Cement business to see 13 per cent volume growth in FY22

NEW DELHI:  The cement industry is set to hit a decadal high in volume growth during the next fiscal year at 13 per cent, helped by an expected revival in demand from the infrastructure and urban housing sectors, and a generous low-base effect, Crisil Ratings said. 

Increased volumes, however, will be counterbalanced by the impact of rising power and fuel costs on cash accruals, Crisil’s analysis of 15 cement companies indicated. These 15 firms account for 75 per cent of the sector’s sales volume.

“Higher spending on infrastructure would be in line with the 26 per cent increase in budgetary allocation for infrastructure. That, coupled with pent-up demand in urban housing, will drive volume growth. Demand from the hinterland the saviour this fiscal should sustain on the back of higher rural incomes,” said Nitesh Jain, director, Crisil.

While volume growth will rebound, higher cost of sales would weigh on cement profitability. Rising prices of diesel, petcoke or coal, and polypropylene bags may push up costs by Rs 150-200 per tonne. To be sure, freight, power and fuel constitute almost 55 per cent of the total cost of cement sales.

Operating profits could also moderate by Rs 200-250 per tonne next fiscal year due to the higher costs and lower net realisation, after having touched a 7-year high of over Rs 1,200 per tonne this fiscal year.