Cement Industry Faces Revised Forecast Amid Sluggish Demand

Icra has adjusted its growth forecast for the cement industry to 4-5% due to slow construction activity. Challenges include decreased profit margins and pressured cement prices. However, increased infrastructure spending and improved rural consumption could boost demand in the latter half of the fiscal year.

Icra, a rating agency, has lowered its volume growth forecast for the cement industry to 4-5% at 445-450 million tonnes for the current fiscal year. This adjustment is attributed to lackluster construction activities across housing and infrastructure sectors, contrary to its earlier prediction of 7-8% growth.

The decline in operating profit margins, which fell by 375 basis points to 12% in Q2 FY2025, reflects the industry's ongoing struggles. Furthermore, cement prices dipped by 10% YoY due to muted demand and over-abundant supply, despite some cost relief from coal and pet coke moderation.

However, optimism persists for H2 FY2025 as expected improvement in rural consumption and increased government infrastructure spending might stimulate demand for cement. Icra anticipates that these factors should support a recovery in cement volumes, particularly driven by rural and urban housing needs.

(With inputs from agencies.)