Ramco Cements formerly known as Madras Cements, has reported a drop in profit to Rs.25.59 crore from Rs.83.60 a year ago, a 69 per cent drop. The company’s net sales fell from 2.8 per cent to Rs.842.62 crore. Analysts relate this to overcapacity coupled with raw material cost increases. The cost of materials escalated by 23 per cent reaching Rs.161 crore in the December quarter. The cement companies in south have been under pressure for the last 16 quarters. The Telangana issue and lack of availability of construction raw materials like sand and gravel in Tamil Nadu and Karnataka have made matters worse.
Manufacturers of South have lowered the prices by 5 per cent to Rs.290 a bag from a year ago. Most of the companies in this region are operating at 65 per cent of capacity. The sector can be rescued only if demand grows at ten per cent for the next four years so that at least 85 per cent of installed capacity is in use. Analysts predict that the growth rate will fall from six per cent to four per cent in coming year.