Ambuja Cements (ACL) has decided to raise cement prices by Rs 20 per 50kg bag in two tranches. The first hike is expected to be effective from October while the second one will come in early January. Post hike, the retail prices of cement will go up to Rs 265 per bag.
When contacted, ACL managing director AL Kapur told ET, "We are unable to increase prices due to the government pressure. Our margins are under pressure due to spiralling input prices. A hike of Rs 20 per bag will help us maintaining our margins and profitability."
The government had recently imposed a temporary ban on rise in cement prices to keep a check on the headline inflation. The moratorium came to an end of August 16 which means that cement producers are now free to go by the market forces.
Recently, ACC and Dalmia Cement had accepted that an increase of Rs 20 per bag was necessary to keep their margins afloat. However, they had not increased prices till now.
Analysts said that most cement companies will first increase prices in the Southern market as cement demand in this region is higher than that of North. The North and West markets are likely to follow suit.
In the last one year, cement prices were up just 4% against a 20% growth in input cost. The companies have no option left but to hike prices before additional capacities started coming in the market at the end of 2009-10.
ACL has outlined a capacity expansion plan of Rs 3,500 core over two years. This expansion would take the company’s cement capacity to 22 mtpa by 2009. Currently, the company has an installed capacity of 18.5 mtpa and is undergoing grinding capacity additions at Dadri (UP), Nalagarh (HP), Sanad in Gujarat and Barh in Bihar. These projects are stipulated to be completed by 2010. Holcim, the world’s second-largest cement maker has a 48% controlling stake in ACL.