Stock Fundamentals

Cement companies report concrete gains despite weak volumes in Q4

Keerthi Sanagasetti | Updated on May 24, 2020

Firms reported a surge in EBITDA per tonne in Q4, thanks to higher realisations and savings on energy and logistics costs

Cement manufacturers were battling weak volumes for most part of FY20.

The situation only worsened with the complete halt in construction activities beginning March quarter.

Though the impact of the nationwide lockdown was felt only for 10 days in the March quarter, listed companies reported a steep drop in volumes — 10-16 per cent (y-o-y) — during the quarter.

Only Shree Cement managed to record a lower 5 per cent decline in volumes, thanks to higher volumes from its new plant in South India.

However, companies continued to report a healthy growth in EBITDA margins, thanks to better realisations and cost savings.

We deep dive into the March quarter results of leading cement manufacturers to assess their performances and outlooks going ahead.

Margins remain healthy

Cement companies witnessed a weak demand in the first half of FY20. Monsoon and embargoes on construction activities due to pollution in several Northern States aggravated the demand slump in the subsequent quarters.

The spread of the Covid-19 pandemic in February-March made matters worse. Cement majors UltraTech Cement and Shree Cement ended the year (FY20) with about a 4 per cent (y-o-y) drop in sales volumes.

Despite the weak demand scenario, companies posted healthy blended realisations.

While cement prices largely remained stable in most parts of the country, the spike in realisations was on account of better sales mix — higher share of premium products (with greater fly ash content).

Cement companies, barring ACC, reported 3-6 per cent rise in their blended realisations in the March quarter. ACC saw a marginal drop of about 1.6 per cent in realisations.

Also, companies continued to witness savings on the energy cost front.

While the addition of Waste Heat Recovery Systems (WHRS) aided some, a drop in import prices of pet coke helped others.

That apart, the busy-season surcharge waiver by the Railways, too, helped cement companies save on the logistics cost during the March quarter.

All these led to a surge in EBITDA per tonne in the quarter ended March 2020.

UltraTech Cement reported the highest ever quarterly EBITDA of ₹1,231 per tonne, up 17 per cent (y-o-y). For others, the spike in EBITDA per tonne was even higher — 25-44 per cent (y-o-y).


The ongoing challenges for the construction activity in the country amid the Covid-19 crisis will impact the demand for cement companies in the near term.

With 10 days of lockdown in the March quarter alone dragging down volumes, the pain could intensify in the ensuing quarters.

A recent survey by CRISIL estimates a 30 per cent drop in cement volumes in FY21.

However, several channel check reports indicate that cement sales remained healthy in the first quarter of FY21, thanks to pre-buying from most construction contractors on fear of lower material availability (later in the year). The sale prices also remained under check.

On the cost front, companies may continue to benefit from falling pet coke prices. The gains on logistic cost may, however, be limited despite the recent crash in crude prices.

Both cement companies and dealers are likely to witness tight liquidity conditions in the near term. CRISIL in its recent survey report has estimated a 12-17 per cent potential increase in the working capital requirements of cement dealers.

Fearing this, cement manufacturers have cut down their capex plans for the coming quarters.

Published on May 24, 2020

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