September 06, 2008

High input costs hit cement producers

It is reported that, while cement producers are under pressure from the government to cut prices, they are hit by a sharp rise in the raw material costs and their profit margins have remained minimal or without growth.

An ASSOCHAM study recording these findings points out a big rise of 42% in raw material costs, much higher than the growth in the profit margins of cement companies in the last quarter of 2007-08.

Mr Venugopal Dhoot president of ASSOCHAM said that "Power and fuel cost, which constitute 60% of the total operating expenditure of cement companies, have increased by 24% in the fourth quarter of 2008. This is on account of the 10% rise in coal prices."

Leading firms, including Grasim Industries, Ambuja Cement and ACC registered minimal or no growth in their net profits. Ambuja Cement reported a drop of 42% in its net profit, while ACC showed no growth and Grasim Industries’ bottom line was restricted to 9%.