Shree Cements posts 44% fall in Q3 profit on high fuel costs

Shree Cement Ltd reported a 43.7 per cent fall in third-quarter profit on Wednesday, missing expectations, as persistently high input and fuel costs triggered by the Russia-Ukraine war weighed on the cement sector.

The Kolkata-based company posted a standalone profit of Rs 277 crore for the quarter ended Dec. 31, compared with Rs 492 crore a year earlier.

Analysts, on average, had expected a profit of Rs 322 crore, according to Refinitiv IBES data.

Total expenses rose 26.8 per cent to Rs 3,846 crore, amid a surge in global oil prices.

Even though prices of key fuel components such as petroleum coke and coal slightly cooled-off in the third quarter, prices remained elevated. Marginal cement price hikes, largely led by the eastern region of the country, failed to offset the surge.

Power and fuel costs, which account for a major part of the cement maker's expenses, jumped 61.3 per cent to 13.03 billion rupees.

The Indian cement sector is betting on the country's investment in infrastructure in the pre-election period to drive up its demand. A 33 per cent jump in allocation for key infrastructure sectors in the Union Budget 2023-24 might also boost cement demand. India is the world's second-largest cement producer.

"Given the government's focus on infrastructure growth in the Union Budget 2023-24,... cement sector is poised for robust growth in coming years," the company said in an exchange filing.

However, the rising input costs led by higher fuel prices may impact margins, the company added.

Gross revenue from operations in the third quarter rose 16.4 per cent to Rs 5,199 crore.

Rivals Ramco Cements, ACC Ltd and Ultratech Cement reported a fall in third-quarter profit on higher costs, while Ambuja Cements reported a profit jump on higher demand.

Shares of the company fell 2.1 per cent to Rs 23,750 after the results. The stock shed 13.7 per cent in 2022.