Tender costs, rising enter prices more likely to make a dent in cement corporations’ income
Corporations had steadily elevated cement costs every month since December, with cumulative hikes exceeding 3%, however they needed to partially roll again costs in March because of resistance from the market. Consequently, whereas cement costs within the final quarter had been 1-3% increased in comparison with the December quarter, they had been 2-3% decrease in comparison with the quarter ended March 2024.
“With a forecasted drop of ~2-3%, Q4FY25 marks the fifth consecutive quarter of common cement costs tumbling YoY pan-India,” stated ICICI Securities analyst Navin Sahadeo.
Apart from market chief UltraTech Cement, most main cement producers are anticipated to report between 5% and 55% revenue declines year-on-year because of shrinking margins, analysts stated.
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UltraTech is more likely to buck the pattern, helped by a 12-15% quantity progress following acquisitions and price efficiencies from working leverage.The March quarter is a seasonally sturdy interval for cement producers, marked by a spike in quantity gross sales together with some pricing energy, in comparison with the December quarter. Therefore, corporations are anticipated to report a big bounce in income sequentially.Gross sales quantity progress within the final quarter has been the very best by way of 2024-25 ended March, and can shore up volumes for the fiscal into mid-to-high-single digits, analysts stated. This may also assist the revenues of most cement producers rise as much as 15% on 12 months within the March quarter.
A couple of corporations, although, might report a decline of their prime line, they stated.
The profitability of corporations, in the meantime, will likely be impacted by a surge in pet coke costs, which have elevated 14% within the home market and 17% within the worldwide markets, sequentially.
“For the reason that cement trade’s working price per tonne is straight impacted by fluctuations in pet coke and imported coal costs, a $10 change in both gas supply leads to a ’30-40 per tonne variation in working prices,” Axis Securities stated in a pre-earnings word.
Consequently, the earnings earlier than curiosity, tax, depreciation and amortisation (Ebitda) made by corporations on each tonne of cement bought is seen decrease as in comparison with the year-ago quarter.
The working margins of corporations are additionally seen 100 foundation factors decrease on a mean.
“We anticipate margins to have peaked within the close to time period, given the latest improve in pet coke costs,” Kotak Institutional Equities stated in a word.
As in comparison with the primary half of the fiscal, earnings of cement makers had been stronger within the December quarter, though they remained weaker compared to the earlier 12 months.
Within the March 2024 quarter, cement makers noticed a 11-12% progress in volumes, whereas working revenue per tonne improved, helped by decrease prices.
