Cement production slumps 12% in Q1 FY22: ICRA report

Cement production declined 12% to 82 million tonne (mt) in April-June FY21-22 against the previous quarter as Covid-19 induced lockdowns in several states affected demand, according to an ICRA report.

The output was 54% higher, helped by a lower base on account of nationwide lockdown in April 2020 year-on-year (YoY), the ICRA said.

The cement production in 4M FY2022 is lower by 2% against pre-Covid levels, it said.

Though ICRA anticipates total production in the country to increase by 12% in the current FY, supported by factors like pent-up demand, pick-up in infrastructure activity, and rural housing demand.

ICRA Assistant Vice President & Sector Head, Corporate Ratings Anupama Reddy said that the sales volumes of ICRA's sample witnessed a fall of 20% QoQ due to the impact of the second wave of Covid-19, however, higher by 44% YoY. The net sales realisations observed an increase of 4% YoY and 5% QoQ on the back of the cost hikes taken by cement companies in June quarter 2021-22.

These price hikes are majorly driven by the increase in input costs, mainly power and fuel and freight expenses over the last few months.

While the industry observed cost side pressures, the companies report the highest ever OPBIDTA per mt at Rs 1,372 per mt in Q1 FY22, exceeding the previous peak of Rs 1,306 per mt achieved in Q1 FY2021, Reddy said.

The raw material prices rise due to higher additive prices such as fly ash and inward freight prices due to a rise in diesel costs and the rise in the power and fuel price per mt was due to the increase in coal and pet coke costs. In the June quarter, the coal costs rose by 154% YoY and the pet coke costs by 98% YoY.

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