Price Realisation Bleeds Cement Companies

Cement players have reverted to loss-making mode with 22 companies reporting an aggregate net loss of Rs 20.15 crore during the fourth quarter ended March 2002. These companies had posted an aggregate net profit of Rs 149.26 crore in the fourth quarter of the previous year.

Lower price realisation per bag, particularly in the southern states, has been the main cause for the slump in profits, analysts said. Low cement prices resulted in cement sales declining by around one per cent in value terms despite a 16.15 per cent growth in sales volume.

The south-based companies were more affected by the lower price realisation than their counterparts in the west and north.

The decline in profitability unravels the fact that cement companies can report profit only if the prices are firm, with reduced sales volume to keep prices firm.

The average cement prices in the last one year declined from a peak of around Rs 180-185 in April-June 2001 to around Rs 170-180 during July-September 2001.

The prices were in the Rs 160-165 bad during January-March 2002. In April-June 2001, cement consumption rose by 3.74 per cent in terms of volume, while sales were up 15.52 per cent on better price realisation. This resulted in the 22 companies posting an aggregated net profit of Rs 194.36 crore from a net loss of Rs 61.91 crore in the corresponding period of the previous year.

In July-September 2001, cement consumption was up 7.19 per cent, while net profit of the firms