The Hindu Business Line : Cement realisation flat as cos put price on hold

Mumbai, Aug. 5 The compulsion on cement companies to hold the price line amidst the rising input cost was clearly evident from the flat realisation reported by frontline companies in the first quarter of fiscal year 2009 compared with the fourth quarter of fiscal 2008 (sequential basis).

As part of measures to control inflation, the Government wanted cement companies to moderate price rise.

Ambuja Cement’s realisation was up 4.06 per cent at Rs 179 per 50 kg bag, while ACC’s was up 3.61 per cent at Rs 172 a bag. UltraTech and Shree Cement realisations rose 3.03 per cent to Rs 170 a bag and 1.26 per cent to Rs 160 a bag, respectively.

Realisation for the south-based Madras Cements and India Cements were up 3.91 per cent at Rs 186 a bag and 2.91 per cent at Rs 177 a bag.

Mr Ajit Motwani, research analyst, Emkay Global Financial Services, said south-based cement companies far outperformed overall industry as consumption grew 11.5 per cent year-on-year, while prices were up 13 per cent.

There seems to be more headroom for south-based cement companies to increase prices as the demand is expected to remain buoyant. “The economic slowdown would cast its shadow on the real estate and infrastructure project, thus disturbing the cement demand,” said an analyst.

The recent six-week ban on cement exports also had an impact on companies such as UltraTech and Ambuja Cement. UltraTech is the largest exporter of clinker and cement.

Input costs rise

Imported coal prices have jumped from $78 a tonne to $179 a tonne in the last one year. Despite cost pressure, Ambuja Cement managed higher realisation due to 5 per cent growth in sales volume.

Fuel and power costs in Ambuja plants are significantly higher 34 per cent year-on-year, in particular the cost of imported coal, which has tracked global price developments and shows no sign of abatement in the near future.

Profitability will continue to remain under pressure as input cost unlikely to come down in the near future.

Prices may go up marginally post onset of construction season from October onwards. Given the high inflation, the government vigil on cement prices will continue, said Mr Motwani.