Lafarge Holcim sees revival in India Cement Demand

Lafarge Holcim sees revival in India Cement Demand
06/01/2017 , by , in ALLIED

Ambuja Cements Ltd., a unit of LafargeHolcim Ltd., says it will take until June for demand to rebound after being dented by Prime Minister Narendra Modi’s surprise cash ban.

Industry-wide output in November rose 0.5 percent from year earlier, the slowest increase in a year, government data show. Production in the January-October period climbed about 7 percent. Demand will remain under pressure for two quarters, Managing Director and Chief Executive Officer Ajay Kapur said.

The recall of high-value currency notes rattled the cement industry where as much as 60 percent of the business is done in cash, Kapur said. In a bid to push sales, the unit of the world’s largest cement producer encouraged its 42,000 distributors and contractors to open business accounts with banks, and bought more than 5,000 point-of-sales machines for its retail outlets. Ambuja is now relying on the government’s push on digital payments and low-cost homes, alongside the recent cut in interest rates, to help restore demand, he said.

“The industry will see improvements in the near future as the government has taken steps to improve market condition,” Kapur said. Construction activity, especially in rural and semi-urban areas, are facing challenges due to heavy reliance on cash, he said.

“Cement demand is expected to drop 0.5 percent in the financial year 2016-17 against our earlier estimate for a 5.5 percent growth,” Emkay Global Financial Services analyst Sanjeev Kumar Singh wrote in a report dated Dec. 28. Brokerage Nirmal Bang Equities Pvt. expects demand to decline 1.3 percent in the year through March.

“We expect demand disruption to push down cement demand recovery by at least a year and hence capacity utilization will be lower for a longer period than what was expected earlier,” Mangesh Bhadang, an analyst at Nirmal Bang, said in a report last month.

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