The cement industry is expected to record an 18-20 per cent volume-based growth and even surpass pre-COVID levels by 6 per cent in the current fiscal, according to a report. However, high input costs on account of inflationary pressure are resulting in a decline in operating margins by 440-480 basis points to around 19.8-20.2 per cent in FY2022, ICRA said.
“For the full year, FY2022, ICRA expects 18-20 per cent volumetric growth to around 355 million metric tonnes which is expected to surpass pre-COVID levels by 6 per cent, driven by continued strong rural housing demand and pick-up in infrastructure activity,” it said in the report released on Wednesday.
ICRA AVP & Sector Head, Corporate Ratings, Anupama Reddy said that despite the increase in the net sales realisations by 5 per cent, the Operating Profit Before Interest, Taxes, Depreciation and Amortisation (OPBITDA) per metric tonne declined by 10 per cent Y-o-Y in the first 9 months of FY2022 to Rs 1,124.
This is “primarily due to increase in input prices – the raw material, power & fuel and freight expenses which are higher by 12 per cent, 31 per cent and 5 per cent Y-o-Y respectively,” she added.
For the full year, the continued elevated costs would push down the OPBITDA/MT by 16-18 per cent to Rs 1,030-1,050/MT, Reddy said.
According to the report, all-India cement production registered a growth of 25 per cent at 290 million metric tonnes in the first 10 months of FY2022 compared to the year-ago period.
“It was higher by 4 per cent when compared to pre-Covid levels of 10M FY2020,” it said.