Cement stocks take a hit on margin pressure | Economic Times

Mumbai: Cement companies are facing margin pressure after average prices declined further by 2.2% in August following a 2% dip in July.This has resulted in shares of midcap cement firms declining between 5% and 15% in the past month, while India Cements, Shree Digvijay, KCP, Andhra Cement and Dalmia Bharat have fallen over 10% each.“The impact on margins is expected to be visible in the forthcoming quarters, but the companies (will) try to maintain margins with receding monsoons,” said Sandeep Tulsiyan, an analyst at JM Financial. “The moderation in prices was primarily led by a 4.7% dip in the East sector and a 4.4% fall in the South.”The all-India average retail price of cement fell by Rs 7 per 50-kg bag in August to Rs 360 from July levels. In Gujarat, prices improved by Rs 5 per bag, while in central India, it was essentially flat.Input costs, meanwhile, continued to climb, with pet-coke and international coal at their peaks. 85699136Tulsiyan estimated an impact of Rs 450-470/ tonne on variable costs due to higher commodity prices.Pet-coke prices have surged by more than $160 per tonne owing to a skewed demand-supply situation, with refineries running at lower capacities and higher ocean freight rates.“Absence of any relief and higher fuel prices will keep operating costs elevated for cement firms, ensuring a mature outlook to sustain margins, resulting in the continued focus on maintaining prices at higher levels,” said Ravi Sodah, an analyst at Elara Capital. “Thus, in our view, a strong pricing scenario would be critical to ensuring the industry’s profitability.”