Cement industry production to grow 7-8%: Icra gives 'stable' outlook

The domestic cement industry is expected to have a volumetric growth of 7-8 per cent in FY24, helped by a rise in demand from the housing and infrastructure sector, a report by ICRA said on Monday, giving a 'stable' outlook for the sector.

Besides, the softening of input costs would help the cement industry to improve its operating profits before interest, tax, depreciation and amortisation by 14-18 per cent Year-on-Year (YoY) to Rs 900-950 per MT in FY24, it added.

Moreover, supported by healthy demand prospects, the capacity addition in the cement industry is estimated at 63-69 million metric tonnes (MT) between FY24 and FY25.

 

In this, a capacity worth around 33-36 million MT will be added in FY24 and around 30-33 million MT in FY25.

"The cement capacity is expected to rise by 6 per cent in FY2024, the highest addition in the last five years," it said.

ICRA has given a "stable" outlook for the cement sector.

Steady demand from the housing and infrastructure sectors along with a pick-up in industrial capex is expected to support volume offtake.

Power and fuel costs, which were at a peak in H1 FY23, eased in H2 FY23 and are expected to further moderate in FY24, improving the operating margins.

"This should improve the EBITDA margin for the cement sector by 230-270 bps to 16.3-16.7 per cent in FY24," ICRA Vice-President and Co-Group Head, Corporate Ratings Anupama Reddy said, adding, "However, this will remain below the margins reported during FY17-FY22."

However, she also warned that the development of El Nino conditions could adversely impact monsoon in 2023, impacting rural housing, which could pose some downside risks.