New Delhi, (Samajweekly) Cement retail prices are expected to touch an all-time high of Rs 400 per bag in FY22 due to high input costs.
Coal and diesel are the major inputs used in the sector. After rising by an average Rs 10-15 per bag since August, a rise by another Rs 15-20 is likely over the next few months, ratings agency Crisil said.
Besides, earnings before interest, tax, depreciation, and amortisation (EBITDA) of cement makers is expected to decline by Rs 100-150 per tonne in FY22.
“Cement sales volume is expected to rise 11-13 per cent on-year this fiscal, albeit on a low base. This will largely offset the impact of cost pressure on cash accruals and keep credit profiles stable,” the rating agency said.
The agency’s analysis covers 17 cement companies and accounts for 75 per cent of the total market share.
“Cement volume growth will be driven by demand revival across segments – infrastructure, housing and industrial – as the impact of Covid-19 wanes,” Crisil Research Director Isha Chaudhary said.
“Cement demand saw a robust growth of over 20 per cent in the first half this fiscal, but should moderate to 3-5 per cent in the second half, primarily because of a high-base effect, translating to 11-13 per cent growth for this fiscal.”
At the regional level, south India witnessed the steepest hike of Rs 54 per bag in October over the previous month, followed by the central region with Rs 20 per bag. North India saw a hike of Rs 12, while west India was at Rs 10 per bag.
Crisil Associate Director Ankit Kedia said: “While the cost pressure may gradually abate given the softening of coal and diesel prices from October levels, it will take 2-3 quarters to meaningfully reflect in the cost of production.”
“Therefore, the operating profitability of cement makers, or Ebitda per tonne, is expected to moderate by Rs 100-150, or by 300-400 basis points, this fiscal. Absolute profits, however, won’t be affected as higher volume will offset the impact of moderation in margins.”
