Weak pricing to play spoilsport for cement makers despite strong seasonality in Q4
The average prices of cement are down 5-6% in the March quarter as compared with Oct-Dec, with prices trending lower for five consecutive months between November and March.
Even as sales volumes are estimated to have climbed 7-9% as compared with last year, producers have not been able to hike prices as they looked to defend and grow their market share amid rapidly increasing capacities.
As a result, the operating profit made by companies on every tonne of cement sold is seen lower by 9-12% sequentially, or about 150 rupees, analysts said.
This has reflected in the share price performance of most leading cement makers – including UltraTech Cement, Shree Cement, Dalmia Bharat and Ramco Cement – which have fallen 7-21% in the March quarter, as against a near 3% gain in the benchmark Nifty 50.
Adani-owned ACC and Ambuja Cements, though, 13-17% noting the strength in other group stocks.
While earnings for cement companies have traditionally been compared on a year-on-year basis, there has been a significant fluctuation in raw material prices over the last few months, leading to a quarter-on-quarter comparison.
On a year-on-year basis though, both the operating profit made by companies, and their overall profits are seen growing, analysts said. This will be the third consecutive quarter of earnings growth for cement makers, Motilal Oswal Securities said in a note.
With subdued quarter-on-quarter earnings for the March quarter largely factored in, the focus will remain on the commentary given by cement players,
