Rising cost of inputs pressure cement companies
Despite a robust demand, cement companies’ profits are expected to come under pressure in June quarter due to a sharp rise in input costs especially that of pet coke and diesel. Led by a sustained pick-up in infrastructure spending and firm rural demand, sales volume of top cement producers are expected to register an average 20 per cent growth in the June quarter.
However, the average cement prices during the quarter was down five per cent year-on-year even as cost pressures increased due to high energy prices and depreciating rupee. The all-india average cement prices declined by ₹3 per 50 kg bag to ₹328 in June, after a ₹4-5 increase in the previous two months. Petcoke prices have been increasing for the last 15 months and cement companies have managed to pass on the incremental cost partially by hiking cement prices. However, after a certain level they were not able to increase prices due to excess supply in the market. The sector is bogged down by excess capacity.