Cement prices have firmed up; took Rs 5-10 increase: Heidelberg

Cement prices have firmed up in the past one month, and Heidelberg has taken a price hike of about Rs 5-10 per bag, says Jamshed Naval Cooper, CEO and MD, HeidelbergCement India.

In an interview with CNBC-TV18, Cooper talked about the state of the demand, outlook going forward and the company's acquisition plans. Below is the transcript of Jamshed Naval Cooper’s interview with Latha Venkatesh and Anuj Singhal on CNBC-TV18. Latha: First, the state of prices. How have prices been in the last one month in central India, the market you serve? A: The prices have been very firm, I would say. They have not moved up, neither have they gone down they are very stable in this last one month and there is some improvement in prices which has started happening from the first of this month. As of now, there is some improvement which is taking place. Latha: So, you are taking hikes? Are you pricing your cement higher? A: Yes, we have increased our prices. It ranges from about Rs 4-5 a bag to about, in some markets, about Rs 10 per bag. Anuj: Is the price rise on back of genuine demand or is it more because of the cement companies being in a position to hike prices? Something which a lot of people always accuse cement companies of. A: There is a shortage in the market. There is a good demand which is coming up especially in the central India part and that is one of the reasons where we are having enough of orders. The books are getting a little fuller, so we said let us take a price increase. We will take further price increases also in the days to come. Anuj: So, how much do you think it will improve your realisations and pure earnings before interest, taxes, depreciation and amortisation (EBITDA) going forward? A: Going forward should be about Rs 200 a tonne on the realisations side.  Latha: And that is an improvement over how much averaged in FY15? A: I cannot say that how long it is going to last, but this is a very temporary phase, so we are talking about just a couple of days till the monsoon hits. Latha: You have any inorganic plans at all because cement is the one space where we are seeing merger and acquisition (M&A) activity. We have always seen M&A activity. Would you look at inorganic moves? A: Yes, we are looking at it. There are certain things on our cards. We are working on them. Latha: Are they southern cement companies? A: Southern part we already have Italcementi (ITC) with us, that is Zuari Cement which is a global acquisition, so there will be work going on, on that. Anuj: If you could give us some more light on where exactly are you looking for acquisition. You are of course, mainly in central India, but what is your target area? A: Let us see. I will not comment right now, because it is a little sensitive.  Anuj: But will it be a small acquisition or a decent size acquisition?A: Let us see. As I said, there are 2-3 things which are on our cards, we will work on that.Latha: What is your war chest? What is the likely amount of money you have set aside for acquisition?A: This will be a global thing which will be run out of Germany. So, it has nothing to do with HeidelbergCement India as such. So, it will be run through the Germany office.Latha: What is the debt level then?A: The debt is about 7 billion euros.Anuj: And would you need to raise some more debt to finance this acquisition?A: No, not now.Anuj: Internal accruals would be enough?A: Enough for that.Latha: How much of low cost coke do you have? You were using pet coke in the fourth quarter, our research expert tells us and that aided your margins, but now, those prices have spiked. So, do you have an inventory gain?A: No we are sourcing everything from the locals, so we are not having any imports which we have hedged on anything. So, we are going by the local market.Latha: What do you likely think that you will be able to have higher margins in FY17, vis-à-vis FY16?A: Depends on how the markets pan out. But seems to be that if the markets, the way they have started moving, things look to be a little positive.