Cement industry has started recovering: India Cements MD Srinivasan

The Indian cement industry has started recovering from the impact of COVID-19 helped by pent-up demand and improved rural markets, India Cements Vice-Chairman & Managing Director N Srinivasan said.

The company expects an uptick in demand on the back of government's push towards infrastructure projects such as construction of highways, rural infrastructure and irrigation projects, Srinivasan said while addressing the 74th Annual General Meeting of India Cements Ltd (ICL).

"The industry has started recovering slowly from May 2020 given the pent-up demand and the improved rural demand," Srinivasan said while addressing the shareholders virtually.

During the first quarter of FY2021, Andhra Pradesh and Telangana governments re-started their infrastructure projects and housing for poor schemes.

"With further relaxation of lockdown measures, there are expectations of increased public spending on rural infrastructure, irrigation, road building and other projects. This along with pick up in individual home building and construction is expected to improve the cement demand," he added.

According to DIPP data, the cement industry had a steep de-growth of 86 per cent in production in April 2020 and marginally improved to register a de-growth of 39 per cent unto June 2020, said Srinivasan.

"Based on the information available, the cement industry in the south had also registered a negative growth of around 45 per cent during the first quarter," he said.

While talking about ICL's performance in the COVID impacted April-June quarter, Srinivasan said it reported good working results on the back of improved selling price and sustained efforts on cost reduction despite the steep drop in volume caused by the lockdowns.

"The company achieved an EBIDTA of Rs 159 crore during the first quarter as compared to Rs 245 crore in the previous year during these challenging times with much lower volume (was down by 52 per cent) as compared to the previous year," he said.

Total revenue of Chennai-based ICL, including other income, was down to Rs 5,085 crore in FY 2019-20 as against Rs 5,659 crore.

As per the official estimates, the overall cement production for the industry in 2019-20 had a "marginal negative growth" to 334.48 million tonnes from 337.32 million tonnes in 2018-19.

The cement industry had a healthy demand growth of 13.31 per cent in FY2018-19.

The demand was affected post the general elections in May 2019 due to stalling of the some of the existing projects for review, extended monsoons, low capital outgo on infrastructure and road projects.

"The overall capacity utilisation at the all India level dropped to 74 per cent from 78 per cent in 2018-19. The industry in the south reported a de-growth of around 8 per cent last year reversing the turnaround reported in 2018-19 with robust growth of 19 per cent," Srinivasan said.

Though there was some recovery in cement demand from December, the momentum could not be sustained with the outbreak of COVID-19 pandemic and the nation-wide lockdown from March 25 which paralysed the construction activity.