Cement firms report strong volume growth amidst realisation challenges

24 Aug 2023 CW Team

Cement companies experienced robust double-digit volume growth in the previous quarter due to strong domestic demand, according to data from 42 firms. Despite this, limited improvement in realisations and higher-than-expected raw material costs resulted in a mixed performance. Net profit for the quarter improved by 5.8% year-on-year (y-o-y), but declined 12% sequentially. The year-on-year profit before interest and tax increased by 14.4%, while sequentially it declined by 7.5%. Realisations dropped by 1% sequentially on average, impacting operating performance despite the volume growth. Average cement prices per 50kg bag also saw a decline. Cement companies' performance slightly missed expectations due to stagnant profitability and lower-than-anticipated cost reductions. While the average Ebitda per tonne improved slightly, it was still lower by 7.8% compared to the previous year.

Challenges persist in the current quarter as construction activities slow down post-monsoon. Analysts highlight the importance of cement price stabilisation for future earnings support. Despite the obstacles, analysts remain positive about strong volume growth in the upcoming fiscal year and closely monitor cement price trends for future developments. The correction in blended fuel costs provides a potential support factor for manufacturers' earnings.

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