The price of Gulf war is flashing on cement bags
Cement companies have taken price hikes primarily thrice this fiscal year. In April, prices were hiked by ₹10-15/bag, with some rollbacks in May and June. In July and August, prices remained stable, despite the monsoon season. In September, companies made price hikes of ₹5-8/bag, and in October, by ₹10-12/bag, said Manish Valecha, co-head of Research, Anand Rathi Institutional Equities, adding that this was undertaken to offset fuel and energy costs mainly.
Ambuja Cements Ltd, the country’s second-largest cement maker, also expects the industry to push through further price increases as input costs rise. “We will see more progressive hikes expected in the coming months because the industry is going to pass on some of this cost to the customers if they are beyond a reasonable level,” chief executive Vinod Bahety said during the company’s earnings call on 29 October.
For Shree Cement Ltd, India’s third-largest cement maker, the September quarter illustrated how higher volumes do not necessarily translate into better unit economics when costs rise faster than prices.
Domestic sales volumes grew 18% year-on-year to 9.31 million tonnes, while consolidated earnings before interest, taxes, depreciation and amortization (Ebitda) increased about 4% to ₹1,016 crore. Ebitda per tonne, however, declined to ₹966 from ₹1,055 a year earlier, indicating the pressure on profitability despite stronger sales.
During the quarter, the company’s power and fuel expenses surged 56% to ₹1,843.25 crore.
The Kolkata-based cement maker’s managing director Neeraj Akhoury said prices in October were better than in September, but cautioned that the outlook remained dependent on market conditions. “Price is purely a function of demand and supply,” he said, adding that the company expected to deliver better prices in the December quarter than in June-September.
Dalmia Bharat Ltd echoed the sentiment, stating that both September and October have seen healthy price increases, helping them “recover a part of the cost inflation”.
Better pricing, alongside volume growth and improved cost absorption, is expected to support profitability in the December quarter, although higher input costs remain a concern, Yatin Malhotra, chief financial officer of Dalmia Bharat, told analysts.
