Cement prices nearing all-time high
Prices are likely to go up by another Rs15-20 in the next few months and may touch Rs400 per bag on account of costlier raw materials such as coal and diesel: Crisil
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• Cement sales volume expected to rise 11-13% which will offset impact of cost pressure of cement companies
• High input costs impacting price structure
• Ebitda (pre-tax profit) for cement makers likely to decline by Rs 100-150 per tonne
New Delhi: Cement prices are likely to go up by another Rs 15-20 in the next few months and touch an all-time high of Rs400 per bag on account of costlier raw materials such as coal and diesel, according to a report by rating agency Crisil.
The inflation will also lead to a decline of Ebitda (pre-tax profit) for cement makers by Rs 100-150 per tonne this fiscal because of high input costs, it said. The cement industry had already gone for a price hike by an average Rs10-15 per bag (consisting of 50 kg) across India in August.
"Retail prices of cement, after rising by an average Rs 10-15 per bag pan-India since August are likely to go up by another Rs 15-20 in the next few months and touch all-time highs of Rs 400 per bag," said the report. However, it also added that cement sales volume is expected to rise 11-13 per cent this fiscal, compared with a low base of the pandemic impacted FY21. "This will largely offset the impact of cost pressure on cash accruals and keep credit profiles stable. A Crisil Rating analysis of 17 cement companies, which have a volume market share of 75 per cent in India, indicates as much," it added.
The recent rally in prices of imported coal, which is up by over 120 per cent year-on-year in the first half; and petcoke, which is also up 80 per cent, is likely to increase power and fuel costs by Rs 350-400 per tonne this fiscal. Moreover, a large part of the cost inflation is yet to be absorbed. Energy-efficiency measures, such as increasing the use of alternative fuel sources, stocking inventory for a quarter, and long-term contracts, will shield the industry from the full impact of the price hike.
"Freight costs are also likely to increase Rs 50-75 per tonne (up 5 per cent year-on-year) despite factoring in the recent excise duty cut on diesel by the central government and several states," it said. CRISIL Research Director Isha Chaudhary said cement volume growth will be driven by demand revival across segments infrastructure, housing and industrial as the impact of Covid-19 wanes. "Cement demand saw a robust growth of over 20 per cent in the first half this fiscal, but should moderate to 3-5 per cent in the second half, primarily because of a high base effect, translating to 11-13 per cent growth for this fiscal," Chaudhary added.
