Retail cement prices jumped by Rs 12 per bag in the second quarter of this fiscal, with a sharp rise of Rs 36 in west and Rs 15 in south on a year-on-year basis, owing to rising production costs, a report said.
Cement companies will continue to bear the brunt of higher pet-coke prices that increased 13 per cent q-o-q to USD 96 per tonne in Q1 FY18, Kotak Institutional Equities Research Analyst Murtuza Arsiwalla said in the report.
The profitability of cement companies too is expected to decline 3 per cent y-o-y to Rs 828 per tonne as the burden of higher production costs outweighs the benefit of a modest price increase, Arsiwalla added.
All-India retail cement prices declined by Rs 8 per bag on a quarterly basis in Q2 FY18 due to seasonal weakness seen during the time of the year.
The prices declined across regions, with the highest decline in north and central by Rs 14 per bag. Cement prices in the south declined by Rs 7, while west and east regions saw prices declining by Rs 3-5 per bag on a q-o-q basis, the report said.
A part of the decline may be attributable to reduction in prices on account of GST benefits in select states.
A modest price increase and healthy volume growth, although dented by higher production costs, will likely underpin Q2 earnings, the report said.
More importantly, the first quarter under GST could yield surprises on realisations as well as benefits from input cost credits, it said.
The cement industry is likely to register 6 per cent y-o-y growth in Q2 FY18. Potential re-stocking of inventories may have helped volumes even as volume trends in the recent past have borne the brunt of GST rollout, demonetisation, and introduction of RERA, the report said.