A first major rise was seen in cement prices last month since the rollout of the goods and services tax (GST), upending the downtrend seen for an extended period. The rates surged in the last week of the month, with an average hike of up to Rs 25 per bag (50 kg) compared with the same period in January, a report said. The hikes will boost the operating profitability of cement manufacturers even as costs are coming down and demand growth rising, the report by CRISIL Research said.
On account of dwindling costs and surging demand growth, the manufacturers will see 200-250 bps on-year improvement in margins in the current quarter, it added.
“That said, sustainability of these prices beyond the current quarter appears uncertain as demand momentum is seen coming off in the first half of next fiscal given the impending elections. However, price cuts on these massive hikes would still ensure reasonable price growth of 3-5% through fiscal 2020,” said Prasad Koparkar, Senior Director, CRISIL Research.
Meanwhile, a recent study by India Ratings and Research (Ind-Ra) said that the country’s cement manufacturers may benefit from the continuing demand push, on account of the healthy growth expected across end-markets such as individual home building, affordable housing, roads and irrigation sectors.
This momentum is expected to continue in fiscal year 2020, propelled by government-led spends on roads and affordable housing schemes, the study also said. The agency added that it maintains a stable outlook on the cement sector for fiscal year 2020.