Prices hiked by Rs 10-15/bag from June 1: Heidelberg Cement

Cement prices were increased in June in few regions. In an interview to CNBC-TV18, Ashish Guha, managing director and chief executive officer of Heidelberg Cement says, the company has hiked prices by Rs 10-15 per bag in Central India from June 1. "In South and West, the prices have been flattish with a little bit of southward bias in Southern India," he adds. 

The price increase, he says, is on the back of higher input cost. “Delay in monsoon likely to support cement prices,” he asserts. He expects margins to improve slightly in April-June quarter. "We hope it would be a little better with these price increases coming, if we are able to hold onto these price increases," he adds.  Meanwhile, the Competition Commission of India has said that final orders on cement cartels are in the final stages and are expected soon. Guha says that the company is not impacted by CCI's probe into cement cartelisation. Below is the edited transcript of his interview with CNBC-TV18's Mitali Mukherjee and Sonia Shenoy. Also watch the accompanying video. Q: Cement makers have hiked prices by up to Rs 15 per bag in some areas. Can you confirm to us whether these price hikes have been taken? What has the quantum been? A: We have taken up price hike in Central India, in most of the regions in Central India between Rs 10-15 a bag. That’s happened from June 1. In South and West, the prices have been flattish with a little bit of southward bias in Southern India. In Central India, we have taken between Rs 10-15 a bag price hike. Q: Effectively for the northern and central region then what does that take the per bag price up to? What has led to this increase in prices? A: Let’s go back to history. January to March of this year versus last year we have seen a cost increase in the region of 16-17% and a price increase of about 5%. So, ultimately we will have to try and pass on the cost increases to the customers. It’s only an attempt to reach to that level. We are far away from that. The margins have dipped from 17.5% to 9.5%. So, somewhere we have to try and get better margins. Q: In that case then along with this Rs 10-15 hike, will there be any impact in terms of margin performance for this quarter or do you think it will go down as net neutral because of the cost pressures you were alluding to? A: It should be a little better. We hope it would be a little better with these price increases coming, if we are able to hold onto these price increases. The markets are not as buoyant as we had expected. They are still bit of sluggish. We have seen a little bit of improvement in May over April of this year the growth is about 12%, on a YoY basis, it’s about 8-8.5%. There is slight growth in demand after a very big lull. So, we hope that continues and then we should be able to better our margins. Q: You are hitting the seasonally dull patch though for cement companies where demand peters off a little bit in the monsoon period. Have you begun to see signs of that already? Are you confident this increase in prices will last? A: Not yet. The monsoon’s already have hit Kerala.  In South India, there is a little bit of southward bias on prices. But in other parts of India, we are still hoping that we should be able to take a few more increases in the next few months. If we are able to hold onto them, it should be a better quarter than last year, July to September. If you see the cement demand in the last few years, it has been pretty erratic. One of the best quarters used to be October to December for us. For the last two years, we have not seen October-December so buoyant. While as the monsoon quarters used to be very bad for us, we have seen somewhat of improvement in the last few years. But hopefully we can take that through this year and then the prices should hold. And we should see a better July to September quarter than last year. Q: There has been a pearl of concern though over the entire cement space pending that CCI report that may talk about cement cartelisation. What has the Cement Association itself heard in terms of its dialogue with the CCI? How soon do you think that report maybe presented? A: I really can’t comment on behalf of the industry. As far as we are concerned, we entered in India in 2006 and therefore we are not a party to it. Secondly, Mysore Cements, we believe has never been a party to it neither has Indorama Cement, which are the two major companies that we acquired. Thirdly, we haven’t seen any cartelisation in the last six years that we have been in India, neither have we heard about it nor have we been part of it. I heard Mr. Chawla saying the other day it should be taking two to three weeks to come up with the report. No idea on what the outcome is, but we believe there is no cartelisation and we strongly go by that.