Indian Cements has indicated that the company will have to resort to price hikes in the coming months in view of escalating raw material prices and spike in fuel and power costs.

“The cost of production has gone up significantly and every player has increased the prices. We will also have to increase prices to balance the spike in cost of production,” said N Srinivasan, Vice-Chairman and Managing Director, India Cements, which has reported a 69 per cent drop in net profit for the September quarter.

Performance report

India Cements’ net profit dropped to ₹22 crore for the quarter ended September 30, 2021, when compared with the net profit of ₹71 crore in the year-ago quarter.

In Q2 of this fiscal, the cost of production for India Cements increased by ₹325 per tonne year-on-year. Fuel cost was significantly higher at ₹359 crore in Q2 of this fiscal against ₹230 crore in the year-ago period, while transportation and handling charges increased to ₹277 crore compared to ₹215 crore. On a sequential basis, the net plant realisation (NPR) fell by ₹221 per tonne, while year-on-year the drop was ₹175 per tonne when compared with for Q2 of last fiscal.

The NPR also fell because the company began tapping far away markets due to poor demand in home markets such as Kerala and parts of Tamil Nadu. Its capacity utilisation in Q2 was 61 per cent.

“We are surviving because of the coal that we bought at slightly lower rates earlier,” he said. The company is sitting four months stock of coal bought at $135 per tonne (present price is over $250 per tonne). With a lead time of two-and-half months to procure imported coal, the company will now have to place orders at a much higher prices, and this will further increase the cost of production.

Industry analysts have pointed out that rising pet coke, coal, and diesel prices will impact the operating costs of cement companies, going forward. This should lead to companies effecting price increases.

Srinivasan said that India Cements had already increased prices by ₹30 per bag in November and another ₹30 to ₹50 per bag increase is warranted, going forward, if costs are to be recovered.

Revenue from operations

India Cements’ revenue from operations grew to ₹1,235 crore against ₹1,090 crore, an increase of 13 per cent.

Meanwhile, an analyst said that there was a demand pick up in October, and cement prices also increased 7 per cent month-on-month and 6 per cent quarter-on-quarter.

comment COMMENT NOW