ICRA: High input prices play spoilsport for cement players

23 Mar 2022 , 05:24 PM

The all-India cement production registered a growth of 25% at 290 million MT in 10M FY2022 compared to 10M FY2021. It was higher by 4% when compared to pre-Covid levels of 10M FY2020. The demand picked up in December 2021-January 2022, higher by 14% Y-o-Y during this period following a decline of 3% Y-o-Y in November 2021 due to unseasonal rains and festivities.

For the full year, FY2022, ICRA expects 18-20% volumetric growth to around 355 million MT which is expected to surpass pre-Covid levels by 6%, driven by continued strong rural housing demand and pick-up in infrastructure activity.

Commenting on the 9M FY2022 performance of the cement companies, Ms. Anupama Reddy, Assistant Vice President & Sector Head, Corporate Ratings, ICRA, says, “Despite the increase in the net sales realisations by 5%, the OPBIDTA/MT declined by 10% Y-o-Y in 9M FY2022 to Rs. 1124/MT primarily due to increase in input prices – the raw material, power & fuel and freight expenses which are higher by 12%, 31% and 5% Y-o-Y respectively.”

“For the full year, the continued elevated costs would push down the OPBIDTA/MT by 16-18% to Rs. 1030-1050/MT in FY2022. The operating margins are expected to decline by 440-480 bps Y-o-Y in FY2022 to around 19.8%-20.2%. While the leverage (TD/OPBIDTA) is improving from 1.5x in FY2021 to 1.3x in FY2022 due to a decline in total debt on account of scheduled repayments, the DSCR is likely to witness moderation from 2.1x in FY2021 to 1.8x in FY2022,” Anupama added.