The Hindu Business Line : Q1 cement despatches rise

Mumbai, July 21 Despite cement despatches of frontline companies improving in the first quarter of 2008-09, steep rise in input cost is expected to exert pressure on the bottomlines.

Except for ACC and UltraTech Cement, all the other major cement companies have reported an increase in despatches in the first quarter, with Shree Cement topping the table.

UltraTech despatches have dipped 5 per cent to 4.25 million tonnes (mt), while ACC fell by one per cent to 5.30 mt.

Shree Cement despatches jumped 27 per cent to 1.78 mt, Madras Cement 15 per cent to 1.57 mt, India Cements 7 per cent to 2.45 mt, while Ambuja Cement and Grasim Industries saw their despatches improve by 3 per cent each to 4.50 mt and 4.11 mt, respectively.

June tab

Interestingly, the despatches have improved across companies in June, which is considered a dull period due to the onset of monsoon.

ACC despatches in June rose 5.29 per cent to 1.79 mt, the Aditya Birla Group 5.18 per cent at 2.58 mt, Shree Cement 27.67 per cent to 6.09 lakh tonnes (lt) and Dalmia Cement 5 per cent to 2.95 lt.

“Though small and medium cement companies have reported a good growth in dispatches compared to the top four due to the lower base effect, it is true that they are fast catching up and expanding capacities rapidly,” said an analyst.

Cement consumption in the quarter under review has grown 8 per cent year-on-year, while prices rose 6.9 per cent to Rs 242 per 50 kg bag against Rs 237 in the same period last year.

Prices were up Rs 3 per bag compared to prices in the March 2008 quarter.

Input cost pressure

The rising coal prices and freight cost are expected to dent EBIDTA (earnings before interest, depreciation taxes and amortisation) margins.

The sharpest decline is expected from Madras Cement and Ambuja Cement as they depend heavily on imported coal. International coal prices have almost doubled in the last one year.

Mr Ajit Motwani, Research Analyst, Emkay Global Financial Services Ltd, said the industry is expected to add about 70 mt of new capacity over the next two years which will snatch the pricing power from cement producers.

‘High cost push pressures and the inability to pass it on to consumers will severely impact margins of cement companies. Overall, we expect cement companies to report a 6 per cent decline in their EBIDTA,’ he said.

Related Stories:
Cement output down in May
Cement realisations hit in Jan-March quarter
Spiralling coal prices may push up cement cost further

More Stories on : Cement | Cement

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