 "Stable prices, lower fuel cost, moderated demand in FY25: Cement executives")
The cement sector in the current financial year (2024-25/FY25) could see stable prices and lower costs, said top executives from large manufacturers, some hinting at moderate growth in demand for the same period.
“Going forward, there might be some moderation in FY25 in terms of demand,” said Atul Daga, chief financial officer for UltraTech Cement, during his address to analysts in a post-earnings call last week.
However, he added, “Our belief is that the slowdown should be shorter than in earlier years, primarily because private sector housing has also picked up momentum.”
For 2023-24 (FY24), cement demand in India is estimated to have grown by 8-9 per cent year-on-year.
In terms of prices, Daga expects the pricing environment to remain stable or improve, stating, “not going down any further”, during the call.
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Analysts had earlier labelled the last quarter of FY24, ending in March 2024, as unusual, as cement prices did not rise as is the norm for the fourth quarter (January-March).
UltraTech’s closest competitor, Ambuja Cement, echoed similar sentiments on the pricing environment.
Ajay Kapur, chief executive officer (CEO) for Adani Cement, informed analysts that pricing should remain stable. Kapur does not expect any price cuts but anticipates an increase going forward. Ambuja Cement is promoted by Adani Group.
Others, such as Dalmia Bharat (Cement), had a more cautious pricing guidance to offer.
Puneet Dalmia, managing director and CEO of the company, said, “Generally, the quarter ending June 2024 sees a price increase across markets. However, we have not seen it so far.”
He added, “I believe that prices may remain soft in the first two quarters, and price increases, if any, may happen from the October-December quarter this year onwards.”
Dalmia expects cement demand in FY25 to grow by 8.5-9 per cent, while he anticipates the company to register a higher growth rate of 12-13 per cent.
On the capital expenditure front, while UltraTech and Ambuja reiterated their medium-term capacity expansion plans, Dalmia said the company is still debating it with the management and the board and will take a few more quarters before presenting the expansion plan to reach a capacity of 75 million tonnes.
The three cement makers are also expecting some fuel cost benefits to accrue in the current financial year (FY25).
Executives from Dalmia noted that some of the coal mines won in earlier rounds of auctions starting production this year will bring down costs.
Executives from UltraTech also noted, “Our fuel consumption cost for the quarter was Rs 2.03 per kilocalorie. The costs will keep sliding during this year, with material improvements being visible from January, March 2025 onwards.”
FY25 Company Guidance
UltraTech expects some amount of demand moderation in FY25
Pricing should be stable, said executives from Ambuja Cements
June 24-ended quarter price increase not seen so far, noted executives with Dalmia Bharat
Companies expect costs related to coal and other fuel to slide, predictable in FY25
Source: Company's analysts call transcripts