Cement Firms' Profitability to Go Up in 2014-15: Care Ratings

New Delhi: Domestic cement makers' profitability is likely to improve in the ongoing fiscal  year (2014-15) on higher realisation due to improved price, CARE Ratings said in a report on Monday.

"Though there may be partial reversal in cement price hikes in the near term due to monsoon impact, the average cement price during FY'15 is expected to be higher as compared with FY'14," the rating agency said.

Last fiscal year was a challenging year for the cement industry due to pressure on realisation coupled with increased costs. Cement makers raised the price of the building material in the last quarter of 2013-14 and in the first quarter of the current fiscal year.

The agency said this will lead to higher realisation for them despite the fact that the average freight cost may  be higher than FY14 on account of increased diesel and rail freight rates.

"Higher realisations...are expected to not only negate the impact but also result in improved profitability margins on year-on-year basis," it said.

Cement demand witnessed growth of 3.5 per cent in 2013-14 as compared to 5.3 per cent in FY13 and 6.7 per cent in FY12, mainly due to a slowdown in infrastructure, industrial and real estate projects.

"Consequently, cement prices remained under pressure for major part of the year. Though few attempts to increase the prices by the cement companies were made during the year, the hikes were reversed most of the times till Q3 FY'14," it said.     

On an overall basis, the sector witnessed margin pressure during FY14.