After chasing volumes, cement cos hike prices

livemint.com:

₹10-35 per 50kg bag, analysts at Jefferies India Ltd said, after an interaction with dealers. The price hike follows 1-2% month-on-month decline in the price in August, and stable prices until then. The June quarter saw strong demand for cement, but instead of raising prices, companies chose to push volumes and expand the market shares.

Consequently, there was little improvement in profitability. Average June quarter cement price at ₹355 was slightly lower than ₹358 in January-March, and significantly lower than ₹365 a year ago. Therefore, better prices in the current quarter (July-September) will be necessary to support cement companies’ earnings and operating performance.

In the June quarter, operating profits (profit before interest, taxes, depreciation and amortization) of 42 companies fell by 7.5% sequentially (during Q1) with raw material costs remaining almost flat. For cement makers, raw material prices remained volatile. Data from Yes Securities showed that pet coke and imported coal prices was range-bound between $100 a tonne and $120 a tonne.

In August, pet coke and imported coal prices rose by 17% and 9% month-on-month, respectively, said analysts at Yes Securities. Hence, price hikes and absorption of these hikes will be key to improved earnings outlook for cement manufacturers. Considering a 15-20% uptick in input prices in the past two months, absorption of price hikes will be required to sustain or upgrade consensus earnings estimates, said analysts at Emkay Research.