High input costs impact HeidelbergCement India 4Q

HeidelbergCement India posted lower-than-expected results on the back of a sharp rise in input costs. However, the company’s exposure to the Central and Western regions, where demand remains strong, stands it in good stead.

The company’s topline increased by 36 per cent YoY and 25 per cent QoQ to INR2570m, it recorded a net loss of INR18m in the fourth quarter of the 2011 calendar year.

Strong demand in the Central and Western regions enabled the company to operate at utilization rates of 97 per cent in the third quarter of the fiscal year 2012 (FY12) against 74 per cent on a pan India basis. While pan-India cement demand growth was ~6 per cent in 9MFY12, demand remained robust in the Western and Central regions that grew by ~17 per cent and eight per cent YoY respectively.

The company’s is currently setting up a 1Mta grinding unit in Damoh (Madhya Pradesh) & 1.9Mta  grinding unit in Jhansi (Uttar Pradesh) remains on track and are scheduled to go on-stream by the end of 2QCY12. It is also setting up a conveyor belt from limestone mines to the clinker unit, which will lead to reduced freight costs.

SPA Capital remain positive on the cement sector and state that HeidelbergCement, which has strong foothold in Central & Western India, is well placed to benefit from the growth opportunities in these regions.

Source: Equity Bulls