Rising input costs are expected to dent the bottomlines of Indian mid-cap cement firms during the Jan-March quarter, despite part of the hike being passed on to consumers, industry watchers said.
"Last year (in comparable quarter) realisation was on the higher side, and in this quarter there is an input cost pressure," Rupesh Sankhe, an analyst with Angel Broking told Reuters.
The input cost pressure has impacted the sector by around 350 basis points. This was mainly due to rise in coal and clinker prices (raw material for cement production) and freight charges, he said.
According to a Reuters’ poll of 16 brokerages, India Cements Ltd is expected to post a 50.99 per cent fall in net profit, Shree Cements Ltd a 21.54 percent drop and Ultratech Cement a fall of 23.52 per cent in Jan-March quarter.
The sector is hopeful of a revival from June quarter onwards, as the economy slowly pulls out of the global recession that impacted construction and real estate sectors in the country.
Construction and real estate are the two major users of cement.
In Jan-March, the industry began emerging out of the recessionary trends of 2009, when construction activity was on the lower side, said T Srinivasa Rao, vice president (finance), Rain Commodities , adding a revival was expected from the June quarter.
Analysts agreed that FY11 would be better than FY10, though the sector was unlikely to have a smooth ride.
The September quarter (of FY11) will be bad for the sector, and December quarter "slightly" bad as the sector is expecting a price correction. The input cost pressure would continue, Sankhe said.
"We are expecting almost 10 percent (price correction) in June, because the peak season will end and supply will get stablised," he added