Rising costs may pinch JK Cement, India

Rising costs may pinch JK Cement, India
Published: 08 November 2010

JK Cement, which is focused on the northern Indian and Karnataka markets, has seen some investor interest over the past three months, despite a rather lacklustre performance in the September 2010 quarter. 

The investor interest is because of expectations of a pick-up in the demand for cement post monsoon, given the strong economic activity in the country and pick-up in housing demand.

Also, reports indicate that cement prices have risen sharply in several parts of the country. 

For instance, in New Delhi, cement now costs INR220 per bag, a rise of 15% from three months ago. Also, in the key southern markets, like Bengaluru, prices have touched INR235 per bag, a rise of 27% in three months. This should help the company to bring about a turnaround in its performance and overcome rising input costs, like those on freight, and power and fuel costs. 



In the first half of the financial year, cement demand across the country had grown barely 5% YoY, considerably slower than the growth reported during the earlier financial years. The country witnessed near-record monsoon in different parts of the country this year and it adversely affected demand from user industries like construction.

During the September 2010 quarter, JK Cement’s operating profit margin fell nearly four-fifth compared with a year earlier to 4.7%. Its net sales also fell marginally to INR434.9 crore in the second quarter.