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Last Updated : Jun 08, 2016 03:57 PM IST | Source: CNBC-TV18

Cement prices up 8-9% in Q1 but volumes may be soft: Sanghi

In an interview with CNBC-TV18, Bina Engineer, Director of Gujarat-based Sanghi Industries, talked about the cement demand situation in the state and whether there is an uptick going into next year's state elections.

In an interview with CNBC-TV18, Bina Engineer, Director of Gujarat-based Sanghi Industries, talked about the cement demand situation in the state and whether there is an uptick going into next year's state elections.

Below is the verbatim transcript of Bina Engineer's interview with Reema Tendulkar and Mangalam Maloo on CNBC-TV18.

Mangalam: First up could you tell us what is the price increase being in Gujarat quarter on quarter (QoQ) and the price increase in the last one month if any?

A: The price increase over the last quarter is in the range of about 8-9 percent, so QoQ we have seen an improvement. There would be very marginal change between the last month and the current month.

Reema: The cement prices the current quarter that we are in, they are higher than the March quarter by nearly 8-9 percent. Has that affected demand in any way, could you give us a sense of how the demand is shaped up in the last two quarters and what is the current capacity utilisation?

A: For us the current capacity utilisation is in the range of about 75 percent on dispatch basis. However, the volumes are slightly depressed as compared to the March quarter. We have still not seen any huge uptick which was anticipated on a pre-monsoon period. We are now only looking forward to a better monsoon and better demand that would arise out of the retail segment.

Mangalam: There is Gujarat government elections in FY17 itself. So has there been any traction from that front as well. Has the government started announcing development projects and how does that augur for demand going forward?

A: Yes, clearly there has been an uptake from the infrastructure mainly backed by the road and transportation sector in the sense that Gandhinagar Metro has started work. The various kind of highways construction is seeing and additional expenditure. There we are seeing an additional demand which apparently you could say that is on the back up of the upcoming election.

Mangalam: You spoke about your capacity utilisation being around that 75 percent mark, but could you break up your capacity utilisation in terms of your old plant, which was 3 million tonne as well as the new plant which is now 1 million tonne, I believe?

A: That’s true these are basically 3 grinding mills. We have been using them more or less in the same fashion, so capacity utilisation is same across all the 3 grinding mills.

Reema: When you say volume is slightly depressed this quarter compared to the March quarter. Could you elaborate more how much lower would they be QoQ?

A: QoQ may be about 5-6 percent lower volumes.

Reema: Do you believe that if the demand is a bit depressed we are entering into the monsoon season. Will this price increase that’s cement companies have taken Sanghi Industries included sustain according to you?

A: We believe that price increase would be maintained because that this is the trend which has taken place across the entire country and not in specific segment or specific company. Across entire nation we are seeing the price increase and which is at a level which is maintainable. I believe the price increase will be maintained and most of the other regions like UP or Chhattisgarh area have also seen similar price increases as also we have seen in the Andhra Pradesh and the southern sector.

If the prices increase across the nation there would not be any cascading effect on one region to another because of the price arbitrage and therefore we believe that the price increase should be maintained.

Mangalam: But talking about your expenses if you could break up some details for us from your fuel expenses. Could you tell us how much of your fuel expenses or fuel mix accounts for petcoke at the same time we have seen petcoke price as much as 30 percent from 2016 lows? What are the kind of effects that could have on your margins and finally what is the kind of inventory of petcoke that you are sitting on right now?

A: We have in the March quarter we have used around 40 percent of petcoke and we still hold stocks which should last us most of next two months. We are using at the same level and going forward we always have the option of the imported coal where we maintains similar cost per calorie.

Of course petcoke is beneficial by say about Rs 0.10 per kilo calorie cost but otherwise Indonesian coal is also very competitive. I don’t see any substantial impact of fuel on account of change from petcoke and going forward unless we see a huge jump in petcoke price we may continue to buy petcoke and we continue to evaluate the optimisation of the fuel mix between petcoke and Indonesian coal.

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First Published on Jun 8, 2016 03:52 pm
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