Cement Companies' Profitability Hit by Sharp Rise in Costs

Cement companies can come under pressure, with brokerages expecting a drop in profitability when they report September quarter numbers amid a sharp increase in costs. Global research firm CLSA said that cost inflation and seasonal price softness was weighing on the profitability of cement companies. It has forecast a 14 percent year-on-year drop in profits in the second quarter. Domestic research and broking firm ICICI Securities expects a 6 percent YoY drop in EBITDA during Q2 FY22E as companies may not be able to pass-on sharp costs increases in a seasonally weak monsoon quarter. Volumes are expected to grow 5 percent YoY, while average EBITDA per tonne may decline 10 percent YoY (Rs 130 per tonne) to Rs 1,165 per tonne, it said in a note. Realisation increase of around 3 percent YoY may fall short of 7 percent YoY costs increases. On a QoQ basis, realisations may fall 2.5 percent, while cost per tonne may increase 3 percent QoQ, resulting in a 17 percent QoQ fall in EBITDA per tonne, ICICI Securities said.