Construction Industry News
Cement volume growth recovered to a strong 7-8% YoY level in Q4 FY24, driven by aggressive volume expansion efforts. This recovery follows strong growth of approximately 15% year-on-year in the first half of the fiscal year, with a modest slowdown in the third quarter due to regional challenges.
This represents the third consecutive quarter. A year that saw strong growth in demand, reaching around 11% in FY2024, totaling around 441 million tons. On this high basis, CRISIL MI&A Research expects demand growth to moderate to 6-7% in FY25.
However, cement prices across India took a heavy hit in the second half of the financial year amid competition Increasing. . And the largest offer in the market. Prices have fallen by Rs 40 to Rs 45 per bag in the five months (November 2023 to March 2024) since the last price hike in October 2023.
Against the trend of flat prices in the first few months of and in the fourth quarter (and falling prices (in March due to increased volume at the end of the year), January and February did not see any sustained price increases this year, highlighting the high intensity of competition in the market. The significant increase in volume at the expense of prices led to a sequential decline of around 6% in cement prices to an average of Rs 370-375 per 50 kg bag in Q4, with March outlet prices at Rs 360-362 per bag. So, at the overall level, cement prices were low, falling by about 1.5% to Rs 383-385 per bag on average in FY2024 from an all-time high of Rs 391 per bag in FY2023.
Speaking about this, Sihul Bhatt, Research Director, CRISIL Market Intelligence and Analytics, said, “Increasing competitive intensity due to entry of new players, increase in production capacity by 40-42 MT and benign cost pressures prompted correction in cement prices in the year. Fiscal 2024 After four consecutive years of price increases at a CAGR of about 4% from FY2020 to FY2023, in FY2025, continued capacity expansion, easing cost pressures and moderation in demand will limit any recovery and keep prices within Range (1) -1%
On the profitability front, benign costs brought a sigh of relief for players in FY2024 despite weak achievements and although global coal and coke prices continued to decline, respectively, by about 7%. And about 11% sequentially, in the fourth quarter, it is estimated that the focus on market share led to a decrease in margins by about 120 to 170 basis points on a quarterly basis. /p>
On an annual basis, energy and fuel costs, which represent between 30% and 35% of total costs, fell by between 16% and 18% in FY24, mainly due to a fall in Australian coal prices of ~58% % and coke prices at the international level. Prices increased by ~38% year-on-year. As a result, profitability is expected to rebound in FY2024, with an expansion of 300-350 basis points, reaching ~17%.
In FY2025, CRISIL MI&A Research expects a correction in strength of -9%. 11%. Fuel costs are driven by weak coke and coal prices. Transportation expenses are also expected to decrease by 1% to 3% due to lower diesel prices, along with efforts by players to improve progression distances through aggressive expansions.
However, raw material costs are expected to remain within a limited range in FY2025, and improved availability of fly ash and slag will limit any significant increases. However, the auctioning of limestone mines should limit the sharp decline in commodity prices.
Sachidanand Chaubey, associate director of research at CRISIL Market Intelligence and Analytics, says: “Lower input costs are expected to To further expand margin by 100-150 basis points in FY2025 to 18-20% despite tapering achievements. However, margins could remain lower compared to highs of ~25% in FY2021 amid results. Weak.Crude oil activity and coal prices should be monitored due to geopolitical uncertainty as they may impact profitability.
