Moneycontrol Bureau
Cement companies are expected to report strong earnings for the June quarter, due to increased demand because of delayed monsoon in many parts of the country, which pushed up construction activities.
Explaining why June quarter will see companies reporting good numbers, Ravi Sodha of Elara Capital says: "Demand peaked in May on delayed monsoon after a tepid March-April, when several northern states were hit hard due to sand shortage which eventually led to a decline in construction activities." He further says that companies used the opportunity to liquidate their piled up inventories together the industry was able to sell 20.25 million tonnes compared with 17.9 million tonnes last year.
And while sales rose around 9% during the quarter, realizations too improved as cement prices climbed by almost Rs 23 per bag to hit a record high price of Rs 295 per bag. However, a 22% increase in railway freight rates could shave off nearly Rs 55 from every tonne of cement sold, says a note by brokerage house ICICIDirect.
On the whole, margins should have expanded because of the 20% fall in prices of imported coal price. But a similar depreciation in the rupee has neutralized much of that benefit.
Though higher volumes were a booster for the industry, the weak rupee which depreciated around 8% year-on-year, partly negated the 20% fall in import coal prices. "Yet, we expect most cement players to post a reduction in their power and fuel cost due to the reduction in coal prices," states Angel Broking in a preview note
A critical event that shook the sector at the close of the June quarter was the Competition Commission of India (CCI) slapping a penalty of 50% of FY10 and FY11 profits on forming a cartel. However, analysts have discounted this development as the sector has decided to fight back by appealing to the appellate tribunal contesting the order and hence this scuffle will go on for quite sometime and will not have any immediate impact on company financials. But nevertheless, it may impact pricing power of the sector in future.
Here's a look at company specific Q1 performance as estimated by brokerages
Company
|
Q1FY12 revenues (cr)
|
% change YoY
|
PAT Q1FY13 (cr)
|
% change.
|
2798
|
16
|
437
|
29.8
| |
2583.3
|
18.9
|
457
|
32
| |
5232
|
19..9
|
165
|
161
| |
Shree Cement
|
1406
|
36
| ||
J.K Cement
|
802.9
|
32
|
90
|
80
|
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