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Cement sales volume growth is expected to moderate in the December quarter due to subdued demand in rural and housing segments, besides other regional headwinds such as elections in four states, heavy floods in the southern states and construction bans in the northern states.
The sales volume of top cement companies is expected to grow seven per cent in the December quarter with the industry capacity utilisation remaining stagnant at last year’s level of 80 per cent due to fresh capacity addition. However, operating margins will improve due to lower costs and price hikes in select markets.
The Commission for Air Quality Management had banned non-essential construction and demolition activities in the Delhi-NCR region for over 25 days as the air quality deteriorated in November. This was expected to delay the handing over of flats to buyers by three months. The availability of labour was also an issue due to the peak festive season in the December quarter, which slowed down construction activity in the housing sector.
UltraTech Cement has reported that its consolidated sales volume was up six per cent in the December quarter at 27.32 million tonnes year-on-year.
Dharmesh Shah, Research Analyst, Emkay Research, said the volume growth trajectory has slowed down to 6 per cent in the December quarter on account of elections in four major cement-consuming states – Rajasthan, Chhattisgarh, Madhya Pradesh and Telangana and low offtake, specifically in East region.
The industry has been attempting a price hike of (₹10-30 for a 50 kg bag) in January, but partial absorption may be delayed till the second half of this month. Besides, the recent decline in fuel cost of about ₹1,660 a tonne in the last couple of months may ease cost pressure in the coming quarter, he added.
Sanjeev Kumar Singh, Research analyst at Motilal Oswal Financial Services, said cement prices increased across regions but were partially rolled back in November and December through discounts and price cuts due to subdued demand.
Consequently, he said the blended realization for the top eleven companies is estimated to increase 2 per cent year-on-year to ₹5,782 a tonne.
The cost pressure is expected to come down in the coming months, with the US petcoke prices declining by ₹1,660 a tonne to ₹9,628 a tonne in the last two months due to a downturn in the coal market. Spot fuel prices are also lower by 8-10 per cent compared to average prices in Q3 FY’24. The recent decline in input prices and likely operating leverage should provide scope for a fall in cost pressure in the coming quarter.
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