Quarterly results propped up by steep price increases

The latest quarterly results reveal that cement producers are increasingly turning to price rises to offset the ongoing jump in energy costs, while they struggle to maintain margins. In addition to price increases, companies are reviewing their energy portfolios, fuel types and accelerating the shift to alternative fuels.

In Indonesia PT Indocement saw its energy costs reach 50 per cent of total production cost in the third quarter of 2022, prompting the company to implement three price increases in March, June and September this year. It has also announced that it has increased its alternative fuel rate from 12.2 per cent at the end of 2021 to 18.4 per cent by September 2022, including expanding its use of low calorific value coals from 88 to 91 per cent.

Dangote is also ramping up its use of alternative fuels in response to energy costs, with the company processing 101,553t of waste in the 9M22, up 77 per cent YoY, albeit from a low base. It is also on track to commission its alternative fuel feeding system at its Obajana Lines 1 and 5, and Ibese Line 3 this month. With the price of automotive gas oil (AGO) continuing to rise rapidly, Dangote is also investing in compressed natural gas (CNG) as a cheaper alternative to AGO. In the 9M22 Dangote saw its fuel and power costs advance by 39.8 per cent YoY due to the rising cost of coal, AGO and gas, which is pegged to the US dollar. 

Pakistan-based Kohat Cement reported a 20.3 per cent decline in sales volumes in the 1QFY22-23, but revenue over the same period advanced by 30 per cent, driven by a strong increase in prices. According to the company, its average maximum retail price in the 1QFY22-23 stood at PKR995/bag (US$4.43), compared to PKR650/bag in the 1QFY21-22 and PKR955/bag in the 4QFY21-22. 

InterCement has also reported improved revenues on the back of higher prices. Despite costs advancing by 21 per cent YoY in the third quarter of 2022, improved pricing across all its locations helped drive a YoY increase in sales of 16.5 per cent over the three-month period. In Mozambique, despite sales volumes falling by 14.3 per cent YoY, increased pricing, along with better operational efficiency, resulted in a 207.5 per cent YoY advance in adjusted EBITDA. However, in Argentina, even with strong demand and a pricing uptick, the high inflationary environment saw adjusted EBITDA fall 8.6 per cent YoY. 

Ireland’s CRH has also posted an increase in sales in the opening nine months of 2022, up 13 per cent YoY. In the US lower activity due to poor weather conditions was offset by improved pricing initiatives across all its lines of business. Meanwhile, in Europe, sales were ahead 13 per cent YoY, but this was primarily driven by strong price increases across all areas, helping to offset cost inflation in energy and raw materials. 

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