Lower fuel cost, higher sales boost cement profit

The domestic cement industry, which performed dismally during the July-September quarter (Q2), is set to post better profits for the October-December quarter (Q3) on account of higher sales volume, lower fuel and packaging cost. Though only a few cement companies have declared their Q3 numbers, the initial trend points to a better performance than Q2 for the industry.

“The primary reason behind better performance in this quarter is improved volumes and lower fuel cost. The company has also cut on the logistics cost by relocation of markets. For Q4 too, the fuel cost trend is downward and we have booked at lower price,” said Shailendra Chouksey, director, JK Lashmi Cement. The company’s sales grew marginally over the Q2 while net profit jumped over 108 per cent .
 

LOOKING UP

 Rs crore

           Net profit

%
chg

Q2FY09Q3FY09 Ultratech164.19238.3845.17 JK Lakshmi26.8856.04108.48 Prism15.0131.03106.72

The cost of packaging has also come down by over 21 per cent in Q3 vis a vis Q2. The cost of polypropylene bag, used to package cement, has declined from Rs 7 to Rs 5.50. The cost of imported coal during the quarter stood at Rs 5,200 a tonne, down by more than 27 per cent from Q2.

Ultratech, an Aditya Birla group company witnessed more than 15 per cent jump in sales while net profit grew over 45 per cent vis a vis Q2. These numbers, while being better than Q2, are still poor if compared to previous year’s corresponding results. This is due to the inability of the cement companies to pass on the sharp jump in raw material costs.

Though fuel prices started softening from November 2008, its real impact will be reflected in Q4. During Q3, as the company consumed fuel out of inventory and the new orders are in pipeline, the variable cost was up by 35 per cent, said an Ultratech release.

“Q3 performance was better due to a jump in volumes post-monsoon. However, realisation has remained same,” said H M Bangur, president of the Cement Manufacturers’ Association and managing director, Shree Cement. The all India cement sales for Q3 stood at 44.74 million tonnes, up 7.72 per cent from 41.53 million tonnes during Q2.