Swiss cement major, Holcim, promoter of two of India's biggest cement companies, ACC and Ambuja Cements, said there is no escape from increasing the cement prices in the country considering the high energy costs.
In an interview, Paul Hugentobler, member of executive committee of Holcim, said the cement prices across the world including in India has to rise by $20 to $30 a tonne so that the companies can maintain their profitability.
"If we compare the first quarter of this calender year with the same period of last year, our profitability has come down by 5-7 per cent. If the input costs continue to rise like this, we will not have any other option but to raise prices," he said. Cement prices have already gone up by 4 per cent in the last one year.
Many cement companies are looking at increasing their prices in the coming months to cushion the impact of rising raw material costs. On the government's move to put a ceiling on cement prices, Hugentobler said if this (government intervention combined with high energy costs) continues, the cement companies may have to shut shop. "There is no way out."
"There could be a demand slowdown," Hugentobler warned, adding that the company is making its capacity addition plans according to market cues. "If raw material prices keep rising like this, the demand will obviously come down," he added.
Holcim, which increased its stake in ACC this week by 3 per cent to 46 per cent, has made sufficient plans by substituting energy with alternative fuels to cut costs so that they can maintain their margins.
"Of course our margins are under pressure. Coal prices have gone up by 60 per cent. This constitutes a major component in cement production. We are looking at the option of substituting oil and coal with windpower, waste steam and alternative fuel."
Thanks to rising input costs, Indian companies are taking many steps so that they can maintain their margins. Holcim, which plans to increase the capacity of both the companies from 40 million tonnes to 55 million tonnes in two years, is spending more on making its plants environment-friendly.
"We are targeting to substitute our energy by 30 per cent in 3-5 years." On the market speculation that Holcim will eventually merge ACC with Ambuja Cements, Hugentober said: "We can always send the accountants to merge the balancesheet but it is very difficult to merge the culture of both the companies. We have no plans as of now to merge the two entities though in our global balancesheet we are consolidating our Indian operations."