Sucheta Dalal :Pricing pressure high input costs impact Binani Cement Ltd
Sucheta Dalal

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Pricing pressure, high input costs impact Binani Cement Ltd   

January 27, 2010

Binani Cement Ltd has admitted to pressure on price realisation for cement due to over capacity, low demand from the commercial real-estate segment and high input costs. The company has registered a modest 12% growth in net sales of Rs423 million, from Rs3,600 million in Q3FY2009 to Rs4,023 million in Q3FY2010.

“In this quarter, the realisation of cement was less on the pricing side. There is a pressure on cement pricing everywhere. In addition, input costs—especially logistics costs—have increased,” said Vinod Juneja, managing director, Binani group of industries.

According to Mr Juneja, if it were not for the Dubai crash and the Andhra Pradesh turmoil, net sales could have been better by around 10%.

Mr Juneja attributed the pressure on cement prices to the turmoil in Andhra Pradesh. “For the last quarter, we do not have capacities in the south, but cement companies operating in (the) Telangana (region) and (the rest of) Andhra Pradesh started diverting supplies to Maharashtra and Gujarat. This resulted in a drop in the realisation of prices for cement. But we have still not incurred any loss.”

Cement prices all over India have stabilised, backed by the peak demand season for cement. Mr Juneja expects this rise in price to continue up to June 2010. The rise in cement prices started in December 2009, with significant price rise registered in the southern and western regions. Analysts expect this rise in price to continue till March-April 2010.

Before the recent rise in prices, cement prices all over the country were on a continuous downfall. In a short span of time between August to October 2009, cement prices had fallen from Rs230 per bag to Rs140 per bag. The southern region was worst affected by the downfall.

Binani also has huge investments in cement plants in Dubai. Cement production from Dubai has now been diverted to other countries. “Binani Cement Ltd was a major supplier to real estate in Dubai. To overcome the problem in Dubai—at least for the next one to two years—we are immediately opening our African markets and markets in Sudan, Kuwait and South Africa. Iraq and Oman will also be tapped,” added Mr Juneja.

On the fall in cement prices in Dubai, he added, “In good times, we were able to sell cement at around 350 dirhams per tonne of cement, which has now come down to roughly 240 to 250 dirhams per tonne. We are not selling it for a loss, but there are hardly any margins left.”

Binani Cement has reported an increase of 573% in profit after tax from Rs84.90 million in Q3FY2009 to
Rs571.70 million in Q3FY2010. — Amritha Pillay

-- Sucheta Dalal