Heidelberg set to hike cement prices in south India: CMD

Heidelberg Cement has recently hiked cement prices by Rs 10 on a 50 kg bag in west and central India. The hike was long overdue due to a prolonged slack season, says Ashish Guha, CEO and MD of the company.

He further said that the company has not yet raised prices in the south market but a revision cannot be ruled out in near term as situation is improving in the region.
The company took the decision to revise prices after sales picked up around 20%, month-on-month in December after months of sluggish growth.
On a larger scale, the industry is poised for a moderate growth in the medium term due to a sudden spurt in construction activities on eased policy reforms. The sector, at the beginning of 2013 has even predicted a 12% growth and a significant price correction.

Below is the edited transcript of Guha's interview to CNBC-TV18.

Q: Where have prices increased over the last couple of days? What has the quantum been across various regions in India?
A: Yes, prices have been increased in the last few days. We have made some increases between January 9 and 14. The range is between Rs 5-15 with an average of Rs 10. So, depending on market-to-market where the demand is growing, we have taken these increases, which were long overdue but couldn’t be taken because of a disastrous November that we had. Q: Can you just break that up between markets in the Central part of India, the Western part and the Southern part. Where have the markets prices gone up and by how much?
A: The increase in Western India is about Rs 5 and in Central India roughly on an average about Rs 10. In the South, we have not yet increased the prices. We are yet to see any kind of demand perking up there. So, we have not taken in South as yet, but we hopefully will be taking an increase there too. Q: Would you need to push prices even more going forward given the kind of some of the cost pressures which are coming in including things like fares going up, railway fares or freight rates going up post any kind of move on diesel. Would those need to be priced in or factored in as well?
A: Earlier, we were at 25 percent on an average earnings before interest, tax, depreciation, and amortisation (EBITDA) margin. This industry and major players are still about 20 percent odd in terms of EBITDA margins and the smaller ones that have gone into Europe have low teens. So, if we have to get investments back into the cement space, the prices definitely have to move up and essentially the input cost increases are mainly coming from government owned agencies like coal, power freight, diesel. Where are we going to control it? If one wants to control cement prices, I think he/she is asking for a boon. So obviously, the prices have to move up if it has to be an overall healthy industrial growth for the country in the medium-term. Q: You said November was disastrous. What’s the sales trend been through December and in the early part of January?
A: December year-on-year is very healthy. On an average, I think the industry grew by 20 percent, November over December. However, December over December year-on-year was flat. So, you can imagine what this November must have been for the cement industry in terms of dispatches and that can indicate consumption. Q: You had indicated earlier that you were targeting about 4 million tonnes in terms of sales volumes for the entire calendar year. Should that be relooked at? Or do you think that’s a reasonable sales target to set out?
A: I think yes, it is reasonable. It maybe a little 5-7 percent here or there. We are commissioning plants very soon. We will announce commercial production of those very soon and once they come up we should be able to go upto somewhere near 4 million tonnes for this year.