too as it derives 90% of its sales from the southern region because prices are continually under pressure and the surplus capacity situation is set to continue.
"With the capacity growth outstripping demand in the southern region, prices would continue to be under pressure, The cement industry would continue to experience lower capacity utilisation levels. Inflation would also affect the costs of various inputs of production and distribution, thereby affecting realisation,"Madras Cements has said in its recent annual report.
However, the expected rise to continue until 2013 is an optimistic assumption that has been made by presuming a demand expansion that at least equals the anticipated growth in the country's gross domestic product of around 8%. However, as the demand growth has halved to 5% compared with the past three years, concerns are building up within the industry that the worst is yet to come. The Madras Cements stock has been under pressure throughout the past year, losing 23% this year, and hit a 52-week low at INR 80 last month.
The scrip for the company closed at INR 80.75 (down 1.40%) with the intra day high and low being INR 82.40 and INR 80.75. The total traded quantity for the day stood at 15,000 shares.