Cement sector exits Q4 with flat prices; western region emerges as new pain
1 min read 29 Mar 2023, 11:31 AM ISTAttempts of price hikes have failed to sustain due to the volume push, lower-than-expected demand, and increased discount offerings, said analysts
PremiumThe March quarter (Q4FY23) was a washout for cement companies as far as movement in cement prices is concerned.
Latest dealers channel check by Elara Securities (India) Pvt. Ltd showed that the all-India average retail price dropped ₹8 per 50 kg bag on a month-on-month basis to ₹371 in March. With that, all-India average cement prices are likely to be up around 2% year-on-year, but may remain largely flat sequentially in Q4FY23.
Attempts of price hikes have failed to sustain due to the volume push, lower-than-expected demand, and increased discount offerings, said the Elara report dated 28 March. In some areas, unseasonal rains and lower labour availability also impacted construction activities, thus hurting cement demand.
This means that investors should brace for subdued sequential realisations growth in the upcoming quarterly earnings.
Region-wise, central India reported a price dip of ₹5 per bag, followed by north, west, east and south. South India saw the highest month-on-month fall of Rs10 per bag. This region has seen lackluster pricing trends for quite sometime now, mainly hurt by intensive competition to grab market share.
That said, the western region is also showing signs of pain. "After witnessing a largely flat trend for the past many months, cement prices in Gujarat have fallen up to Rs10 per bag in March. On the other side, Maharashtra showed a mixed trend with a higher price dip of Rs10 per bag in Mumbai. Prices in Nagpur/Nasik fell Rs5 per bag each," added the Elara report.
With the June quarter being seasonally strong for the cement sector, prices are expected to see an uptick in April.
Meanwhile, easing input costs pressure provides some comfort as prices of key input fuels petroleum coke and coal have moderated from their recent highs. "Based on our calculation, average fuel cost for the industry should decline Rs80-90/tonne in 4QFY23, followed by Rs200/tonne decline in 1QFY24 (based on current coal/petcoke prices)," said a recent Motilal Oswal Financial Services Ltd report.
