After enjoying a peak pricing power in March, cement companies are likely to face margin pressure in the April-June quarter, due to a combination of weak cement prices and sluggish demand because of the monsoons. Cement prices have already fallen to INR 266/bag from INR 276 in March and profits of leading companies likeACC, Ambuja and UltraTech could weaken further in the coming quarters if demand does not pick up, say analysts.
In addition, margins will also be impacted by higher interest and depreciation costs during Q1, said brokerages
"Lower demand from the infrastructure segment, slow pick-up in real estate activity and slow construction due to the onset of the monsoon led to the lower volume growth in the quarter," Jaspreet Singh Arora from Anand Rathi told moneycontrol.com.
"The sector continues to be plagued by cost pressures like the recent news flow of sharp hike in regulated coal prices in Indonesia could further dent margins as fuel costs might increase This, in turn would put severe pressure on profitability of manufacturers over the next 2-3 quarters," says a report by brokerage house Emkay.