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Coal India has raised prices of Coal by 30%, effectively by Rs800/mt of coal. This is significant
cost push for cement companies. UltraTech which uses 35% linkage coal will face a cost push of
Rs2bn-2.2bn ( 6% of EBITDA expected in FY12).
Coal India raised prices by 30% for cement users
Coal India has announced a price hike of 30% of prices of coal from immediate effect. The
last price hike was in October 2009, and it was a 9% hike then. So clearly, this price hike has
been sharper than expected, with the base price of coal rising from Rs2730/mt to Rs3550/mt.
UltraTech would face a cost push of Rs2-2.2bn.
We estimate that UltraTech procures around 35% of its coal requirement from Coal India or
linkage sources. The share of linkage coal has been gradually going down over the years, as
Coal India has not been able to meet the growing requirement. We estimate that UltraTech
procures around 2.7m-2.8mmt of coal from Coal India, hence the impact of the recent price
hike would be Rs2bn-2.2bn. We estimate a cost push on per bag basis of Rs3/bag which
would have to passed on through price hikes.
Cement prices currently strong, but we remain cautious
The All India average cement prices have improved from Rs225/bag in September 2010, to
Rs245/bag currently. In many markets cement prices are at all India high levels. The industry
has been able to push through significant price increases in the last few months, which would
have a positive impact on margins in 4QFY11 as compared to 3QFY11. However, the
capacity utilisation rates are expected to remain low at 75% over the next two years, and
hence it is critical that manufacturers behave rationally for the period of over-supply. Given
the fragmented structure of the industry (with over 40 players on an All India basis), we
remain cautious and expect cement prices to be volatile.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Coal India has raised prices of Coal by 30%, effectively by Rs800/mt of coal. This is significant
cost push for cement companies. UltraTech which uses 35% linkage coal will face a cost push of
Rs2bn-2.2bn ( 6% of EBITDA expected in FY12).
Coal India raised prices by 30% for cement users
Coal India has announced a price hike of 30% of prices of coal from immediate effect. The
last price hike was in October 2009, and it was a 9% hike then. So clearly, this price hike has
been sharper than expected, with the base price of coal rising from Rs2730/mt to Rs3550/mt.
UltraTech would face a cost push of Rs2-2.2bn.
We estimate that UltraTech procures around 35% of its coal requirement from Coal India or
linkage sources. The share of linkage coal has been gradually going down over the years, as
Coal India has not been able to meet the growing requirement. We estimate that UltraTech
procures around 2.7m-2.8mmt of coal from Coal India, hence the impact of the recent price
hike would be Rs2bn-2.2bn. We estimate a cost push on per bag basis of Rs3/bag which
would have to passed on through price hikes.
Cement prices currently strong, but we remain cautious
The All India average cement prices have improved from Rs225/bag in September 2010, to
Rs245/bag currently. In many markets cement prices are at all India high levels. The industry
has been able to push through significant price increases in the last few months, which would
have a positive impact on margins in 4QFY11 as compared to 3QFY11. However, the
capacity utilisation rates are expected to remain low at 75% over the next two years, and
hence it is critical that manufacturers behave rationally for the period of over-supply. Given
the fragmented structure of the industry (with over 40 players on an All India basis), we
remain cautious and expect cement prices to be volatile.
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