Cement price hike to counter high energy costs: Fitch

Mumbai The recent price increases by India's cement companies will counter the higher energy costs, Fitch Ratings said on Tuesday.Besides, the impact on their profitability from a resurgence of the coronavirus is likely to be limited, it said.

Fitch expects cement demand to be less affected by the restrictions to curb the spread of Covid-19 this time around, while the larger cement companies' strong profitability in the financial year ended March 31, 2021 (FY21) should cushion their financial profiles against downside risks. "Key energy commodities, including petroleum coke, imported coal and diesel, which together account for more than 50 per cent of cement makers' costs rose sharply, particularly after Q3FY21," it said.

However, the impact on cement companies' costs was less apparent in Q4FY21 as they switched to using lower priced imported coal and benefitted from lower-cost inventories and a lag in adjustments in freight costs.

"We expect the impact to be more visible in Q1FY22, but the mid-single-digit price increases by the cement companies after Q3FY21 will help to cushion the overall impact on their per ton profitability. "The fresh curbs to contain the resurgence of coronavirus in India after March 2021 are more localised," the ratings agency said.