Mumbai: Cement-makers have become a bright spot in an otherwise lacklustre earnings season so far. Most cement companies have reported more than 15 per cent revenue and profit after tax (PAT) growth in the January-March 2019 quarter, and analysts expect them to do well over the FY19-21 period, with cement prices improving and cost controls being implemented.
As the incremental demand is now higher than the incremental capacity added, cement-makers are adding more capacities. Management commentaries also said the companies are trying to rationalise cost of production and expecting improvement in pricing.
Ultratech Cement, which reported 18 per cent higher sales volume over the third quarter (Q3) and 148 per cent jump in net profit over Q3, in its outlook, said,“ The cement industry started witnessing a pick-up in demand since FY2018, achieving double-digit growth since the last two years, after a period of tepid growth. However, there continues to be relatively low increase in new capacity. Incremental capacity added during the year has been 12 million tonne against incremental demand of around 38 million tonnes.”
“The government’s thrust on infrastructure development and increase in the pace of execution under the low-cost housing programme supported strong volume off-take. With stabilisation of RERA, pick-up in urban housing is also being witnessed. All of these are expected to result in sustained demand growth for cement going forward,” the Ultratech management said.
Another manufacturer, JK Cement, reported a 42 per cent year-on-year rise in net profit and 13 per cent rise in sales in the fourth quarter, driven by cost controls.
JK Cement’s operational expenses rose a modest 1 per cent on good cost controls (logistics and overheads) and operating leverage gains, which almost offset the impact of higher energy costs year-on-year.
JK Cement, which is adding fresh capacities in Rajasthan, UP and Gujarat of around 6.5 million tonne, is expected to perform well in FY19-21, brokers said.
Sagar Cement also reported healthy numbers on account of cost rationalisation and better realizations, and its performance is expected to improve further in an improving pricing environment and cost reduction, said analysts from Anand Rathi Shares and Stock Brokers.
JK Lakshmi Cement also reported strong profit recovery in the fourth quarter, with revenue growth of 31 per cent and PAT growth of 28 per cent.
