Cement Industry Expected To Grow 13% by Volume in FY22
The cement industry is set to hit a decadal high volume growth of 13% in the next fiscal, helped by an expected revival in demand from the infrastructure and urban housing sectors, according to Crisil Ratings.
The increased sales volume will counterweigh the impact of rising power and fuel costs on cash accruals and will keep the credit outlook of cement makers stable, the rating agency said.
While volume growth will rebound, higher cost of sales would weigh on cement profitability next fiscal. Rising prices of raw materials such as diesel, pet coke or coal, and polypropylene bags may push up cost by ₹150-200 per tonne, it said adding that freight, power and fuel constitute almost 55% of the total cost of sales of cement.
“Increasing share of infrastructure and urban housing means a higher proportion of sales will be from the cost-conscious non-trade channels. That would translate to marginally lower net realisation for cement companies,” the agency said.
Companies had slowed down Capex and chose to conserve cash amid demand disruption. Besides, ample liquidity and strong balance sheets have cushioned the impact of the pandemic on the credit profiles of cement companies. The report also added that timely release of funds for key housing and infrastructure projects as announced in the budget for the next fiscal will be crucial for the anticipated demand growth.