Indian Cement industry Price Updates

Cement Price Updates

Cement Prices

The cement industry is seeing some demand recovery now that lockdown is being lifted in many states.

According to  a Kotak Institutional Equities (KIE) Ltd report released recently, 

“Rural and pent-up demand has led to higher-than-expected volumes in May-June 2020 and the industry could just suffer nearly 40% year-on-year decline in 1QFY21E volumes, better than earlier expectations,".

Against this background, cement prices, however, have seen moderation. The Kotak Institutional Equities (KIE) Ltd report stated "Our dealer checks suggest all-India cement prices have declined by 3% to ₹369/bag in June 2020 with easing supply-side constraints after a sharp 10% month-on-month increase in May 2020".

However  Indian Cement Industry insiders have across the board stated that Cement prices are likely to be on the higher side for Cement companies to break even given the current economic situation.

Cement industry Financial Updates

India Cements

India Cements on just reported consolidated net profit of Rs 53.46 crore in the entire FY20 as against Rs 25.26 crore in the previous fiscal. Total income stood at Rs 5,223.12 crore in fiscal year 2019-20 compared to Rs 5,809.6 crore in the last fiscal.

The India Cements board also recommended a dividend of Rs 0.60 per share for FY20. India Cement's net loss in Q4FY20 came at Rs 11.76 crore against profit of Rs 32.57 crore (YoY). The cement major incurred a one-time loss of Rs 100 crore due to the market uncertainty in the quarter under review. Total income stood at Rs 1,198.1 crore against Rs 1,623.0 in FY19.  In standalone terms, the company posted a net loss of Rs 111.07 crore in the given quarter.

Addressing the media following the company's results, Mr. N. Srinivasan, MD of India Cements said about Mr.Damani:

"There is nothing to say. He is a respectable person who has chosen to invest in India Cements. I should not say more. This company has been around for more than 70 years. We will continue to make cement."

Damani's family that promotes retail chain D-Mart has steadily increased shareholding in the company.

It stood at 15.16 per cent as of March 2020. Damani and his brother Gopikishan S Damani together now hold 19.89 per cent in India Cements according to regulatory filings.

Indian Cement industry Updates

 JK Cements Financial Highlights

JK Cements posted solid March quarter results and a relatively better outlook despite the covid-19 outbreak.

Lower costs and better realisations helped JK Cement at the profitability level inspire of lower sales volumes.

JK Cement’s pre-tax and exceptional item earnings expanded by 22% over the same period last year to ₹258 crore.

JK Cements March quarter Ebitda of ₹346 crore was much better than expected. Ebitda is earnings before interest, taxes, depreciation and amortization.

Indian Cement Industry Updates

Indian Cement Industry

India Cements

The South Indian cement major denied reports that suggested business tycoon Damani was considering a controlling stake in the company.

"We reiterate that the company is in total compliance of all the disclosure requirements to the stock exchanges under Regulation 30 of the SEBI (LODR) Regulations, 2015 and wish to clarify that other than the disclosures already available in the stock exchanges, we have no other information/announcement (including impending announcement) to be made, which in our opinion may have a bearing on the price behaviour in the shares of our company," the company said in a BSE filing recently.

JSW Cement

New Brand Ambassadors

JSW Cement has brought in former cricketer and current president of the Board of Control for Cricket in India (BCCI), Sourav Ganguly as well as captain of the Indian national football team and Bengaluru FC, Sunil Chhetri as its brand ambassadors. The company is also rolling out its new multi-media marketing campaign ‘Leader’s Choice’ featuring both these sports icons.

Ramco Cements Results

Ramco Cements  has reported 13.17 % decline in consolidated net profit at Rs 142.90 crore for the fourth quarter ended on March 31, 2020, mainly due to the coronavirus-induced lockdown.

The company had posted a net profit of Rs 164.58 crore during the January-March quarter of 2018-19.

Total revenue of the company was down 9.17 % to Rs 1,403.90 crore during the quarter under review as against Rs 1,545.77 crore in the corresponding period of previous fiscal.

Total revenue the company was down 9.17 % to Rs 1,403.90 crore during the quarter under review as against Rs 1,545.77 crore in the corresponding period of previous fiscal.

Total expenses stood at Rs 1,218.69 crore in fourth quarter of 2019-20, down 6.38 %, as against Rs 1,301.85 crore in year-ago period.

During the quarter, cement sale volume was down 10.98 % to 29.32 lakh tonnes as against 32.94 lakh tonnes in the year-ago quarter.

However, for the fiscal 2019-20, Ramco Cements' net profit was up 18.43 % to Rs 605.70 crore. It was Rs 511.43 crore in financial year 2018-19.

Damani and India Cements

India Cements Updates

Radhakishan Damani, the Indian business magnate, who built a fortune rolling out his Avenue supermarkets across the country, is considering acquiring a controlling stake in India Cements Ltd., according to insider sources.

Damani, the owner of Avenue Supermarts Ltd who comes from a humble background, has seen his wealth swell $2.8 billion this year to $12.5 billion.

According to the Bloomberg Billionaires Index, Damani is today India’s fourth-richest person. The retail business tycoon and his family members have been acquiring shares of India Cements for some months now, and their holdings quadrupled this year to about 20% as of March 31, exchange filings show.

The share value of India  Cements had jumped when news broke out and have since been rising steadily.

India Cements is a 74-year-old cement manufacturer with over10 factories in India, but mainly concentrated in Southern India.

The cement manufacturer’s controlling shareholder, N. Srinivasan holds about 29% of its shares.

Covid-19

And The Global Economy

The latest edition of the Global Economic Prospect report released by the World Bank yesterday highlights the following:

1.  The COVID-19 recession is the first since 1870 to be triggered solely by a pandemic.

2.  For many emerging markets and developing countries, however, effective financial support and mitigation measures are particularly hard to achieve because a substantial share of employment is in informal sectors.

3. Economic activity among advanced economies is anticipated to shrink by seven per cent in 2020 as domestic demand and supply, trade and finance have been severely disrupted.

4. Emerging Markets and Developing Economies (EMDEs) are expected to shrink by 2.5 per cent this year, their first contraction as a group in at least 60 years.

5. Per capita incomes are expected to decline by 3.6 per cent, which will tip millions of people into extreme poverty this year.

6. The blow is hitting hardest in countries where the pandemic has been the most severe and where there is heavy reliance on global trade, tourism, commodity exports and external financing.

7. While the magnitude of the disruption will vary from region to region, all EMDEs have vulnerabilities that are magnified by external shocks. Moreover, interruptions in schooling and primary healthcare access are likely to have lasting impacts on human capital development.

8. The global economy has experienced 14 global recessions since 1870: in 1876, 1885, 1893, 1908, 1914, 1917-21, 1930-32, 1938, 1945-46, 1975, 1982, 1991, 2009 and 2020.

9. The current projections suggest that the COVID-19 recession will involve a decline in global per capita Gross Domestic Product (GDP) by 6.2 per cent, making it the deepest global recession since 1945-46, and more than twice as deep as the recession associated with the global financial crisis.

10. Current forecasts suggest that in 2020, the highest share of economies will experience contractions in annual per capita GDP since 1870.

11. The share of economies in recession will be more than 90 per cent, even higher than the proportion of about 85 per cent of countries in recession at the height of the Great Depression of 1930-32.

Covid-19 Pandemic

And the Indian Cement Industry Outlook Series

Cement Demand

The Indian cement industry as a whole has witnessed a nation-wide decline in demand by about 50-60% during April - May 2020. Most cement plants were shutdown during the period of March - April 2020.

Most Cement plants resumed production in a phased manner from mid-April 2020.

The Indian Cement Industry are unanimous in their take that the profitability would be impacted in view of lower demand and sales volume but the exact impact upon the profitability due to Covid-19 would be difficult to ascertain as of now.

Covid-19 Pandemic

And The Indian Cement Industry Outlook Series

Capacity utilization at cement companies has improved significantly in May after a sharp drop in April with some cement companies reporting upto 80% drop in capacity utilization.

 While cement production halted in March-April owing to the nation-wide lockdown and the steps taken by the government to control the Covid-19 pandemic, production commenced in May in some of the cement plants after getting approvals from the respective state governments.

Easing of logistical hurdles and improved workers’ availability have helped cement companies move production levels upward in May and is expected to go up further in June in the expectation of more relaxations to the  lockdown.

According to the Indian cement industry, the IHB segment ( individual house builders ) which drives 55 per cent of the annual national demand, has been looking up after construction activities were permitted by various state governments.

Government infrastructure projects expected to be the catalyst to kickstart the economy post Covid-19, will create a huge demand for Cement, which in turn is expected to ramp up Cement capacity utilization to pre-covid19 levels. 

Cement Company Results

Sagar Cements

Standalone Results March 2020 

Net Sales was at Rs. 215.24 crore, 

down 19.76% compared to last year.

Reported Standalone quarterly figures for Sagar Cements are given as under:

Net Sales at Rs. 215.24 crore in March 2020 down 19.76% from Rs. 268.26 crore in March 2019.

Quarterly Net Profit at Rs. 8.59 crore in March 2020 down 49.17% from Rs. 16.90 crore in March 2019.

EBITDA stands at Rs. 35.65 crore in March 2020 down 20.85% from Rs. 45.04 crore in March 2019.

Sagar Cements EPS has decreased to Rs. 3.91 in March 2020 from Rs. 8.28 in March 2019.

Covid-19 Pandemic

And The Indian Cement Industry Outlook Series

Against the Covid-19 pandemic, most businesses will be looking to maintain their cash position. This is true of the Indian Cement Industry too. Due to the lockdown, cement sales have been adversely affected and this in turn has affected their ground level liquidity. Focus will be on maintaining or improving liquidity. Another aspect would be reducing expenditure. To this effect, a major casualty will be capital expenditure.

Cement major UltraTech has already begun moving in this direction. The Aditya Birla Group Company has stated in a regulatory filing:
That the capital and financial resources of the company are well protected.
That the company had been servicing its debt obligations as per schedule and on the due dates.
The the company did not require to avail the moratorium extended by banks as per RBI guidelines.
That the company plans to restrict its capital expenditure (CAPEX) to Rs. 1,000 crores.