New Delhi [India], October 5 (ANI): Cement demand is likely to grow by 5 per cent in FY25, and few more round of price hike by companies is expected in the coming months says a report by Centrum.
Multiple factors like delayed government spending post general election, more than normal monsoon and flooding across multiple locations in the country has impacted the demand adversely. On a year on year basis, the cement demand has contracted by 5-6 per cent, but with recent capacity expansion a growth of 2.7 per cent is expected.
“Demand across south, north and central region was weak with certain micro markets reporting more than 20% YoY decline in demand. However, our recent channel check suggests that most participants expect a sharp improvement in demand in 2HFY25. We are building in 5% demand growth for the sector for FY25,” says the report.
The report adds that because of contraction in demand, Q2 FY25 saw a 1.5 per cent decline in prices of cement. Highest decline in prices was seen in the central region with 4 per cent QoQ fall. However eastern India experienced stable prices with marginal hike in September on a weak base.
Many cities saw lowest cement prices over the past 3-4 years in this quarter. But the report adds that the prices which continued to drop for last few months, with minor increase in August and September, will see it going up in coming months.
“The slide in prices which continues for consecutive 7-8 months halted in August and some price increase was observed in the months of August and September. We expect few more rounds of price hikes in coming months driven by demand revival.” the report adds.
With pickup in demand and hike in prices cement companies is likely to see a 5 per cent growth for the entire FY25.
The report highlights significant decline in earnings of the cement companies because of lower demand and price cuts. EBITDA is expected to drop to Rs 704/mt, down by Rs 159/mt quarter-on-quarter (QoQ) and Rs 220/mt year-on-year (YoY). At the same time it also forcasts a recovery on EBITDA per metric tonne.
Consolidation in demand in south India and higher utilization in North India will bring pricing growth for cement companies in remaining part of FY25.
The report concludes that with demand revival and price hikes, the cement companies will come up with better earnings growth in remaining part of the year, H2FY25. (ANI)
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