India’s cement production is expected to reverse the quarterly decline and finish the current financial year ending March 2022 with a 12% growth, supported by the pent-up demand, rural housing demand and the pickup in infrastructure activity, rating agency ICRA said.
Cement output in the three months ended 30 June was 82 million metric tons, down 12% from the previous quarter due to the lockdown on economic activity imposed to curb the coronavirus spread.
According to ICRA estimates, key input costs such as raw material, power and fuel surged 26% each while freight surged 9% in the quarter ending June a year ago. The raw material costs increased due to higher prices of fly ash and increase inward freight costs due
The surge in power and fuel costs per metric ton was due to the rise in coal by 154% and pet coke prices by 98% year on year during the quarter. The impact of the elevated fuel prices was offset by the improving share of green power and operating efficiencies by cement companies.
“While the industry witnessed cost side pressures, the companies report highest ever operating margin per metric ton in April to June, surpassing the previous peak achieved in same quarter last year, majorly supported by the higher net sales realisations and the cost optimisation measures undertaken,” said Anupama Reddy, assistant vice president and sector head at ICRA.
ICRA said net sales realisations of cement companies improved during the latest quarter due to product price increases.
The reliance on debt for new capacity additions in the current year is likely to be lower owing to the healthy cash generation and strong liquidity of the cement companies, ICRA said.