The demand slowdown may continue in the cement industry in the second quarter of the fiscal year 2020, a report said.
The demand slowdown may continue in the cement industry in the second quarter of fiscal year 2020, a report said. The election-related headwinds and ongoing monsoon season are the major factors that may impact the cement demand in Q2 of FY20, report by Motilal Oswal Financial Services said. However, the sector may see recovery in the second half of the ongoing fiscal. “Managements highlighted that the cement industry volumes declined 3-4% YoY in 1QFY20, as all-India utilization stood at 67% versus 75% in 4QFY19. Also, election-related headwinds impacted demand during the quarter,” the report said.
Some cost savings are also expected in the coming quarters by the cement players, owing to reducing energy prices, it added. “Various regions are witnessing roll back in prices. Current all-India prices are at INR10-15/bag, which is 3-4% lower than the 1QFY20 average,” it added.
The report also said that the corporate earnings in the first quarter of FY20 has remained below the expectations for both the Nifty and the MOFSL Universe. “Domestic Cyclicals continued driving earnings growth for the third consecutive quarter, led by Financials, which contributed almost the entire earnings delta but still fell short of expectations. The Nifty delivered 5% earnings growth for the quarter versus our estimate of 12%,” it added.
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All the sectors except cement, IT consumers, NBFC and private banks missed the expectations in the first quarter, it added. The weak demand has mainly been on account of economic slowdown, coupled with muted sentiment, the report added.
The corporate sector including auto and FMCG is seeing a slowdown and has asked the government for a stimulus package. A few days back, the government came out with a slew of reforms to boost the sluggish economy.