What Cement Makers Expect In Fourth Quarter
Workers unload cement bags from a truck near a construction site in New Delhi, India.  (Photo:Bloomberg News).

What Cement Makers Expect In Fourth Quarter

Higher volumes and lower costs aided the operating profit of cement makers in the third quarter. Yet, rising raw material prices could put pressure on margins hereon.

Most of the cement companies reported double-digit growth in their volumes, led by UltraTech Cement Ltd.’s 14% rise over a year earlier. India’s largest cement maker said that was driven by an uptick in demand from government projects, infrastructure, and urban real estate.

Volume growth for ACC Ltd., however, remained flat because of capacity constraints.

While volumes rose, realisation or what they make on every tonne of cement was largely unchanged. UltraTech Cement’s realisation held steady despite the highest volume growth and came without sacrificing margins. Ambuja Cements was able to maintain that because of growth in the northern region.

Dalmia Bharat’s realisation fell due to weaker pricing in the south and east India, according to the company. Shree Cement’s blended realisation rose but when adjusted for freight, it declined 1.4% over a year earlier—indicating higher volume growth was driven by efforts to cater to faraway markets in central India.

Operating Performance

Operational performance worsened sequentially for most cement makers even as it improved year-on-year. ACC and Ambuja were outperformers, with Ebitda per tonne growing more than 30% over a year earlier, aided by special products, cost cuts.

Lower realisation depressed operating performance of Dalmia Bharat, while Shree Cement and UltraTech reported better-than-expected Ebitda per tonne.

A Motilal Oswal report suggested that Ebitda per tonne of cement makers in the ongoing quarter ending March 2021 would remain strong at least on a year-on-year basis if not sequentially as an increase in total variable cost would be partly neutralised by lower maintenance cost and better fixed cost absorption.

Outlook And Prices

ACC and Ambuja expect 15-17% growth in 2021, led by affordable housing and the government’s renewed focus on infrastructure. UltraTech sees robust rural demand and a pick-up in urban real estate activities, driven by lower interest rates and government support towards housing aiding demand.

A channel check report from Motilal Oswal suggested that prices have improved 1-2% month-on-month in north and west, but the average pan-India price in the fourth quarter is down 2% sequentially and 1% over a year earlier.

ACC said a portion of the higher petcoke prices is already reflected in October-December. The company aims to bridge the cost gap with the industry over the next five years.

The full impact of higher petcoke prices would be reflected in April-June, while January-March would see a marginal impact. It expects coal and fuel prices to stabilise over the next six months.

Here’s what the cement makers said after their third-quarter earnings:


  • Cement demand expected to grow 15-17% in 2021, led by affordable housing and the government’s renewed focus on infrastructure.
  • Net sales realisation stood at Rs 4,881 a tonne and Rs 4,834 per tonne for quarter ended December 2020 and calendar year 2020.
  • This is up 8.3% and 2.4%, respectively, over the same period a year earlier on account of a better product mix and an improved pricing environment.

UltraTech Cement

  • Rural demand and infrastructure projects remain robust.
  • Urban real estate demand has started picking up, led by lower interest rates and various steps undertaken by the government to support home buyers and builders.
  • Q3 FY21 saw price a sequential decline of 1-2%, with east India witnessing weaker pricing, while north remained stable. South also saw prices soften.
  • inflationary pressures from power costs are expected to ebb after six month.

Dalmia Bharat

  • Demand should grow at 5-6% in FY21, with the east at 6-8%, northeast at 8-10% and the south at +/-2%.
  • Q3 FY21 prices remained under pressure, particularly in the east. Prices have started picking up in January but remained largely stable in the north.
  • Do not foresee a further decline in prices in the east as demand is growing.

Ambuja Cements

  • Post recovery from Covid-19, expects cement demand to grow 15-17% year-on-year in 2021 due to continued focus on infrastructure and the rural economy in the Budget 2021. Housing accounts for 60–65% of the total cement demand.
  • The focus on agriculture and rural development is expected to boost rural demand, including demand for rural housing.
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