The 204 million tonne (mt) cement industry, which witnessed a total capacity addition of 30 million tonne in FY08, is going through a rough phase owing to spiralling input costs.
According to experts, cement companies, in Q2 FY09, may see their EBIDTA dwindle by about 400 to 500 bps due to significant cost push, especially in the form of energy and freight costs.
The quarter-on-quarter (Q-o-Q) topline is expected to take a dip due to low volume growth during the monsoon, whereas Q-o-Q bottomline may be marginally low as compared to the last quarter.
?Rising input costs and rate hike by banks may impact our EBIDTA this quarter by 3-5%,? said Vinod Juneja, MD of Binani Cement.
However, experts also believe that the second quarter is likely to witness a mixed bag of results: good realisation for companies in the south (like Madras Cement and India Cement) and negative for those in the north (like Shree Cement, JK Lakshmi and JK Cement, among others) due to competition from Pakistan.
HM Bangur, CMD of Shree Cement, said, ?We have increased our volumes substantially this quarter. Hence, revenues will be better due to high volumes. However, EBIDTA is likely to take a hit.?
Meanwhile, cement prices have headed north in some parts of the country in September. However, the impact will not be seen in this quarter, feel experts. In FY08, the total capacity addition for the industry was 30 mt. Further, at least another 45 mt of capacity is scheduled to be commissioned in FY09. As a result, FY09 is expected to witness excess supply based on capacity additions of FY08 and FY09. While incremental demand would be around 16 mt, incremental supply may be at least 45 mt.
Moreover, cement prices are expected to rise further to offset cost push, said industry sources.