Construction material firm’s see margins, capacity utilization under pressure
In an interview to CNBC-TV18, Keshav Bhajanka, executive director of Century Plyboards and Raju Patel, committee member of Morbi Ceramic Association discussed demand trends amid spiking commodity costs.
Input prices have been on the rise globally as well as locally and the recent hike in the price of compressed natural gas (CNG) in Gujarat. Gujarat Gas has raised CNG price by Rs 2.58 per kg to almost Rs 80 a kg, along with an increase in domestic piped natural gas (PNG) price.
This implies, that many industries will have to pay more for inputs, which in turn will impact their profitability.
In an interview with CNBC-TV18, Keshav Bhajanka, executive director of Century Plyboards and Raju Patel, committee member of Morbi Ceramic Association discussed the demand trends amid spiking commodity costs.
Bhajanka said, “For us, CNG prices are not that relevant because we are more or less on biomass or on coal in certain locations.”
Having said that, plywood raw material prices have spiked by more than 10 percent, laminates by closer to 20 percent, MDF close to or above 20 percent, he said, adding that however, by virtue of being market leaders, the firm has been able to pass these costs on.
“There is a time lag and in the short-term, there will be a hit in profitability, but in the long-term, I do not think there will be any meaningful impact on either demand or margin,” he said.
He also sees good opportunity in capex because the industry or some players facing constraints due to working capital but Century Plyboards has a very strong balance sheet and has provisioned for all capex initiatives well in advance, he said. Bhajanka added that the firm’s plans remain on track. “In fact, we are trying to prepone some of them. Hopefully, we will be able to get our capacities on perhaps sooner than expected,” said.
Meanwhile, Patel said it is difficult to pass on the price hike immediately. “Overnight price increase of tiles will be a bit difficult for us to pass on to the customer. The industry, presently, is running almost at 60 percent capacity utilization and at the same time the supply of gas is 80 percent instead of 100 percent requirement,” he said.
On capacity, he said his firm has been utilising 60-70 percent capacity since October 2021.
For the entire discussion, watch the accompanying video
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