Cement companies likely to post muted performance in Q1 amid sluggish demand
Cement makers have not been able to raise prices in any of the months since November 2023. It has prompted them to focus on volume growth, which is likely to increase the competitive intensity.
for cement in the June 2024 quarter was impacted by heat wave, fall in the pace of construction activities during the general elections in April and May, shortage of labour and unseasonal rain in some regions. As a result, the average all-India cement price fell by 3% year-on-year to Rs348 per 50 kg bag in the June 2024 quarter.Cement makers have not been able to raise prices in any of the months since November 2023. It has prompted them to focus on , which is likely to increase the competitive intensity.
According to estimates of seven brokerages, sales volume at the sector level is likely to improve by 3-4% year-on-year in the June 2024 quarter.
Among the large cement makers, ’s volume growth is expected to exceed the average sector growth driven by its focus on gaining and consistent capacity addition. The country’s largest cement manufacturer is likely to clock 5-6% volume growth for the June quarter.
In the June 2024 quarter, prices of key raw materials including pet coke and coal fell by 9-10% from the year ago levels. This may result in savings of Rs 40-60 per tonne. But in the broader scheme of things, lower cost of key raw materials will not amount to substantial gain for firms as cement prices continue to trade lower when compared historically.
Analysts estimate that large are likely to save 6-8% on manufacturing a tonne of cement. The earnings before interest, taxes, depreciation, and amortisation (EBITDA) per tonne for the industry is likely to remain flat at Rs871 per tonne from the year-ago quarter.
Revenue of the listed cement companies are expected to either fall by 4-6% or show a marginal growth of 1-3% in the June 2024 quarter while net profit may drop by 4-9%.
Source: Stocks-Markets-Economic Times
