With a significant rise in input costs, the cement sector could experience a steep decline in its operating profit per tonne in the first quarter (Q1) of financial year 2022-23 (FY23), compared to a year ago. In fact, the year-on-year decline would be the deepest in the past 10 years.

Jefferies estimated that the average Ebitda/t for this quarter for cement companies under its coverage will decline by around Rs 451 year-on-year/Rs 45 quarter-on-quarter to Rs 958 (the YoY decline would be one of the highest in the past 10 years). Despite revival in volumes, an increase in input costs weighed on margins. International pet coke and coal prices are up 25-30% QoQ for Q1FY23. The brokerage’s analysts expect the increase in energy prices to reflect to some extent in Q1FY23, and its full impact to be felt in Q2FY23.

“We expect cement to report a 21% YoY Ebidta decline for 1QFY23 … the fall reflects lag in passing costs even as volume growth recovers to mid-teens YoY (soft base),” said the brokerage’s analysts in a recent report.

Companies have struggled to pass on the costs, especially those with exposure to the southern markets.

Also Read:
K Lakshmi launches new brand in central and eastern UP
Shree Cement to set up integrated cement unit in Guntur