The Hindu Business Line : Cement cos’ price realisation growth slows down in Q1

Mumbai, July 30 The growth in price realisation for cement companies has slowed down in the quarter ended June 2007 compared to the fourth quarter ended March 2007 (on sequential basis).

This probably reflects that the companies have little scope to further hike prices.

Analysts, however, see a strong demand after the monsoon was likely to bring about a marginal hike in prices.

Net price realisation of ACC has gone up marginally by 3.03 per cent to Rs 3,498 per tonne in the quarter ended June 30, 2007, against Rs 3,395 per tonne.

Similarly, Ambuja Cements’ rose 1.39 per cent on sequential basis to Rs 3,305 per tonne (Rs 3,304) in the quarter under review, while UltraTech price realisation increased 5 per cent to Rs 3,054 per tonne (Rs 2,908).

Shree Cements reported a 1.85 per cent rise in realisation at Rs 3,020 per tonne for the June quarter.

However, year-on-year, ACC’s price realisation was up by 10.8 per cent, Ambuja Cement – 11.96 per cent, UltraTech – 15.15 per cent and Shree Cement – 13 per cent.

“We believe that the cement companies have no significant headroom to increase prices from the current levels. About 75-80 million tonnes per annum of capacity scheduled for commissioning over the next three years would result in excess supplies, which in turn would result in price moderation, going forward,” said Mr Hitesh Agarwal, senior research analyst, Angel Stock Broking.

Though the cement companies have reported a flat realisation in the quarter, prices remained stable at the high levels. The average cement price in Mumbai is Rs 250 per 50 kg bag, Delhi – Rs 219 and Hyderabad – Rs 215.

The difference between the cement company’s price realisation and the retail price covers incidental cost such as loading and unloading, transportation, storage, levies and dealer margins.

“Demand has been good, but the margins are not so lucrative. Labour cost has gone up in last few years and so has transport expenses. In Mumbai, prices are on the higher side partially due to Octroi,” said Mr Neeraj Prasad, a cement dealer.