Tag: cement

Cement price hikes anticipated, but scepticism looms over sustainability

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Reports from industry sources hint at upcoming price hikes in the cement sector across various regions of India, ranging from ₹20-80 per bag. In South India, the anticipated hikes may fall within the range of ₹50-80 per kilogram, while in parts of Maharashtra, they could range from ₹20-40 per kilogram.

However, the prospect of substantial price increases might not necessarily warrant celebration just yet. The acceptance of these hikes will be crucial, especially considering the current high inventory levels in warehouses following a robust volume push by manufacturers towards the end of the fiscal year.

The true demand trends will only become apparent next week when inventory levels are expected to drop. Moreover, with elections on the horizon, implementing significant price increases could prove challenging. Clarity regarding the absorption of these hikes is anticipated post the April 10, 2024, once inventory levels are replenished.

The question arises: Why the sudden surge in prices in April 2024?

The cement industry experienced a pricing decline of approximately 5% quarter-on-quarter during the fourth quarter of FY24, particularly pronounced in South and East India. In March 2024, pan-India prices witnessed a month-on-month decline of 2%, hitting their lowest point in the last three years.

Despite the downward pressure on prices, there is optimism surrounding fourth-quarter volume growth, which is anticipated to surpass estimates, potentially reaching 6-7% according to Jefferies.

Analysts had been anticipating a price increase in April, but doubts linger over its sustainability. Both Jefferies and Incred suggest that while companies may announce price hikes, particularly sharp ones in South and East India, the sustainability of these increases remains uncertain, which will ultimately impact earnings.

In conclusion, while a price increase is on the horizon, the degree of market acceptance coupled with the sustainability of these hikes remains paramount.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Holcim to spin off North America unit, seeking $30 billion value

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Holcim Ltd, the world’s largest cement maker, said Sunday it plans to separate its fast-growing North American business to pave the way for a listing next year in the US valued at more than $30 billion.

The Swiss maker of building materials also named its European head, Miljan Gutovic, as chief executive officer. He will replace Jan Jenisch, who will remain chairman. The executive move is effective May 1.

A valuation over $30 billion is in “the right ballpark” for the unit, Jenisch said in a conference call after the announcement. Holcim shares soared 38% last year, reaching the highest level since 2015 in December. They closed Friday at 64.20 francs.

The spinoff “should be a very value-creating move from our side for our shareholders,” Jenisch told reporters. “We now make two independent champions.”

The separation unwinds a period of acquisitions around the globe for Zug, Switzerland-based Holcim, triggered by diverging regulatory regimes in North America and Europe. North America accounted for $11 billion of revenue last year, according to Jenisch. In 2022, the region generated more than a third of the company’s revenue.

The US market is growing at a rapid pace as builders race to relieve a chronic lack of single-family homes and meet regulatory pressures for more energy-efficient buildings. The unit expanded through an acquisition spree that broadened its offering of building materials.

Listing 100% of the business on the New York Stock Exchange is expected to take about 15 months, Jenisch said. Under the current plan, every Holcim shareholder would get shares following the transaction — one in the European operations and one in the US.

Management including the US CEO will be decided between now and the first half of 2025, he added.

“I will make a decision later on which position is there for me,” he said when asked about a possible future role in the US business.

Under Jenisch’s leadership, Holcim agreed to buy Duro-Last Inc., a US maker of commercial roofing systems, in a deal last year valued at $1.3 billion, and acquired Bridgestone Corp.’s Firestone Building Products unit in 2021 for $3.4 billion.

Gutovic has been a member of Holcim’s executive committee since 2018 and led the company’s drive to reduce its carbon emissions. Previously, he worked at Swiss specialty chemical company Sika AG in various management roles.

Since joining the company in 2017, Jenisch has pivoted the company away from traditional cement as builders face increasing pressure to lower their carbon footprint. At the same time, Holcim exited cement activities in some emerging markets, including the sale of its Indian operations to billionaire Gautam Adani for $6.4 billion.

Earlier this month, Gutovic said Holcim is looking at another 20 bolt-on acquisitions in 2024 and doesn’t exclude another transformational deal. Holcim is expected to report earnings on February 28.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Cement industry to add 150-160 million tonne capacity by FY28: Report

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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To cash in on rising demand from infrastructure and housing sectors, the cement industry is on course to add capacity by 150-160 million tonne from FY25 to FY28, a report said on Tuesday.

In the past five fiscals, the industry has added capacity by 119 million tonne (MT) per annum to reach a total of 595 MT now, according to a Crisil Ratings report.

The capacity addition is for the purpose of meeting the rising demand as well as to consolidate market share in a highly fragmented and competitive industry, the report added. Cement demand grew 8% in fiscal 2022 and 12% in FY23.

As much as 70-75 MT capacity addition is expected to be commissioned in the next fiscal, with 50-55% concentrated in the eastern and central regions.

Large players will account for 50-55% of the planned capacity addition, the report said, adding, however, incremental supply and stiffer competition will cap price growth but benign cost will protect and aid margins.

Robust demand in the past two fiscals has bolstered the balance sheets of large cement players and some mid-sized ones with strong market presence, prompting them to expand capacity on the back of healthy cash accrual and credit profile.

This fiscal, demand is projected to grow 10-12%, driven by the government push to affordable housing and pre-election spending on infrastructure. That said, incremental supply and heightened competition will limit price growth to 0-1%, maintaining prices at Rs 390-395 per 50-kg bag, and keep utilisation at 70-75%.

Next fiscal, the demand growth is expected to moderate to 4-6% on a high base of the previous three fiscals. Also, rising raw material costs and a flat base will lead to an uptick of 1-3% in prices to Rs 400-405 per 50-kg bag, it said.

According to Miren Lodha, a director with the agency, cement prices inched down 1% during the first three-quarters of the current fiscal, marking a trend reversal after four years of growth between fiscals 2020 and 2023 when it grew at a compound annual growth rate of 4%.

With capacity increasing by 35-40 MT this fiscal, the highest in more than a decade, and acquired capacities being ramped up, a significant increase in supply will test market discipline and restrict the increase in prices to only 0-1%, he warned.

According to Sehul Bhatt, an associate director at the agency, softening of power, fuel and freight charges, which account for 50% of the total production cost, has provided a breather to manufacturers amid steady realisations.

Hence, lower cost, steady prices and healthy volume will expand the operating margins by 300-350 basis points to 16.5-18.5% this fiscal. The rebound in profitability comes after a contraction of 620 basis points last fiscal due to higher petcoke and coal prices.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Cement Q3FY24 outlook: What experts anticipate on demand and pricing

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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There are some key factors at play for cement companies in the third quarter of the current financial year 2024. There has been a decline in costs, and the October-December quarterly earnings will come on a low base on a year-on-year (YoY) basis.

Cement prices were raised in the northern, southern and western India at the start of the quarter while in the eastern parts, the price hikes were done in September 2023. A part of these prices increases were reversed in November due to lower demand during festivals, and a labor shortage.

The third quarter will also see the benefits of the fall in energy prices, resulting in lower costs and improved earnings before interest, tax, depreciation, and amortisation (EBITDA). In fact, the costs are expected to be the lowest in seven quarters.

Jefferies estimates that companies in the cement universe could report a 50% YoY growth in EBITDA, with the per tonne EBITDA increasing to four digits. That’s an increase of more than ₹1,000 after nearly eight quarters.

On a regional basis, north-based companies are likely to outperform. That’s going to be driven by higher YoY growth, both in volumes as well as in prices.

After double-digit growth in the first two quarters of the year, expectations are that the cement industry demand will slow down to mid-single digits in the third quarter three of FY24. The state elections, the festival season, and bad weather in South India impacted the construction activity during the past quarter.

Ultratech also reported a 5% growth in India volumes in quarter three. And that’s likely to be in line with industry growth unlike what was seen in the previous few quarters when they led industry growth and in fact, outperformed in the previous quarters as well.

Also Read | FMCG Q3FY24 outlook: Experts weigh in on likely outperformers amid challenges

Jefferies expects ACC and Ambuja to report higher EBITDA growth due to a low base and Shree Cement may benefit from higher pricing in north India.

From the midcap space, JK Cement and Birla Corp could outperform on the growth front.

In a recent analysis of the cement industry on CNBC-TV18, Navin Sahadeo, an analyst at ICICI Securities, pointed out that a combination of price hikes, cost declines, and anticipated operating leverage benefits could contribute to an estimated EBITDA per tonne rise of about 15% to 17% quarter on quarter (QoQ) or around 30-35% year on year (YoY).

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However, Sahadeo’s optimistic view on the sector seems to be at odds with recent market sentiments. He expressed skepticism about the industry’s actual growth, stating, “If UltraTech Cement has posted a 5% kind of growth YoY, I would like to believe the industry is more in the 3-4% range. So clearly demand has seen a knock because the first half we are growing at 11.5-12%.”

Contrary to Sahadeo’s perspective, Goldman Sachs has downgraded its position on the cement sector from overweight to neutral. In a recent interview with CNBC-TV18, Sunil Koul, Equity Strategist-APAC at Goldman Sachs, shed light on the rationale behind the decision. Koul acknowledged the longer-term potential of the cement industry, citing its connection to both real estate recovery and infrastructure. However, he noted that recent stock surges, exceeding 15%, and anticipated muted volumes over the next couple of quarters led to the downgrade.

“We do think that the absolute upside on a more tactical basis is not going to be there, so that is why we neutralized it,” explained Koul, emphasizing the cautious stance taken by Goldman Sachs in response to the industry’s recent developments.

For more, watch the accompanying video

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3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Strong demand, declining costs to boost cement sector: Axis Capital

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Amit Murarka, Executive Director at Axis Capital is optimistic about the cement industry. He believes the sector stands strong due to several positive factors: high demand, lowered costs, and price hikes. These combined conditions make the industry’s situation just right, reminiscent of a Goldilocks scenario.

“We are very well positioned for the overall sector as a whole. Things have aligned very well for the space. We are in a Goldilocks scenario in that sense, strong demand, a decline in cost as well as price hikes,” he told CNBC-TV18.

He expects the upcoming six to twelve months to be favorable for the industry.

UltraTech Cement is his preferred pick from the sector.

From the small and midcap space, he likes JK Cement.

Analysts pointed out that traditionally the second quarter has been a seasonally challenging period for cement companies, with limited price hikes. However, this time, the scenario is different, with cement prices remaining relatively stable, experiencing only slight declines on a sequential basis.

Murarka noted that the fourth quarter generally is the best quarter for the cement sector. Strong demand plus price hikes generally happen in quarter four.

Analysts estimate a 10-12% year-on-year increase in cement demand due to increased infrastructure investments leading up to the elections.

Murarka pointed out that election or pre-election years are a great period for the cement sector as infra spends are high, and private demand gets supported by industry hikes.

“We have seen that coming through this year as well. The state election calendar has been announced for November and general elections should be four to five months after that. Next year is something that we will have to see. We would not expect a double-digit demand growth next year per se,” he explained.

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However, he expects the demand momentum to stay strong.

“Private demand including the urban real estate is looking good from a longer-term perspective,” he stated.

For more details, watch the accompanying video

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

India wins bid to host international conference on cement in 2027

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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India has won the bid to host the International Congress on the Chemistry of Cement (ICCC) here in 2027, where global leaders, academicians, and professionals would deliberate on progress of research in this sector, an official statement said.

The bid was won against UAE and Switzerland.

The department for promotion of industry and internal trade (DPIIT) said that India’s leading research and academic institutes, National Council for Cement and Building Materials (NCCBM) along with IIT Delhi successfully presented India’s bid before the steering committee members of the conference during the ongoing 16th ICCC at Bangkok, Thailand.

“The decision was announced on September 20, 2023 at Bangkok,” it said.

The conference is the largest event of its kind which reviews the progress of research in the area of cement and concrete, it added.

The gathering has been held generally at intervals of four to six years since 1918.

Last time it was held in 1992 in the national capital.

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“This event is not only a testament to our research and academic organization’s capabilities but also a chance to showcase New Delhi to the global cement and concrete industry,” it said.

It added that India’s cement industry is second largest in the world with installed cement capacity of 600 million tonnes.

The industry in India plays a key role in the circular economy framework in the country by utilizing various industrial wastes and is having one of the lowest carbon footprints and most energy efficient in the world, the department said.

“The booming infrastructure development, resources, and expertise available within India make it a perfect backdrop to bring together thought leaders, academics, cement and concrete professionals, and enthusiasts to exchange ideas and drive progress,” it said.

The experience and framework of the Indian cement industry for addressing issues such as decarbonisation, alternate energy sources, and low carbon cement provide an ideal modal for deliberations.

NCCBM is an apex research and development organization under the DPIIT. It is dedicated to research, technology development and transfer, education and industrial services for cement, allied building materials and construction industries.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Nomura Bulls vs UBS Bears: Clash of opinions on cement sector prospects

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Two prominent brokerages, Nomura and UBS, hold contrasting views on the cement sector, with Nomura adopting a positive outlook while UBS remains cautious.

Nomura believes there are strong near-term drivers which outweigh structural challenges. Their analysis reveals that the cement sector has historically experienced its highest volume growth during pre-election years over the past four election cycles. Nomura’s forecast predicts a compounded annual growth rate (CAGR) of 5 percent for cement demand from FY24 to FY26, surpassing the 3.8 percent achieved during FY13 to FY22.

The brokerage maintains its positive stance in the short term, citing moderated input costs as a contributing factor. They anticipate a 30 percent year-on-year improvement in EBITDA per tonne for FY24. However, they acknowledge that the potential for return on capital employed (RoCE) expansion is limited due to the large under utilised asset base and a flat cost structure.

Dalmia Bharat is Nomura’s top pick in the sector, as they believe the company has the potential to become a pan-India player in the near future. On the other hand, they have given Shree Cement a reduce rating, citing the company’s diminishing cost advantage and its shift away from its traditional base in north India.

In contrast, UBS holds a negative view on the cement sector, primarily due to increasing competition and high valuations. The brokerage suggests that any significant surge in stock prices may present an opportunity for profit-taking.

UBS anticipates a slowdown in cement demand following the general elections in May 2024, as well as an excess of capacity additions compared to medium-term demand. They expect players in the sector to rely on pricing strategies to foster growth or defend their market share. Furthermore, UBS sees limited potential for value-accretive merger and acquisition (M&A) activities.

Despite their cautious stance, UBS maintains a positive outlook on ACC and retains a buy rating. However, in contrast to Nomura, they suggest selling Dalmia Bharat, and they have also lowered their ratings on other companies in the sector.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

April cement demand robust while pan-India prices remain flat: Report

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Cement industry volume is likely to have grown high single digits in April 2023 at ~35 mtpa, implying about 80 percent utilization and relatively higher 85 percent clinker utilization, according to Antique Stock Broking. The volumes likely grew in mid-single digit in North and West, whereas East, Central and South likely grew in high single digit when compared with same period last year. For FY24, the brokerage expects industry growth to remain robust at 7-8 percent aided by higher pre election government spending, after witnessing 9-10 percent growth in FY23.

Average pan-India prices are broadly flat since March. Price increase of Rs 10/bag was witnessed in South, after witnessing Rs 20/bag fall in Q4FY23. Prices in north India were flat, while West and Central regions witnessed price increases of Rs 3-5/bag. East India witnessed Rs 5/bag price decline, according to various channel checks.

Also read: Expect cement prices to rise in May or June: Anil Singhvi, Shree Digvijay Cement

Domestic petcoke prices are down 20 percent since March to Rs 14,639 in May and likely to see further correction in June revision. Imported fuel prices corrected further by ~10 percent month on month in May till date and are now down nearly 50 percent from their peak. According to Antique Stock Broking, the benefit of 10 percent fall in fuel prices is equivalent to 2 percent price hike on EBITDA. This is likely to translate into benefit of Rs 250-300/ton reflecting in initial two quarters of financial year 2023-24.

In the second quarter, India enters into a seasonally weak period, however, earnings may surprise led by lower costs and increased consolidation.

Ultra Tech, the largest player in the Indian cement industry,  achieved 100 million tonnes of production, dispatches and sales in FY23. The company clocked 15 percent volume growth during the period. This was backed by an effective capacity utilisation of 84 percent capacity utilisation for the year.

Also read: Here’s why it is imperative for cement industry to take adequate price hikes this quarter

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

UltraTech Cement to announce Q4 earnings today; profit likely to decline

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Shares of leading cement manufacturer UltraTech Cement Ltd were trading flat on Friday ahead of the company’s announcement of its financial numbers for the fourth quarter ended March 2023 (Q4 FY23) later in the day.

According to the CNBC TV-18 poll, UltraTech Cement is likely to see its profit decline despite growth in revenue during the March quarter compared with a year ago.

The company’s revenue in Q4 FY23 is estimated to jump 18 percent to Rs 18,585 crore compared with Rs 15,767 crore in Q4 FY22, as per the CNBC-TV18 poll.

EBITDA, or earnings before interest, tax, depreciation and amortisation, is expected to rise 7 percent to Rs 3,292 crore during the quarter compared with Rs 3,072 in the same quarter a year ago.

However, UltraTech’s profit after tax (PAT) is estimated to decline by 33 percent to Rs 1,755 crore in Q4 FY23 compared with Rs 2,614 crore in Q4 FY22, the CNBC TV-18 poll said.

Margins are expected to decline to 17.7 percent during the March quarter compared with 19.4 percent in the same period a year ago.

The estimates are backed by the sales volume numbers that the company had issued earlier this month. The company’s grey cement sales jumped 15 percent to 30 million tonnes in Q4 FY23 versus 26.1 million tonnes a year ago.

The company’s total consolidated sales volume had risen 14 percent to 31.7 million tonnes during the quarter compared with 27.7 million tonnes in Q4 FY22. Production and dispatches cross 100 million MT in FY23.

Notably, the cement manufacturer has shown significant outperformance in Q4 FY23 versus the industry growth due to market share gains in North and capacity expansion executed in the past one year.

However, owing to a weaker pricing environment, realisations are expected to remain flat compared with the previous quarter.

Margins are estimated to improve sequentially as operating leverage plays out. UltraTech has also been controlling its power and fuel cost better compared with peers in the prior quarters, a move that may also boost margins.

Analysts would now be watching UltraTech’s updated debt number in the upcoming earnings call as the company has been expanding capacity.

Investors should also watch out for the management’s commentary on the industry’s demand and supply dynamics and the progress on synergies from the integration of Century Textiles’ assets.

On Friday, shares of UltraTech were trading flat at Rs 7,534 on BSE.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Earnings preview: Cement sector likely to report strong demand uptick

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The cement sector witnessed strong demand in January and February, though there was some slowdown in demand in parts of March 2023. The pre-election spending continues to boost infrastructure segment demand in multiple states driving overall cement demand growth.

When the industry players report their earnings for the fourth quarter of the last financial year (Q4FY23), sector watchers expect mid-teen volume growth (13-16 percent) for UltraTech Cement, Dalmia, Shree Cement and JK Cement.

Ramco Cement is expected to grow at around 20 percent. The large cement players should dominate and outgrow smaller cement companies.

Companies with capacity additions in the past one year and with southeast regional presence are expected to outperform industry volume growth for FY23, while Adani Cement twins (ACC and Ambuja Cement) will be negatively impacted owing to the Himachal Pradesh plant closure for parts of the past quarter.

Costs are likely to have started a downward spiral and will soften further in quarter four of FY23 due to lower energy costs, better operating leverage and reduced maintenance expenses due to peak season.

This benefit of cost decline is likely to extend for the next few quarters based on current raw material costs and at current energy prices.

Problem is the volume push strategy seems to have depressed prices in quarter four FY23. Channel checks indicate that cement prices at an all-India level have slipped and are likely to be flat to marginally negative sequentially.

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Producers in the northern region are likely to report some growth sequentially and are better placed while south region will lag with a sequential decline.

Jefferies sees the energy cost decline and believes that the operating leverage will drive up EBITDA/tonne average by Rs 135/tonne quarter on quarter (QoQ).

Adding that from their coverage EBITDA is likely to be largely stable year on year (YoY) for quarter FY23 after declining 3-44 percent for past six quarters.

There will be a good improvement for most companies on a sequentially basis and particularly for Birla Corp on a low base while for Dalmia Bharat will see a bit of a decline on a high base.

UltraTech is expected to post a solid set and Ramco topline growth will be aided by higher volumes.

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Mangesh Bhadang, Sr Vice President-Research, Centrum Broking believes that the industry should deliver double-digit growth in quarter four of FY23.

“Industry should report a double-digit volume growth in quarter four of FY23,” he said.

He likes UltraTech Cement and Ambuja Cement in largecap space.

“From largecap, we like UltraTech and Ambuja and from midcap space we like Birla Corp and Nuvoco, which are more of a value buys wherein we expect that there is going to be some growth as well,” he said.

For more details, watch the accompanying video

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Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow