BackHeidelberg Cement’s increased focus on realisations to offset lower volumes
Heidelberg Cement's management expects a 10-11% decline in volumes as it shifts its focus towards premiumisationThe management expects realisations to increase by Rs100 per tonne on a sequential basis in the December quarter
PremiumCentral India focused Heidelberg Cement Ltd saw its volumes decline by 2.3% year-on-year to 1.11 million tonnes (mt) in the September quarter.
The management said, in a bid to avoid bad debts in the current scenario, the company focused more on realisations and profitability. Instead of pushing volumes the company continued to focus on premiumisation, the management said. So, for this fiscal year, the management expects a 10-11% decline in volumes. But this is expected to be followed by a double-digit growth in FY22 aided by the ongoing debottlenecking of units.
Analysts aren’t too worried about the company’s near-term volumes growth. Central India is the company’s core market and contributed more than 80% to its overall volumes. This is primarily because retail and rural market as well as dealers’ channel checks show that demand was comparatively less impacted by the pandemic. Further, good monsoon and government’s measures to boost the rural economy are expected to aid cement demand. So, they expect the company’s long-term volume growth to be better than other regional cement manufacturers.
For now, analysts expect improved realisations to compensate for lower near-term volumes growth.
According to the management, cement prices remained stable in the Central market in the September quarter. Dealers’ channel checks showed that prices in this region were recently hovering around Rs350 per bag. One cement bag weighs 50 kg. From October onwards, the company has increased net sales realisation by Rs50 per mt. Further price hikes would depend on the demand environment in November and December 2020. The management expects realisations to increase by Rs100 per tonne on a sequential basis in the December quarter. In the September quarter, realisation on a per tonne basis stood at Rs4,627.
Meanwhile, with rise in prices of petroleum coke and diesel, the company's operating cost per/tonne could inch higher from the December quarter onward, analysts said.
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