Monsoon, excess supply may shrink cement cos’ margins 9%

Monsoon, excess supply may shrink cement cos’ margins 9%
Published: 01 June 2010

Indian cement manufacturers’ margins will fall 6-9% in June-September due to the combined effect of oversupply and a dip in demand in monsoon.

Margins are likely to be at 26-27% in the July-September quarter, against 32-36% last year, company executives and sector analysts told ET.

Large companies with a pan-India presence recorded a 31% margin in the January-March quarter, which rose to 33% in April-May due to a price increase across regions. “Lower cement prices and higher input costs will put margins under pressure for cement makers,” said Rupesh Sankhe, research analyst with Angel Securities.

Regional players will be the worst hit, he added. Margins will be under pressure in the medium term as the industry may face a surplus, leading to subdued realisations and mounting cost pressures, added Ravindra Deshpande, research analyst at Elara Securities.

Source: Economic Times