Shares of Ramco Cement fell 10% to Rs 634.65 in intraday trading on the BSE on Thursday, down 14% in two days, after the company reported weak results for the quarter ended September 2022 (Q2FY23).

Ebitda fell 52% year-on-year to Rs 193 crore, mainly due to sharply higher fuel prices and weaker cement prices. The second quarter blended Ebitda was Rs 582 per ton, compared to Rs 1,484 a year earlier, which was one of the lowest values ​​in the past eight years. The company said it was unable to pass on the full cost increase to customers because of the sharp rise in fuel prices. While revenue rose 20.1% to Rs 1,794 crore, sales rose 22% year-on-year.

Going forward, Ramco Cements believes that the business environment continues to be uncertain due to the rapidly changing economic environment given the prevailing pressures in the global geopolitical scenario.  “This has put pressure on fuel costs. Usually, the short-term visibility of business prospects is clearer, but this time it is different. This situation may continue for a few more quarters considering the existing uncertainty, but the long-term prospects continue to be promising,” the company said.

Continued consolidation in the cement industry, coupled with the rapid addition of new capacity, could lead to increased demand for market share by players, which could impact margins for the foreseeable future, especially due to uncertainty in fuel prices. Ramco Cements said continued volatility in fuel prices, accelerated depreciation of the rupee and rising interest rates were troubling factors.

Meanwhile, the company has raised its capex guidance for FY23-24 to Rs 2,600 crore (previously around Rs 1,400 crore), modernising concentrators, mine development, etc.

Analysts at Emkay Global Financial Services have lowered Ebitda by 13% for FY23E and 3% for FY24-25E, considering second-quarter misses and higher opex/tonne. Additionally, the brokerage has revised its September 23 target price to Rs 670 from Rs 710 earlier, due to higher capital expenditures and leverage.