The Indian cement industry is set to see some tough times, according to the Business Standard of India, with margins likely to fall further in the June quarter.
The industry’s profit may decline an average 15 per cent in the quarter due to a government-directed freeze on cement prices, export ban, drop in the growth of despatches (YoY), poor realisation, increased input costs, Gujjar movement in Rajasthan and rise in freight charges due to rise in fuel costs.
"The June quarter earnings are unlikely bring any cheer to the cement sector. On an average, we expect a decline of 100-200 basis points in margins as compared with the March quarter. Drop in net profit growth will be severe," said Pawan Burde, senior research analyst tracking cement industry at Angel Broking. The coming quarters will be worse as by that time, newly commissioned capacities will go onstream, resulting in a rise in supply, which would have a dampening effect on prices, he adds.
During the June quarter, companies either cut or froze their cement prices at the government behest.
The northern and central regions saw a cut of Rs 2-5 for a 50 kg bag of cement where as the western market (however, Mumbai did not see any cuts) witnessed a decrease of up to Rs 7 a bag, mainly due to oversupply in the Gujarat market after the export ban was imposed on April 11.