Cementing on upward trajectory

After grappling with rising costs of raw materials and energy, the cement industry faced significant challenges by the end of the first half of FY23. However, the latter half of FY23 brought a notable turnaround. Cement companies witnessed a remarkable increase in both top-line and bottom-line figures in the last quarter of FY23 (quarter ending March 2023). Sequential performance in Mar '23 quarter JK Cements nearly tripled its net profit Company Revenue growth (%) PAT growth (%) UltraTech Cement 20.2 57.5 Ambuja Cements 0.7 57.6 JK Cements 14.2 197.3 Shree Cement 18.6 86.4 The Ramco Cements 28.5 129.9 PAT is profit after tax Factors that contributed to this turnaround Strong demand Major cement companies observed an upswing in capacity utilisation, which serves as a reliable indicator of industry demand. The infrastructure, residential, and commercial real estate sectors continued to exhibit robust demand. Leading the way, the industry leader UltraTech , achieved capacity utilisation of 94 per cent in Q4 (the highest in 15 quarters), surpassing the 82 per cent utilisation in Q3. In March 2023, UltraTech achieved a record-breaking 100 per cent capacity utilisation. Decrease in petcoke prices The cost of petcoke, a crucial raw material, started the financial year at elevated levels, impacting profit margins. However, an improved supply scenario led to a 25 per cent decline in costs in Q4. Additionally, many companies also witnessed a sequential decrease in power and fuel expenses, which are also key input costs. Enhanced efficiency As prices dropped and demand remained strong, overall efficiency improved during the quarter. All companies experienced growth in their EBITDA per tonne, resulting in significant improvement in their operating margins.