Cement sales 10% down in Nov; may be dented in Dec too: Ladiwala

Sanjay Ladiwala, Chairman, Cement Stockists & Dealers Association of Bombay said the trade segment where sales happen in cash transaction have been impacted adversely due to demonetisation but it would be difficult to put a number to that.

The cement sales in the month of November were down around 10 percent and would be low in December as well by a similar percent in case current cash withdrawal limits don’t change, said Ladiwala.

Real estate sector will witness pain due to demnonetisation for a longer time than other sectors, said Ladiwala adding that correction in land prices too are expected. However, infrastructure segment is unlikely to be expected, he said.

For the cement sector, he said although the sales may not grow at the rate of 5-5.5 percent as envisaged earlier, they will definitely be higher than last year. However, the demand will be lower till the end of next year, he added.

Below is the verbatim transcript of Sanjay Ladiwala’s interview to Latha Venkatesh and Anuj Singhal on CNBC-TV18.

Anuj: Have things changed over the last one month, is there genuine slowdown or do you think it is too much noise?

A: There is a slight effect, no doubt, especially in the segment, which is the trade segment where it is mainly cash sell. So in that there is a slowdown. However I cannot give you numbers because it is too early to collate figures and we don’t know how deep the impact is but there surely is an impact especially in the smaller trade segment.

Latha: You cannot give us numbers for the entire sector but — we spoke to Bajaj and they said that one week they saw 25 percent fall in sales. If you can give us even unit wise, how much do you think November will result, will end up in terms of a loss and sell?

A: It is a guess at the best. There is a contraction and I would say about 10 percent would be affected because majority of cement especially in infrastructure and in projects even including builders is all sold by cash through banks so it is only the cash segment which has got affected. I would say about 10 percent.

Latha: If the withdrawal limits stay till December 31, will December also be a 10 percent lower?

A: Maybe little more than that. Yes, but there will be because at the moment, there is some cash in circulation. More is moving towards banking and through cheques but we are not seeing a sort of impact there.

Anuj: Does this have a move on pricing as well or does that get affected? The normal scenario would expect, if demand comes down, pricing comes down.

A: Yes, but it is a little too small and too soon to say that but yes, if this lasts, we should see some correction in prices.

Latha: If you can wear your hat as a veteran of this industry for the past several decades, what is the second round impact? Real estate has been used to transactions in cash and maybe even in non-tax paid money, in black money, now as it comes to terms with a new reality, the cash is gone. It has to deal with white, so over the next 2017, how much of a slowdown do you expect in demand for cement?

A: Real estate is going to be hit badly and we should see prices coming out very substantially because sales will be very difficult to say the least especially in 2017. Infrastructure won’t be affected. What I am afraid of is the individual housing segment in the rural sector, which might be affected because if demonetisation is going to affect the crop season, the sowing season, the whole economy in the rural segment depends on agriculture and if that is going to have an adverse effect on agriculture then we will see demand in the rural sector coming up, which is huge.

Latha: Why should it? They have already allowed seeds to be purchased from government stores with old notes but agriculture income is not taxed. So even if a farmer brought a sack of notes and say this is my agricultural income over the last several years — what is the ground reality you are getting from the rural outposts of cement dealers?

A: There has to be basically an income to be tax free. So I am just saying, if the income is affected because of restrictions in sowing and all that then — I am saying it is an if — only it will be affected otherwise it is healthy.

Anuj: Count question is this will have an impact on land prices especially in the rural areas, they will come down quite significantly so housing might take off that has been the counter argument that I have heard. Your thoughts on that?

A: Not so much in the rural sector. The inflation in land prices is in the cities. Once the bottom is reached, certainly a correction is expected and sales should pick up but during that time there will be quite a lot of pain and we won’t see any demand forthcoming from those sectors.

Latha: Piyush Goyal was talking about a big fiscal boost especially for housing. Would you say therefore that this pain will last only as long as cash withdrawal, fiscal stimulus can be a counter?

A: In the real estate segment, it will be longer than that but in the other sectors, yes. So it is a more short-term pain in the other sectors and the other sectors are growing healthy. So I don’t think cement will be — it will be corrected now, the demand will be affected no doubt but the pickup will be much sooner.

Latha: So if you have to guess for the second half, how much may it be lower?

A: We were expecting cement in this year to grow by about 5-5.5 percent, those figures will have to be revised. They will be slightly above the last year’s figures but following that, there won’t be any pick up at least till the end of next year i.e. November, December.