Cement Prices Are Rising, Developer Margins Are Reducing

Cement Prices Are Rising : Despite an increase in homeownership interest, developers are unable to adjust property prices due to rising input costs. Although increased cement demand has increased production capacity, it has done little to improve developer profit margins. According to a report by the rating agency CRISIL, cement companies’ profits could fall by 15%. Continue reading to find out why!

Despite increased cement demand in India, cement companies have been unable to translate it into higher profit margins due to rising input costs. According to a recent CRISIL report, the profitability of cement companies is likely to fall by about 15% due to an increase in production costs. The report is based on an examination of 22 cement firms, which account for 85 percent of market volume.

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Cement Prices Are Rising : What is the report’s conclusion?

According to the report, cement manufacturers’ profitability will fall by 15% year on year to Rs 900-925 per tonne this fiscal year. This will be in addition to the 9% drop recorded in the previous fiscal year. The increase in production capacity is insufficient to offset the increase in diesel, coal, and petcoke prices, which is the primary cause of the increase in the average cost of cement production.


The effect on overall profits

The cement industry’s 17 percent increase in demand will help to soften the sector’s credit outlook. Even if growth slows in the coming quarters. Average demand for the full fiscal year will be between 8 and 10 percent, the highest since 2019. Increased demand will mitigate the impact of lower profit margins on cement manufacturers’ absolute operating profit and cash accruals.


Cement demand forecasted by industry

The reports also highlighted the anticipated sector demand. An increase in investment in data centres and warehouses will drive demand from the industrial/commercial sector. Government spending will drive infrastructure demand. Non-housing segments will drive volume growth, with offtake increasing by more than 15%. On the other hand, off-take from the housing segment will increase by around 5%. bringing the overall growth to around 10%.


Cement Prices Are Rising : Demographic cement demand

According to the report, the eastern markets are leading the demand drive, with a 15% increase. Infrastructure projects are driving a 10% increase in the central and southern regions. However, because these regions are more developed, the northern and western markets may see mid-single-digit growth.

Despite a recent price drop, the current prices of petcoke and imported coal are still higher than the previous year’s average. This fiscal year, power and fuel costs are expected to rise by Rs 300 per tonne. Likewise, freight costs may rise by Rs 10-15 per tonne.

Because the benefits of lower petcoke and coal prices will be apparent only near the end of the fiscal year. Cement production costs may rise by up to 10%.






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