The profitability of domestic cement makers is likely to improve in the current fiscal on higher realisation due to improved price, rating agency CARE Ratings today said in a report.
"Though there may be partial reversal in cement price hikes in the near term due to monsoon impact, the average cement price during FY'15 is expected to be higher as compared with FY'14," it said.
Last fiscal was a challenging year for cement industry due to pressure on realisation coupled with increased costs.
Cement makers raised the price of the building material in the last quarter of 2013-14 and in the first quarter of the current fiscal.
CARE said this will lead to higher realisation for them despite the fact that the average freight cost may be higher than FY'14 on account of increased diesel and rail freight rates.
"Higher realisations ...Are expected to not only negate the impact but also result in improved profitability margins on year-on-year basis," it said.
Cement demand witnessed just 3.5 per cent growth in FY'14 compared to 5.3 per cent in FY'13 and 6.7 per cent in FY'12, mainly due to slowdown in infrastructure, industrial and real estate projects.
"Consequently, cement prices remained under pressure for major part of the year. Though few attempts to increase the prices by the cement companies were made during the year, the hikes were reversed most of the times till Q3 FY'14," it said.
On an overall basis, the cement sector witnessed margin pressure during FY'14.
