Cement firms see strong volume growth
NEW DELHI : Strong domestic cement demand led to cement companies reporting strong double-digit volume growth during the previous quarter but the limited improvement in realisations and lower-than-expected decline in costs meant that overall performance was a mixed bag. Data compiled by Mint for 42 cement companies showed that the net profit improvement was tepid at 5.8% year-on-year (y-o-y) during Q1. Also, on a sequential basis the net profit declined 12%.
The raw material costs, which were still 17.4% higher year-on-year, were up 2% sequentially. Not much improvement in realisations meant that the operating performance remained muted. The profit before interest and tax though was up 14.4% year-on-year, but declined 7.5% sequentially.
As per Jefferies India Pvt Ltd, the average Q1 realisations declined 1% sequentially for companies under its coverage as producers passed on some part of sequential cost decline to boost volume growth. On a year-on-year basis realization declined around 4%. The volume growth, however, stood at 18.8% year-on-year for companies under Jefferies’ coverage universe.
The lower realisations impacted operating performance even as volume growth supported revenues. The all-India average cement prices per 50kg bag during Q1 had declined to ₹355, from ₹358 during the previous quarter and ₹365 during the year-ago quarter. Analysts at a domestic brokerage said performance of cement companies came slightly below expectations as profitability did not see much improvement over the previous quarters.
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