Double whammy for cement cos; govt stick amid high input cost

NEW DELHI: Major cement firms, facing pressure from the government to cut prices, are hit by a sharp rise in the raw material cost while profit margins remained minimal or without growth, an Assocham study revealed. The study pointed out a big rise of 42 per cent in raw material cost, much higher than growth in the profit margins in the last quarter of 2007-08.

Leading firms, including Grasim Industries, Ambuja Cement and ACC registered minimal or no growth in their net profits, an Assocham Eco Pulse (AEP) study found. Ambuja Cement reported a drop of 42 per cent in its net profit, while ACC showed no growth and Grasim Industries' bottomline was restricted to nine per cent, the study said.

"As inflationary pressures have gripped the economy across commodity segments, the cement sector seems to be one of the worst hit," it said. The wholesale prices of cement surged by 8.5 per cent during this period, it said. Key raw materials used in production have recorded a huge rise in prices. While the wholesale prices of limestone grew by 13.9 per cent, fire clay showed a rise of 30 per cent.

"Power and fuel cost, which constitute 60 per cent of the total operating expenditure of the cement companies have increased by 24 per cent in the fourth quarter. This is on account of the 10 rise in coal prices," Assocham President Venugopal Dhoot said.