Margins were hit in Q3FY22 on high energy cost, Shree Cement MD HM Bangur tells Anil Singhvi; expects improvement in Q4

High commodity prices had an impact on Shree Cement Limited's margins during the quarter ended 31 December 2021, Managing Director (MD) HM Bangur tells Zee Business Managing Editor Anil Singhvi in an exclusive chat (#NewParViews). The company had to spent more on energy, he said adding that company incurred higher cost of coal and diesel during the quarter.

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The margins have seen a hit and declined from 32 per cent to 23 per cent for the Q3 quarter despite a 7 per cent increase in its revenue on year-on-year basis. One of the leading Indian cement manufacturers, Shree Cement has reported a 21 per cent jump in its standalone Profit after Tax (PAT).

Expectations from present quarter

When asked about the present quarter, Bangur said, "Our volumes in the last quarter could have gone up but there was a strike in our Chhattisgarh plant for days. That strike is not there this quarter so the materials will increase. Also, due to the strike, we had to purchase from our competitors which will not take place this time and this will also reduce the cost."

He also added that some prices are going up from February. All the factors - prices, volumes and costing in this quarter will lead to better results this quarter.

Demand side

He expected a strong demand situation going forward. "In January, there was rain and cold. Also, days were shorter so the workers were not getting much time for work but now all the favourable factors have come in," he added.

Bangar also said that he has a lot of expectations from Union Budget 2022 as the Budget 2022 allocation for infrastructure will lead to the demand for cement.

Price outlook

Bangur said that he expected margins to improve in this quarter and be above 23 per cent reported in the previous quarter, though it will still not be as high as 32 per cent.  
"If we see the prices one year ago, the present prices are lower than the prices last year in the months of March and April though the costs have gone up," Bangar said.

The prices go up suddenly but it remains low for a considerable amount of time. For two to three months per year, the margins remain good that is the main factor for average outlook.

He also added, "Even if we talk about the prices of cement for the last 5 to 10 years, On an average, the prices of cement have been lower than the inflation. In general, the cement companies are growing not because of the prices but because of their efficiencies."