Cement prices are seeing a resurgence in prices after remaining downbeat in the last quarter of 2009. The southern region, which had seen steep falls has led the recovery. Dealers in Andhra Pradesh believe that the pick up in prices was partially on account of the Telangana issue. They expect a temporary hike in prices to continue for a while.
In an interview with CNBC-TV18, GP Goenka, Chairman, Andhra Cement gave an outlook on cement prices and spoke about the company’s business going forward.
Q: There has been a lot of talk about cement prices inching up further on back of that disruption in supply due to the Telangana crisis. Could you confirm to us how much of a rise in cement prices have you seen off late?
A: From December onwards we have had price increase of about Rs 8-10 which is nothing compared to what has happened in the rest of the country. But in Andhra we have had a price increase of roughly Rs 10. In January, so far we have had a price increase of Rs 2-3.
Q: You supply to the Mumbai market and to the western region. Going forward can we expect another 10-15% price hike if you could distribute it in terms of Southern markets and Western market where you have a significant presence?
A: In so far as the southern market is concerned where we are predominantly present - all our sales are predominantly in the southern area - another Rs 10-15 rise over the next two months is not unlikely. It will still be lower from rest of the country. Today, the differential is Rs 50, and another Rs 15 rise and the differential will still be Rs 35. But I don’t anticipate any price hike of higher than Rs 15 in the next two months.
Q: You had shut down your unit for some time in December. Could you tell us to which states your dispatches have been impacted due to this?
A: We have not shut down the plant. What has happened is we are in the process of upgradation. The upgradation will get commissioned next week and to achieve that the plant was shut. So we should be up and about next week. Our increased capacity of 3.5Mt should be up and running a week from now.
Q: We hear that the Andhra Pradesh supply has been impacted by 10-12% what do you sense the net effect will be - realizations going up, volumes and supply taking a bit of hit, do you sense it will still be EPS positive for you in the ensuing couple of quarters, or do you sense there is a temporary blip on account of these concerns?
A: So far as Andhra Cement is concerned, we have this huge advantage. Our plant which is getting commissioned next week, a bulk of it is new capacity. It is not the old capacity being revamped.
So we have a huge advantage on our cost which will be close to Rs 500 a tonne, which would be our cost reduction. So our EPS going forward over the next two quarters is very encouraging.