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Lower volume coupled with higher operational cost may take a toll on cement companies' financial performance in the June quarter this fiscal.
Despite higher sales and output, Holcim-owned ACC may also face pressure on its bottom-line due to sharp increase in raw material cost. ACC had commissioned an additional capacity of 12,500 tonnes a day at Wadi in Andhra Pradesh and 7,500 tonnes a day at Chanda in Maharashtra.
Though cost of gypsum, limestone and fly ash — key raw materials — have gone up; the increase was more pronounced in the 34-per cent jump in prices of imported coal. The recent mark-up in diesel prices has also adversely impacted the financial of cement companies, which were already reeling from a supply glut.
Mr Ravindra Deshpande, Research Analyst, Elara Capital, said the sluggish cement demand in the June quarter can be attributed to lower spending by the Government on infrastructure projects and seasonal weakening due to the onset of monsoon.
“We expect most cement players to report a decline in profits in the June quarter due to increase in cost, lower volume and negative impact of operating leverage. Decline in profitability is expected to be much higher for players having presence in Gujarat due to significant decline in cement prices,” he said.
An acute shortage of brick supply in Gujarat has pushed up prices by 50-75 per cent resulting in slowdown of construction activities, said a cement dealer.
The southern region also witnessed significant decline in cement sales. The fall in consumption was felt more in Andhra Pradesh, on account of political instability and little progress in construction and infrastructure activity.
Cement prices all over India were down Rs 15-25 for a 50-kg bag in the June quarter.
The eastern and northern regions faced relatively higher pressure on the price. However, the average cement price is estimated to be higher on a sequential basis primarily on account of a substantial price rise undertaken by the cement manufacturers across the country.
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