Higher Costs May Weigh On Cement Makers’ Earnings
GST, sand mining issues to weigh on cement makers’ Q2 earnings.
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Rising fuel and freight costs are expected to eat into cement makers’ gains from higher prices and volumes as dealers restocked after the Goods and Services Tax rollout.
The ban on illegal sand mining in some states may also weigh in a seasonally weak quarter as it could have slowed down construction activity.
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Earnings Expectations
Here are the Bloomberg consensus estimates for the top eight cement companies.
- Muted revenue growth of 8 percent in July-Sept; 14 percent decline over the previous quarter.
- Net profit is expected to decline 3 percent year-on-year, and fall 32 percent over the previous three months.
- Earnings before interest, tax, depreciation and amortisation expected to rise 9 percent year-on-year.
- Barring ACC Ltd., JK Cement Ltd. and Dalmia Bharat Ltd., all other cement makers are expected to report a drop in profitability.
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Higher Fuel, Freight Costs
Higher fuel and freight costs may impact the operating performance of cement makers. While pet-coke prices fell 6 percent during the September quarter, they rose in the previous three months. The impact on financials will be felt with a lag, according to Kotak Securities.
Pan-India Players Better Placed
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Restocking is expected to have helped volume growth along with higher prices, according to Kotak and ICICI Securities. A lower base and capacity ramp-up aided the volume growth, according to UBS. Pan-India companies are expected to register a revenue growth of 12-19 percent over the year-ago quarter, outperforming regional peers.