Cement Sector Forecast: Slower Growth, Promising Future

The cement industry projects a slower growth of 7-8% this fiscal, reaching 475 million tonnes. Despite lower demand in early months, the year's latter half promises improved margins. Government infrastructure spending and rural housing revival are key growth drivers, but price fluctuations pose risks.

The cement industry is projected to experience slower growth this fiscal, with a 7-8% increase, amounting to 475 million tonnes. An initial decline was recorded due to prolonged heatwaves and a labor shortage coinciding with general elections. However, a more favorable second half is anticipated, as highlighted in a Crisil report.

The report attributes the anticipated improvement to better operating margins and a revival in rural housing demand, buoyed by a healthy monsoon. Government expenditure on infrastructure, which constitutes 30% of cement demand, is expected to bolster growth, with increased capital expenditure planned for later this fiscal year.

Despite potential risks of subdued construction activity and fluctuating costs due to geopolitical tensions, financial metrics remain steady. Cash accruals are predicted to stay robust, with players maintaining healthy liquidity. Yet, a noticeable 6% drop in cement prices in the first half raises concerns about future profitability.

(With inputs from agencies.)