Cement majors witnessed a drop of 2 per cent in their share prices on Wednesday, as prices across the regions slipped over 5 per cent this month.
Further, with no improvement in demand and consistent high input costs, sector analysts say cement stocks are likely to remain under pressure, as the onset of monsoon would only worsen demand.
Among the top three cement makers, Swiss major Holcim-owned Ambuja Cements was hit the hardest, as its shares tumbled 2.22 per cent to Rs 131.90 on the Bombay Stock Exchange (BSE) on Wednesday. Aditya Birla group’s UltraTech Cement, the largest producer, closed 2.1 per cent down, or Rs 22, to settle at Rs 1,027 a share. ACC, sister concern of Ambuja, slipped below Rs 1,000 to close the trading session at Rs 989.60 a share or 1.93 per cent down.
| MONSOON WOES Stock movement on Wednesday | ||
| Company | Close (Rs/share) | Chg (%) |
| ACC | 989.60 | -1.93 |
| Ambuja | 131.90 | -2.22 |
| UltraTech | 1,027 | -2.10 |
| Source: Bombay Stock Exchange | ||
Over the last two quarters, the sector has been seeing disciplined supply of the building commodity material. “However, there are doubts over how long can the companies maintain this to keep the prices afloat,” says a sector analyst in a domestic brokerage house.
This month has seen the all-India average cement prices decline by Rs 15-20 for a 50 kg bag.
In May, the average cement price stood at Rs 270 a bag, currently ruling around Rs 250-255 a bag.
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Industry analysts believe companies may be able to maintain the current level of prices for another 3-4 weeks. “By mid-July, we expect there will be further correction in cement prices. But given the high input costs which are unlikely to ease, price corrections will put pressure on companies’ margins in the September quarter. In that scenario, cement stocks could correct further by around 10 per cent,” adds the head of research in another Mumbai-based brokerage house.
Since the beginning of the current calendar year, cement makers continued raising prices, which touched a high of Rs 285 (all India average) in the March quarter. However, high prices could not be sustained and the start of April witnessed a slight correction of Rs 7-10 a bag before it got stabilised for two months.