As per data from Central Statistical Organisation, the production of asbestos cement sheets grew by 13% to 2.16 lakh tonnes in April 2010. But the production recorded y-o-y fall of 1.0%, 0.6%, 22.1%, 14.3% and 21.4% in May, June, July, August and September 2010. After such y-o-y fall for five months in succession, the industry resumed marginal 0.8% growth in October 2010.

As per industry sources, the good South West monsoons impacted the sales in the quarter ended September 2010. But, contrary their expectations, the growth momentum are not upto the mark in the current fiscal sofar. As a result, though the prices of inputs including cement have hardened, the players are not able to adequately pass on the rise in costs through hike in asbestos cement sheet prices. This is set to worsen the margins of the players, in the midst of accelerating costs, sluggish demand and moderate increase in selling prices.

As the monsoon season had come to an end in the country, the demand for cement products was expected to shoot up as the construction and infrastructure activity abates. Typically the last quarter ending March and the first quarter ending June, in a fiscal year witness good demand. Accordingly, players were expecting rebound in demand after the end of South West Monsoons (which runs through September 2010). Contrary to the expectations, the demand growth has been sluggish in October and November 2010, leading to crash in margins of the players amidst rise in cost of inputs like cement etc.

Visaka industries and other cement product manufacturers had marginally increased prices for cement products like asbestos cement corrugated sheets during the months of October and November 2010, but these hikes were very moderate and not sufficient enough to take care of the incremental cost build up since April 2010. The players are reconciled not to significantly hike prices in December 2010 too, considering intense competition on the one hand, and sluggish demand on the other.

All cement product producers have embarked related diversification to other building products, besides unrelated presence in textiles by Ramco Industries and Visaka Industries. There is some cushion in such diversification, as the margins in those business improve with better off take / improving business prospects.

The core asbestos cement sheet sector's margins have fallen in the current quarter ending December 2010, contrary to the industry's earlier expectations. Now, the players look forward to improvement in demand from the quarter ending March 2011 through the quarter ending June 2011, before the South West Monsoons 2011 sets in.