UltraTech Cement To Dalmia Bharat Expect Price Hikes, Demand Boost In March Quarter
Sluggish demand and a spike in fuel costs were a drag on India’s cement makers in the quarter ended December. But there’s a hope.
Sluggish demand and a spike in fuel costs were a drag on India’s cement makers in the quarter ended December. But there’s a hope.
Operating income of all the five listed cement companies dropped over the year earlier as well as sequentially in October-December. Dalmia Bharat Ltd. witnessed the biggest decline on a sharper fall in demand in its two key regions, east and south, than peers.
High inflation pressure also narrowed the margin of the companies.
Costs rose year-on-year and over the previous three months for all firms. While the cost per tonne was the highest for ACC Ltd., the pace of rise was the fastest for Shree Cement Ltd.
“Inflationary pressures are expected to show up even in the ongoing quarter, as the high-cost inventory usually tapers down with a lag,” Mahendra Singhi, managing director and chief executive officer at Dalmia Bharat, said during the December-quarter earnings call.
According to Atul Daga, chief financial officer at market leader UltraTech Cement Ltd., “Fuel costs have softened from their peak and we don’t expect any more surprises. But the cost pressures remain elevated at the current level and if crude doesn’t continue to behave, the industry will be in dilemma.”
Cement demand, too, fell in the three months through December. Marred by sand shortage, unseasonal rains and labour unavailability, it declined the most in the eastern region. The companies’ volumes rose over the year earlier but fell sequentially.
Demand, however, is expected to pick up in the seasonally strong March quarter and on pent-up needs. That, along with price hikes, is likely to partly offset the cost woes in the quarter ending March 31.
UltraTech Cement, in its third-quarter earnings call, said demand was improving across the country. That has strengthened prices in a few markets, and there’re expectations of an improvement in rates as the demand outlook remains strong.
The companies’ margin depends on their ability to hike prices.
HM Bangur, managing director at Shree Cement Ltd., told BloombergQuint that the industry needs to increase prices in a quarter or so for “survival of upcoming capacities” while energy crises continue to remain a concern. “An increase of Rs 50 a bag could help close the gap with higher costs.”