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Leading cement companies are expected to post a good growth in profit in September quarter on the back of higher sales volume and increase in cement prices.
The demand for cement has surprisingly remained stable despite the September quarter being hit by south-west monsoon. Unlike previous years, the monsoon was intermittent giving an opportunity for the governments to use the allocated money before the General election next year.
Top-15 cement companies should deliver a strong volume growth of 12 per cent and aggregate utilisation should expand 3.50 per cent to 76 per cent, said Rajesh Ravi, Research Analyst, HDFC Securities.
Aditya Birla group flagship UltraTech Cement has reported that its sales in the September quarter was up 16 per cent at 26.69 million tonne (23.10 mt) on back of robust demand.
Grey cement volume of the country’s largest cement company increased 15 per cent to 25.24 mt (21.86 mt) year-on-year last quarter while white cement was up two per cent at 0.42 mt (0.38 mt). Globally, its cement sales improved 22 per cent to 1.18 mt (0.97 mt).
Despite monsoon-led demand weakness, cement prices increased one-two per cent quarter-on-quarter, except for southern region where prices fell by two per cent. The average net sales realisation is expected to rise one per cent year-on-year, leading to a three per cent CAGR in last four-year.
Operating cost for top cement companies was down 10 per cent led by lower raw material and fuel cost reduction. However, the benefit of lower cost was marginally mitigated by lower utilisation.
While cement price-hikes of over five per cent in FY23 was not sufficient to cover the significant rise in fuel costs, companies used the improved demand and better pricing discipline to pass on the incremental cost to consumers through price hikes.
The cement demand in this fiscal is expected to register a compounded annual growth rate of nine per cent led by infrastructure spending of the government and this should result in third consecutive year of double-digit volume growth in this fiscal, said Dharmesh Shah, Research Analyst, Emkay Global.
“We expect industry volume to grow by 10 per cent year-on-year in FY24. Fall in input cost should bottom out in December quarter, but the price hike in September quarter should offset the cost inflation,” said Ravi.
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