New Delhi: Cement price is unlikely to rise significantly in the current fiscal as a result of subdued demand for the building material, brokerage firm Elara Securities (India) said in a report.
“Cement prices are unlikely to register significant rise. We expect all India capacity utilisation to be in range of 75% to 82% in FY’12.
“Historically cement industry has gained pricing power only when capacity utilisation surpasses 85%. Thus, we expect all India cement prices to increase only by 1.7% to 3.3% on an average over FY’11,” the firm said.
As a result, cement companies would not be in a position to set prices and would face some margin pressures, Elara Securities said.
“We expect the EBITDA/tonne for cement players to remain flat in FY’12 due to upsurge in input costs. We expect cement players to earn EBITDA (Earning before Interest, Tax and Depreciation and Amortisation) per tonne in the range of Rs 600-800 in FY’12,” it added.
South was likely to witness least price increase of up to 2%, while Central India may see price rise in the range of 3-4%, it said.
During the fourth quarter of the last fiscal, cement was trading at Rs 264 per 50 kg bag in North, Rs 247 in East, Rs 275 in South, Rs 231 in Central and Rs 253 in West.
The demand for cement grew by only 4.8% during the fourth quarter of the last fiscal raising fresh doubts among the marketmen about the sustainability of the prices and profitability of the cement makers going forward.
However, cement makers are expecting a positive surprise as the current five-year plan period is nearing to an end and the infrastructure work could be accelerated for completion.