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Industries Shrugging Off Demonetisation Pangs: CARE

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The performance of 3,292 companies in Q1 FY19 over the last year (Q1 FY18) reveals an improvement, with net sales registering a double-digit growth during the quarter over Q1 FY18 performance. Also, after declining by 10.8 per cent y-o-y in Q1 FY18, net profits witnessed a double-digit growth of about 12.9 per cent year-on-year (y-o-y) in Q1 FY19. Net profit margin witnessed marginal contraction of about 30 basis points y-o-y during the quarter, says CARE Ratings in a recent report.

In Q1 FY19, after excluding the banks and finance companies which are guided by exogenous factors, the performance of industry (2,749 companies) depicts almost similar trend as that of the aggregate sample in terms of sales. However, in terms of profits, the aggregate performance of companies witnessed a sharp improvement and increased by 38 per cent y-o-y vis-a-vis a decline of 13.6 per cent registered in Q1 FY18, says the report, Corporate Performance for Q1-FY19, anchored by Madan Sabnavis, Chief Economist, CARE Ratings.

For the aggregate sample, net profit margin remained positive. While excluding banks and finance companies, the net profit margins improved by about 130 basis points in Q1 FY19. It has also been observed that some industries in the Indian economy have been picking momentum leaving behind the demonetisation and GST implementation impact that did impact industry performance between Q3 FY17 and Q2 FY18.

Small firms facing net loss
While the overall aggregate picture of the industry has improved post-GST (Goods and Services Tax) implementation, the smaller companies, i.e., companies below Rs 100 crore sales continue to be on the back foot. This size range with maximum number of companies has continued to register net loss in Q1 FY19. Also, of the total 1,857 companies with net sales below Rs 100 crore, 813 companies (about 45 per cent companies) have posted a y-o-y decline in net sales during Q1 FY19.

Of the 50 industries considered, majority of industries have witnessed positive growth in sales during Q1 FY19 except for nine industries. Out of these, with positive sales growth, 20 industries registered y-o-y higher growth vis-a-vis Q1 FY18. Some of the leading industries were auto – tractors, auto – trucks/LCVs, auto ancillary, metals – steel and iron products, aluminium and ferrous, private banks, housing finance, finance – NBFCs, refinery and oil exploration, fertilizers, industrial gases and fuels, etc.

In all, nine industries witnessed negative y-o-y growth in net sales of Q1 FY19 with significant declines. However, some industries such as glass, paints, textiles, plastics, ceramics, etc. are highly unorganised and therefore the performance will not necessarily be reflected in the analysis mentioned below. In order to gauge the performance of various industries, we have considered the index of industrial production (IIP) growth in Q1 FY19 for the comparable industries, CARE Ratings said. The following are the CARE Ratings’ comments on cement and related industries in the report:

Cement
Industry net sales witnessed a subdued growth during the Q1 FY19. However, as per the IIP, cement production increased by over 14 per cent during Q1 FY19. This growth in IIP could majorly be on account of inventory restocking by players. Rural markets have shown some traction in cement demand.
Central and Western market realisations have improved, eastern markets remained steady. Northern and Southern market continues to be volatile.
Going forward, increase in demand from retail housing (PMAY) and infrastructure is expected to improve realisation for the industry.

Steel & iron
The industry’s performance registered growth which was however lower than Q1 FY18 on sales front on a y-o-y basis backed. The growth in revenues was backed by strong underlying demand and rising international prices, domestic steel prices too went up during the quarter.
Manufacture of basic metals under IIP witnessed a growth of about 3.8 per cent during Q1 FY19.
The prices of HR coils, CR coils and TMT bars grew by 27-40 per cent on a y-o-y basis
Affordable housing is expected to provide big boost to the TMT steel sector. Also, there is a lot of consolidation taking place in the industry, which will benefit the players going forward.

Construction
Industry has witnessed only a marginal growth of 1.7 per cent in Q1 FY19 over a growth of 7.9 per cent in Q1 FY18 due to subdued construction activities in organised real estate during the quarter

Paints
Sales increased only marginally during the quarter on back of slower recovery in demand vis-a-vis last year season.
The quarter witnessed upward movement in crude along with lot of volatility in forex and depreciation in the rupee resulting in high inflation.
However, profits have registered a double-digit growth of about 24 per cent in Q1 FY19 vis-a-vis a decline of about 16 per cent in Q1 FY18.

Ceramics/marble/granite/sanitary ware
The industry witnessed slower off-take from user industry along with issues related to GST implementation (tax rate on tiles under GST increased to 28 per cent vis-a-vis 12-14.5 per cent rates earlier, this rate was revised to 18 per cent later)

The industry continues to anticipate a rise in demand for tiles, backed by the rising rural incomes. Lifestyle decisions in the rural segment is likely to have a positive affect the demand for floor tiles and sanitary ware. The only concern is the declining margins, which comes as a result of frequent revisions in GST rates on Ceramic products.

Some interesting takeaways
Growth in sales for the sample companies excluding banks and finance though marginally lower than that in FY18 comes as a surprise considering that Q1-FY18 was a period when GDP growth slowed down sharply. On a low growth base one would have expected growth to have been higher.
There was a sharp increase in growth in net profit. However, this came over a negative growth rate in FY18. When compared with Q1-FY17, growth is less sharp.
The same picture emerges for net profit margin, where the increase in Q1-FY19 over FY18 from 5.8 per cent to 7.1 per cent is still lower than 7.7 per cent in FY17.
The interest cover improved during this quarter which can be broadly attributed to higher profits growth.
Size wise analysis reveals that the larger companies with sales of over Rs 500 crore dominated the overall performance. However, the smaller ones with sales of less than Rs 100 crore each did not do well in terms of sales and profit.
Industry wise performance was quite diverse with no fixed pattern being discernible.

Y-o-Y decline in net sales in Q1 FY19
Sugar
Consumer durables – electronics
Electronics – components
Telecom equipment
Cement
Ceramics/marble/granite/sanitary -ware
Telecommunications – service providers
Mining and minerals
Diamond and jewellery

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Concrete

Cement industry to gain from new infrastructure spending

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As per a news report, Karan Adani, ACC Chair, has said that he expects the cement industry to benefit from the an anticipated US$2.2tn in new public infrastructure spending between 2025 and 2030. In a statement he said that ACC has crossed the 100Mt/yr cement capacity milestone in April 2025, propelling the company to get closer to its ambitious 140Mt/yr target by the 2028 financial year. The company’s capacity corresponds to 15 per cent of an all-India installed capacity of 686Mt/yr.

Image source:https://cementplantsupplier.com/cement-manufacturing/emerging-trends-in-cement-manufacturing-technology/

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Image source:https://img-s-msn-com.akamaized.net/tenant/amp/entityid/AA1zOrih.img?w=2000&h=1362&m=4&q=79

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GoldCrest Cement to build plant in India

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GoldCrest Cement will build a greenfield integrated plant with a 3.5Mt/yr clinker capacity and 4.5Mt/yr cement capacity. GoldCrest Cement appointed Humboldt Wedag India as engineering, procurement and construction contractor in March 2025 and targets completion by March 2027. It has signed a 40-year supply agreement with Gujarat Mineral Development Corporation for 150Mt of limestone from its upcoming Lakhpat Punrajpur mine in Gujarat.

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