Severe monsoons and price drops hit Indian cement

Severe monsoons and price drops hit Indian cement
Published: 27 September 2010

The top-  and bottom lines are expected to get squeezed as severe monsoons and a dip in prices due to lower demand affect the Indian cement industry during the second quarter ending September 2010.

Analysts expect margins of cement companies to decline by 10-12% YoY. Shree Cement CMD HM Bangur said: “The second quarter results are expected to be lower than the last year for the whole industry. Total volumes during the quarter have increased by 6%.
However, cement price fall and other factors will result in negative topline. Hence, the profit is expected to decrease sharply during the quarter.”

India’s monsoon season is in full swing and demand has been sluggish. Cement despatches in July were flat and in August, they registered 3.83% down MoM.

“We are not expecting any bright results this quarter due to rise in coal prices and freight charges,” said Binani Cement MD Vinod Juneja. Average international coal prices are reported to be around 30% YoY and domestic road freight rates, up 20% YoY, are adding to the cost inflation experiences by cement producers.

Cement prices have been raised twice this month, a sign that price discipline is back with the producers, according to a report in The Financial Express. The rising cost and negative ebidta has triggered this move,” say industry players. Nevertheless, it is believed that these hikes are not sustainable.

Source: The Financial Express