The January–June period, covering Q4FY24 and Q1FY25 - typically seen as ‘busy’ or robust period for cement-makers, could be a less cheerful one this time.

While Q4 volume growth is pegged between 7-10 per cent (nine month average being 9–12 per cent), primarily driven by March stocking post announcement of year-end discounts, making it somewhat better than earlier quarters of the fiscal; a volatility in demand is expected to play out well into September this year with Q1 (April-June) bearing the election season brunt and subsequent July–September months being hit by monsoons.

On the price front, January– March was the fifth straight quarter when cement makers failed to initiate or give effect to any major price increase. Prices plunged 4- 5 per cent q-o-q, and 3 per cent y-o-y .

Cement companies have announced price hikes April onwards – to the tune of ₹10 per bag (average pan-India price) - but the market is not very sure of it being absorbed specially in view of the competitive landscape.

Demand volatility in Q1

Concerns for Q1 (April – June) volumes primarily centre around the polls. The period leads to a restriction on cash movement and general slowdown in work, return of labour to their home-town for voting; apart from demand volatility because of the election season.

Cement demand could be impacted by the additional stocking that was done in March when the discounts kicked-in.

According to a market participant, the demand in H1FY25 (April – September) is estimated to be moderate due to the general elections (till June), followed by the monsoon season.

“There will be muted demand in April–June period because of elections and then Q2 is a seasonally weak quarter. So despite demand remaining robust on paper, it may not have much of an effect in H1,” an industry source said.

According to a report by brokerage firm, Axis Securities, with the general election scheduled in Q1, “cement demand is expected to experience volatility due to disruptions caused by election-related activities”.

“However, demand is anticipated to gradually recover post-election. Additionally, there is a prevailing expectation that the existing government will secure another term, leading to the continuation of infrastructure-related spending, which will further drive cement demand,” the brokerage said in a recently released report.

Price hikes moderated

Pricing environment may continue to be volatile given the odds of slow volume off-take in post-election year (at 6-7 per cent vs 9 - 10 per cent in FY24); and massive fresh capacity addition of 61 million tonnes per annum (mtpa) – which include 34mtpa clinker - in FY25 – and another 62 mtpa cement capacity (which include 38mtpa clinker) in FY26.

Ramp-up of the acquired and under-utilised units–Sanghi Industries in west India (7 per cent of region’s capacity) and JP Associates’ assets in central India (7 per cent of region’s capacity)–would make price hikes more challenging.

“Given the lower exit prices of Mar 24 and increased competitive intensity, we do not foresee a sustainable price hike in the near term,” another brokerage firm, Motilal Oswal said, adding that despite higher capacity utilisation (over 90 per cent) in Q4, the sharp correction in cement prices could lead to “lower profitability during the quarter”.

We estimate average EBITDA/tonne to decline, which would partly be offset by positive operating leverage and favourable fuel prices. Aggregate EBITDA is estimated to increase 24 per cent y-o-y, while OPM (operating profit margin) is expected to improve y-o-y,” it said.

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