Cement industry has been battling tough conditions since past couple of months due to hike in diesel and fuel prices which may lead to a hike of around Rs 10-15 per bag shortly, says Shailendra Chouksey.
We would ideally like to get the price increase but I am not sure whether market has that sort of boost and demand to absorb the hike
JK Lakshmi Cement expects a hike in cement price by Rs 10-15 per bag shortly, says Shailendra Chouksey, wholetime director of the company. The cement industry has been battling tough conditions since past couple of months, he adds.
“The cost has gone up on account of diesel hike and also the fuel prices. So, cement companies have been under tremendous pressure and we are finding it difficult to cope,” Chouksey says in an interview to CNBC-TV18.
According to him, this quarter is particularly known for lower volume because of monsoons but this year it has been unusually low. “We have felt a pinch of close to Rs 250-300 a tonne both in terms of logistics and fuel price increase and that would mean close to Rs 15-20 a bag,” he adds.
Below is the verbatim transcript of Shailendra Chouksey’s interview on CNBC-TV18
Q: Cement companies have hiked prices by Rs 10 per bag, if you could confirm that as you are also a part of those companies?
A: I am not too sure whether this increase has come in all the market but if it has come in some of the markets then I am glad because we have seen the prices softening by close to Rs 40-50 per bag quarter on quarter vis-à-vis the last quarter last year.
The situation has been bad. Meanwhile, the cost has gone up on account of diesel hike and also the fuel prices. So, the cement companies have been under tremendous pressure and we are finding it difficult to cope, both the falling volumes. This quarter is particularly known for lower volume because of monsoons but this year it has been unusually low.
Q: You have not raised prices but will you be looking to raise them going ahead?
A: Most certainly we are looking to raise the price. We are down by about Rs 40-45 a bag vis-à-vis last year in this quarter, but this is a commodity and the prices normally fall in the pattern that there has to be some people who would take that lead and the market is willing to accept.
Right now we have not come across such signals in the north but I am sure if it has, it may be in some of the markets where monsoons have receded. I am sure the prices would pick up here as well and so, it’s just a matter of time. There has also been some pick up in the volumes in September vis-à-vis August and July in north. I am sure the price increase would follow through.
Q: To what extent will the prices increase? Will it be about Rs 10 per bag, are you looking to offset, you said you are down by Rs 40-45 per bag?
A: We would ideally like to get the price increase but I am not sure whether market has that sort of boost and demand to absorb the hike, but I am sure Rs 10-15 hike should be there and that is what we are expecting shortly.
Q: You also said that costs have gone up quite a bit, with regards to year on year or even on quarter on quarter basis, how much has the cost gone up for JK Lakshmi Cement in particular?
A: We have seen cost going up in case of fuel, both in terms of absolute price of the fuel and in terms of the transportation cost of fuel as logistic cost plays a fairly important role in our input and output. In both the cases, in the last 14 months, railways have increased their freights close to 30-35 percent more, which means there would be easily about Rs 250-300 tonne increase in the freight cost.
The only other variable where there has been an increase is the fuel price and there we have come across the fuel increase of close to Rs 60 to Rs 100 a tonne in terms of cost. Overall, we have felt a pinch of close to Rs 250-300 a tonne both in terms of logistics and fuel price increase and that would mean close to Rs 15-20 a bag.
JK Lakshmi Cem stock price
On September 17, 2014, JK Lakshmi Cement closed at Rs 316.80, up Rs 9.65, or 3.14 percent. The 52-week high of the share was Rs 327.30 and the 52-week low was Rs 64.00.
The company's trailing 12-month (TTM) EPS was at Rs 10.01 per share as per the quarter ended June 2014. The stock's price-to-earnings (P/E) ratio was 31.65. The latest book value of the company is Rs 110.75 per share. At current value, the price-to-book value of the company is 2.86.
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