The cement industry is set to hit a decadal high volume growth of 13 per cent 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. ??hile volume growth will rebound, higher cost of sales would weigh on cement profitability next fiscal,??it said.
Rising prices of raw materials such as diesel, pet coke or coal, and polypropylene bags may push up cost by Rs 150-200 per tonne, it said adding that freight, power and fuel constitute almost 55 per cent 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.
Commenting on the report, Crisil Ratings Director Nitesh Jain said that the demand from the hinterland, which was a saviour for the cement industry in the pandemic impacted FY21, should sustain on the back of higher rural incomes.
??igher spends on infrastructure development would be in line with the 26 per cent increase in budgetary allocation for infrastructure in the Union Budget 2021-22. That, coupled with pent-up demand in urban housing, will drive volume growth,??he said.