Cement dispatches likely to dip 10% in FY21: Icra – The Financial Express

At pan-India level, cement prices are higher in the northern, southern and western markets by 20%, 5% and by 8%, respectively, in FY20 while the prices in the eastern markets reduced by 2-3% during the same period.

Cement offtake witnessed healthy growth in January and February.

The nationwide lockdown due to the Covid-19 pandemic would adversely impact the cement demand in the first quarter of the financial year 2020-21 (Q1 FY21) with the construction activity coming to a halt.

The normalisation of construction activity could take some time post the lockdown. Icra expects the cement dispatches to decline by around 10-12% in FY21 on a year-on-year (y-o-y) basis. Despite cracks in demand, the cement prices are likely to get only marginally corrected and with the support of benign input costs, the compression in operating profitability could be limited to 200-250 bps in FY21.

Cement offtake witnessed healthy growth in January and February by 5% y-o-y and 8.6% y-o-y, respectively, while it was affected by Covid-19-led disruption in mid-March 2020.

Offtake in FY20 is expected be remain flat on a y-o-y basis, with a decline of 3-4% in Q4 FY20. The capacity utilisation of the players stood at 71% in FY19 and is estimated at 68% in FY20. This is likely to slip to 58-60% in FY21, thus impacting the return on capital employed (ROCE) of the cement companies, said an Icra on Thursday.

At pan-India level, cement prices are higher in the northern, southern and western markets by 20%, 5% and by 8%, respectively, in FY20 while the prices in the eastern markets reduced by 2-3% during the same period. Further, easing of cost-side pressures, such as a decline in the pet coke prices by 23% and coal prices by 25% in FY20, has supported the decline in the power & fuel costs for the cement makers in FY20.

Anupama Reddy, assistant vice-president, Icra Ratings, said, “We expect the cement demand to decline by around 10-12% y-o-y in FY21. Housing accounts for 60-65% of the cement demand followed by infrastructure segment around 20-25%. Typically, demand in the first quarter of a financial year is led by rural housing post the harvest season.”

via Cement dispatches likely to dip 10% in FY21: Icra – The Financial Express

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