Ramco Cements tumbles 14% in two days on weak Q2 results

The company's Ebitda declined 52 per cent YoY at Rs 193 crore, mainly due to sharp increase in fuel price and weak cement prices

Shares of Ramco Cement tumbled 10 per cent to Rs 634.65 on the BSE in Thursday's intra-day trade, falling 14 per cent in two days, after the company reported a weak set of results for the quarter ended September, 2022 (Q2FY23).

The company's earnings before interest, taxes, depreciation, and amortization (Ebitda) de-grew 52 per cent year-on-year (YoY) at Rs 193 crore, mainly due to sharp increase in fuel price, and weak cement prices. Blended Ebitda per ton for Q2 was Rs 582 as against Rs 1,484 during the previous year quarter, which is one of the lowest in the last 8 years. The company said it could not pass on the full cost increase arising out of sharp fuel price hike, to its customers. While revenues grew 20.1 per cent to Rs 1,794 crore, on sharp 22 per cent YoY increased in volumes.

Going ahead, Ramco Cements believes the business environment continues to be uncertain due to rapidly changing economic environment in view of prevailing stress in geopolitical situation across the globe. "This has put a strain on the fuel cost. Usually the short-term visibility of the business prospects is more clear, but this time it is other way around. This situation may continue for few more quarters considering the prevailing uncertainties, however the long-term prospects continue to be promising," the company said.

The continuing consolidation in cement industry, coupled with speedy addition of fresh capacities, could lead to increased appetite for market share amongst the players may put pressure on margins in the foreseeable future especially due to uncertainty in fuel prices. The continuing volatility in 'fuel prices, faster rupee depreciation, hardening interest rates are bothering factors, Ramco Cements said.

Meanwhile, the company has revised its capex guidance upward to Rs 2,600 crore for FY23-24 (vs around Rs 1,400 crore earlier) owing to preparatory work for a second line in Kurnool, expansion of its Odisha grinding unit, and capex in the RR Nagar modernization & beneficiation plant, mining land development, etc.

Factoring-in the Q2 miss and the higher opex/ton, analysts at Emkay Global Financial Services have reduced Ebitda for FY23E by 13 per cent and for FY24-25E by 3 per cent. Further, building-in higher capex and increase in leverage, the brokerage firm has revised Sep-23E target price to Rs 670 from Rs 710 earlier.