Lower fuel cost, higher sales boost cement profit

Lower fuel cost, higher sales boost cement profit
Published: 26 January 2009

The domestic cement industry, which performed dismally during the July-September quarter (2Q), is set to post better profits for the October-December quarter (3Q) on account of higher sales volume, lower fuel and packaging cost. Though only a few cement companies have declared their 3Q numbers, the initial trend points to a better performance than 2Q for the industry.

“The primary reason behind better performance in this quarter is improved volumes and lower fuel cost. The company has also cut on the logistics cost by relocation of markets. For Q4 too, the fuel cost trend is downward and we have booked at lower price,” said Shailendra Chouksey, director, JK Lashmi Cement. The company’s sales grew marginally over the
2Q while net profit jumped over 108 per cent.

Ultratech, an Aditya Birla group company witnessed more than 15 per cent jump in sales while net profit grew over 45 per cent vis a vis
2Q. These numbers, while being better than 2Q, are still poor if compared to previous year’s corresponding results. This is due to the inability of the cement companies to pass on the sharp jump in raw material costs.

Though fuel prices started softening from November 2008, its real impact will be reflected in 4Q. During 3Q, as the company consumed fuel out of inventory and the new orders are in pipeline, the variable cost was up by 35 per cent, said an Ultratech release.

“3Q performance was better due to a jump in volumes post-monsoon. However, realisation has remained same,” said HM Bangur, president of the Cement Manufacturers’ Association and managing director, Shree Cement. The all India cement sales for 3Q stood at 44.74Mt, up 7.72 per cent from 41.53Mt during 2Q.