Multiple headwinds to slow down cement makers

Multiple headwinds to slow down cement makers
30/12/2017 , by , in ALLIED

The earnings projections of cement companies for FY18 are likely to suffer amid lower anticipated sales volumes and subdued prices.

According to dealer estimates, the all-India average cement price fell by 2 per cent sequentially to Rs 326 per 50 kg bag in the December 2017 quarter. On a year-on-year basis, it rose marginally by 5 per cent. Historically, the sector has been reporting better traction in December. However, this time, realisation is under pressure due to several headwinds.

For instance, cost of sand, a key raw material, has increased by four-five times from the year ago due to lesser availability. In addition, construction activities in the real estatesegment have slowed following demonetisation and implementation of Real Estate Regulatory Authority (RERA) Bill. The segment accounts for 60-65 per cent of total cement consumption. This has impacted offtake volume.

According to analysts, meeting the earlier expectation of 7-8 per cent volume growth for the full year will be a difficult task. To deliver that much growth, companies would require to clock 9 per cent growth in the second half of the fiscal.

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