Cement production likely to be up by 20% in FY22: ICRA

After a sharp contraction of 17 per cent in FY21, production to grow 20 per cent in FY22, says agency.

New Delhi: After a sharp contraction by 14 to 17 per cent in FY21, cement production is likely to witness a growth of 18 to 20 per cent in FY22 and reach pre-Covid levels, according to investment information agency ICRA.

In the first eight months of FY21, cement production declined by 19 per cent year-on-year to 175 million tonnes. ICRA said capacity additions are expected to be in the range of 15 to 17 million tonnes per annum in FY21 as against the earlier estimates of 20 million tonnes.

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Due to Covid-19 pandemic, the demand was adversely impacted and companies are likely to preserve liquidity. The capex is likely to get back to 21 to 22 million tonnes in FY22. The eastern region is expected to lead the expansion and may add 15 to 17 million tonnes during FY21 and FY22, said ICRA. With the recent order by the Competition Commission of India for investigation into the alleged cartelisation by cement companies, any significant increase in the cement prices is unlikely in the near term.

The decline in coal prices by 20 per cent during 9M FY21 has supported decline in power and fuel costs for cement companies. Most cement companies reported decline in revenues in H1 FY21, driven by a decline in sales volumes due to very limited dispatches since April 2020. But the expected volume growth is likely to result in an increase in revenues in the range of 15 to 20 per cent in FY22.

However, an increase in the input costs is likely to result in moderation in operating margins, which remain healthy at about 20 per cent.

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