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Cement Sales in India Muted in Apr-Jun Quarter- Report

Infra News - Published on Fri, 12 Jul 2019

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Financial Express reported that after robust growth in the H2 of the financial year 2018-19, the cement sector is likely to have seen subdued growth in Apr-Jun quarter on account of muted demand, and Lok Sabha election 2019 is to blame for it. The slowdown in government spending, labour scarcity, decreased water supply and lack of private capital expenditure are key factors for soft demand. Most of the government projects were put on hold during elections as the funds could not be released due to the code of conduct. In various markets there was a standstill kind of situation due to elections.

Reliance Securities said that “The domestic cement companies are likely to report subdued sales volume in Q1 FY20 led by soft demand scenario, as the industry’s demand is expected to have witnessed 7-10% de-growth during the quarter. A slowdown in government spending on the backdrop of General Elections, labour unavailability, water scarcity and persistent absence of private capex took a toll on demand. The cement companies under our coverage universe are expected to report an average 2% YoY de-growth in volume, despite 6% YoY growth in UltraTech Cement’s sales volume led by new capacities.”

However, despite the muted growth in revenue, healthy realisation recovery across regions and benign cost environment are likely to cushion up the fall in revenue in Apr-Jun. The cement companies are likely to report average EBITDA (earnings before interest, taxes, depreciation and amortisation) and PAT or profit after tax at 34% and 36% YoY basis, said Reliance Securities. It also noted while the prices of imported petcoke boradly remained flat (-15% YoY), in the domestic market MRPL and Reliance Petcoke too moderately increased by 3% on a quarterly basis.

Further, the diesel prices remained broadly flat too on QoQ basis. But due to lower capacity utilisation, there would be a marginal increase in the operating cost by INR 40-60 per tonne.

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Posted By : Mohan Sharma on Fri, 12 Jul 2019
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