Cement firms reported single digit sales growth for the second consecutive quarter in January-March driven by gradual demand recovery as well as price hike even as higher costs due to rise in crude oil and coal prices impacted profits and margins, analysts said.
Thirty five firms reported six percent rise in sales as net profit fell for the second quarter by 11 percent year on year but rose 72 percent sequentially.
Operating profit fell for the third quarter by 17 percent YoY. Sequentially it rose 28 percent for the first time in four quarters.
According to analysts, demand witnessed gradual improvement in the seasonally good March quarter after subdued December quarter leading to higher capacity utilisation and rise in sales volume. The overall volume was up by an average 16 percent sequentially.
Leading firm UltraTech Cement reported a 38 percent YoY jump in its net profit for the March quarter to Rs 2,454 crore while revenue rose 10 percent to Rs 15,767 crore. Operating profit margin stood at 19.5 percent as compared to 25.6 percent a year ago. The firm saw a 48 percent increase in energy costs, with prices of pet coke and coal doubling during the period. Raw material costs increased seven percent
Ambuja Cement and ACC reported 30 percent year on year decline each in consolidated net profit. ACC consolidated net profit came in at Rs 396 crore while revenue increased 3.13 per cent to Rs 4,426.54 crore.
Ambuja Cement consolidated net profit came in at Rs 856.46 crore. Revenue increased 2.4 per cent to Rs 7,900.04 crore and operating profit declined 19 percent.
JK Cement reported a 21 percent decline in net profit while sales rose 10 percent year on year. Shree Cement reported 16 percent fall in net profit while sequentially it was up 31 percent. Revenue rose marginally 3.6 percent while sequentially it was up 15 percent.
Ajit Mishra, VP- Research, Religare Broking, said in the near term, cost inflation is expected to remain high as prices are still at elevated levels and to mitigate this risk price hike could be on cards.
Analysts expect demand to slow and coal prices to be at elevated levels and increase further. The companies increased prices during April but that is not enough to make up for the increase in coal/pet coke prices. The inability to pass on costs fully to customers remains a primary concern.
As a result, companies are expected to witness lower volumes in the first quarter of FY23 on a sequential basis.
"We expect margins to decrease in the June quarter sequentially," said Centrum Broking in a note to investors.
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