Higher costs dented the performance of Shree Cement in the March quarter (Q4). The surge in fuel and transportation costs resulted in standalone operating profit coming in at Rs 511 crore, lower than the Bloomberg consensus estimates of Rs 558 crore.
While Street expectations weren’t high, given soft cement prices and power realisations, the performance did not match even the muted estimates. Merchant power demand has not been encouraging, leading to tariffs declining sharply. The power segment, which posted losses at the operating level in the December quarter, reported an operating profit of Rs 26 crore in Q4, and this was broadly in line with expectations.
The disappointment was largely in the cement segment. Analysts were expecting the segment to report an operating profit per tonne of over Rs 900, while the company managed to report about Rs 818 per tonne. This is primarily due to a rise in freight rates. Power and fuel costs also rose significantly (54 per cent sequentially), given the spike in coal and pet coke prices. Freight and forwarding costs, too, saw a similar rise, taking a toll on the Q4 show. Peers ACC and Ambuja have seen a similar trend. While UltraTech had been able to manage its costs better so far, they could feel the cost pinch, given the rising coal and pet coke prices.
via Shree Cement: Rising costs take the sheen off Q4 show | Business Standard News
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