Widely read:
हिंदी में भी पढ़ें 
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.
EBITDA per tonne
Ambuja Cements witnessed the biggest improvement
| Company | Q4 FY23 (₹) | Q3 FY23 (₹) | QoQ change (%) |
|---|---|---|---|
| UltraTech Cement | 1088 | 952 | 14.2 |
| Ambuja Cements | 1079 | 829 | 30.2 |
| JK Cements | 771 | 596 | 29.3 |
| Shree Cement | 1011 | 881 | 14.8 |
| The Ramco Cements | 917 | 823 | 11.4 |
| EBITDA is Earnings before interest, taxes, depreciation, and amortisation | |||
Improvement in operating margins
Ambuja Cements witnessed the biggest increase
| Company | Q4 FY23 (%) | Q3 FY23 (%) |
|---|---|---|
| UltraTech Cement | 14.4 | 11.2 |
| Ambuja Cements | 14.7 | 10.1 |
| JK Cements | 9.3 | 6.1 |
| Shree Cement | 11 | 10.7 |
| The Ramco Cements | 11 | 7.8 |
These positive developments have already influenced the share prices of these companies.
1Y share price return
JK Cements gained the most
| Company | 1Y return (%) |
|---|---|
| UltraTech Cement | 46.7 |
| Ambuja Cements | 17.2 |
| JK Cements | 50 |
| Shree Cement | 26.5 |
| The Ramco Cements | 45.4 |
| Data as of July 5, 2023 | |
Will this trend continue?
While volatility persists, the management of all cement companies expresses optimism. Given the high levels of capital expenditure in the country and a substantial decline in key raw material prices, they anticipate maintaining the current levels of margins.
However, it is important to note that this optimism is contingent upon the current circumstances, and there is no guarantee that it will persist.
Suggested read: A concrete analysis of the cement industry
New episodes every Friday
