ICRA revises cement growth outlook for FY22

ICRA has revised its cement volumetric growth outlook from 15% to 10-12% for FY22 as the second wave of Covid-19 has impacted domestic cement production in the first quarter of the financial year. In April, cement production was 11% month-on-month (m-o-m) and decreased to 18% in May. It is not like the previous year when most urban areas got infected. Notwithstanding the start of the monsoon, the expected pent-up demand to drive the volumes is the beginning of Q2 FY22. The ICRA report said the production volumes of cement firms could take a hit this fiscal year; it is expected that the credit profile would remain constant and run by healthy cash generation and strong liquidity. However, the increasing input prices could result in a decline in operating margins by nearly 300 bps. Shree Cement, India Cement, UltraTech Cement, Bharathi Cement, Dalmia Cement, and Ambuja Cement are big cement companies in the domestic market. About the road logistic sector, ICRA said due to the second wave, muted business performance over Q1 FY22 is likely to hold annual growth at 6-9%, compared to the last estimate of 10-12% for FY22. The rating company is expecting the aggregate operating profit margins of logistic companies samples to be between 9-9.5% in FY22, against 9.9% in FY21. ICRA said that the logistic capability of companies to increase freight rates would be essential to sustaining profitability in the near term. Growth across the medium term would continue to run by demand from parts such as pharmaceuticals, industrial goods, e-commerce, FMCG, retail, and chemicals, linked with the paradigm shift of the industry towards organised logistics players, after the GST and E-way bill implementations. Image Source Also read: Cement industry to witness improved demand from July 2021 Also read: Cement prices in India improve, maximum hike in southern India