Cement Sales Take a Knock

With demand growth in cement fizzling out, mainly due to unseasonal monsoon in many parts of India, sales have taken a knock. "As per our channel checks, industry volumes likely declined in high-teens month-on-month (high single-digit year-on-year) in Nov’21 owing to festivities, construction ban in north, sand mining issues in the eastern region, heavy rains in parts of South India, limited labour availability, and a higher base," analysts at Emkay Global Financial Services Ltd said. "Within regions, the highest decline was seen in the South (-4.8% month-on-month), followed by the East (-3.2% month-on-month); while for the North, West and central region, prices remained largely unchanged during the month. Key point to highlight: price decline in the East has completely reversed the hikes taken in October 2021 and prices are now back to the end-September level," analysts at IIFL Securities Ltd said. In the backdrop of cost pressures, the rollback of prices does not bode well for operating margins of cement companies. Even though prices of petroleum coke and coal have seen some moderation from their peaks, its benefits would reflect with a lag, keeping margin growth subdued even in the December quarter, analysts said.