Cement producers to see 80-100% surge in profits for December quarter
quarter, helped by volume growth and a reduction in costs, said analysts.
After clocking double-digit volume expansion in the first half of the year, growth of these companies in Oct-Dec is seen moderating to around 5-6% for most players due to elections in some states, a construction ban in the NCR region and shortage of labor.
While the eastern region was an underperformer, northern markets have performed the best, followed by central India, Jefferies said in a pre-earnings note. Growth in Mumbai was average, while southern regions were weak in November-December, it said.
Apart from the volume growth, a significant boost to earnings for cement-makers will come from a fall in input costs which is expected to be at its lowest level in seven quarters.
Energy costs have seen a sharp decline with the average cost of petcoke down by nearly a fourth as compared to the previous year, while prices of international coal have plunged by more than 60%, Anand Rathi Shares and Stockbrokers said.
While the surcharge charged by Railways will see freight costs inch up, the overall costs for cement makers is still seen lower, which along with a marginal improvement in realisations will help the operating profit grow by as much as 45-60% on year, said analysts.
Operating margins, meanwhile, are seen almost 450-500 basis points higher as compared to the previous year.
