Cement Industry Worrisome Performance

Star Cement has reported a dip of 47 per cent in its net consolidated profit during the first quarter of the financial year 2020-21. The company’s net consolidated income stood at Rs 297.84 crore in Q1 FY21, a dip of 36 per cent from Rs 468.20 crore it registered in the similar quarter previous fiscal. Its revenue from cement segment stood at Rs 368.12 crore as against Rs 604.29 crore in Q1 FY21. The segment reported a decrease of 39 per cent. Shree Cement that has the highest valuation multiple among large cement companies for its cost-efficiency, stronger balance sheet and faster market share gains, has shown a relatively poor handling of operating expenses, at a time when cost rationalization is the mantra for corporate. Driven by higher freight cost and other expenses, Shree Cement’s operating cost per tonne increased 7% on a quarter-on-quarter basis, showed an analysis by Reliance Securities Ltd. This compares with a 2-2.7% sequential decline in the operating cost per tonne of peers ACC Ltd, Ambuja Cements Ltd and Ultratech Cement Ltd. As a result, Shree Cement shares declined 3.80% during the day, making it the top loser among Nifty 50 companies on Tuesday. UltraTech Cement expects a "subdued performance" in the wake of weak real estate and overall slowdown in the economy coupled with the impact of the coronavirus pandemic, according the company's annual report for 2019-20. The nationwide lockdown, amid the coronavirus outbreak, will have a significant near-term impact on the cement industry. The company expects "significant near-term impact" on the cement industry on account of the nationwide lockdown, amid the coronavirus outbreak, which disrupted the production, market and supply chain.