Construction Industry News
Cement prices are expected to rise as more expensive Asian thermal coal, and a higher gas price outlook in Europe is expected to increase costs for cement producers.
Power and fuel prices are likely to rise 10% in the April-June quarter due to a sharp rise in the cost of coal and pet coke in March, UltraTech Cement Ltd told media.
UltraTech Cement Ltd told the media that price increases would be passed on to consumers to sequentially improve profitability.
In April, the pan-Indian cement maker announced a price increase of Rs 30 per bag to make up for higher raw material prices.
Cement makers tried 15 to 20 rupees a bag in India, led by sharper growth in the south and east in April, according to Kotak Institutional Equities dealer audits.
Only some of this would be absorbed and more such increases could be attempted in the coming weeks.
Prices were up 6% year-on-year on an India-wide basis for the quarter ended March.
For the quarter ended March, cost inflation, subdued volume growth and inadequate price increases led to margin squeezes. UltraTech said volumes were stable and power and fuel prices were higher than pan-Indian competitors ACC Ltd and Ambuja Cements Ltd. Operating profit per tonne, however, declined the least.
The outperformance was primarily driven by operating leverage gains and more increased realization -- or what it yields on every tonne of cement -- in the East.
UltraTech's margin is likely to shrink given its inventory policy, and the recent sharp rise in global energy costs has yet to be reflected in the company's power and fuel prices. Higher costs of petcoke and coal are reflected in cement producers' finances after a 30-45 day delay. Margins narrowed for ACC and Ambuja as their prices rose.
According to the Motilal Oswal report, ACC estimates a 7% increase in demand in 2022, compared to 11-13% the industry has seen in the past year.
Ambuja Cements said demand is expected to be driven by real estate rejuvenation, promising harvest prospects for 2022, infrastructure push in India and implementation of production-related incentives to encourage domestic demand.
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