Cement manufacturers have reported a significant decline in margins for the September quarter of FY25, primarily driven by lower sales realisation. The repercussions of this trend are being felt across the industry, as weaker prices and sluggish demand combine to impact profitability.
While industry giants like UltraTech Cement, Ambuja Cement, and Dalmia Bharat have managed to maintain some stability, smaller players such as Nuvoco Vistas Corp, JK Cement, Birla Corporation, and Heidelberg Cement are grappling with a decline in both topline and sales volumes. This situation is exacerbated by external factors, including an extended monsoon season, flooding, and a lack of robust government demand, which have collectively dampened market sentiment. The all-India average price for cement stood at approximately ₹348 per 50 kg bag in June 2024, but fell by 11% year-on-year to ₹330 by September. This downward trend reflects a persistent decline in prices, which have dropped 10% year-on-year in the first half of FY25, compared to ₹365 per bag the previous year. Despite a slight month-on-month recovery, the overall sentiment remains cautious. For instance, UltraTech reported a capacity utilisation rate of 68% with a modest 3% growth in volumes. However, the sales realisation for its grey cement declined by 8.4% year-on-year. In an earnings call, CFO Atul Daga noted a recent stabilisation in prices, suggesting a potential recovery: “From ₹347 in August, prices have improved to about ₹354 currently.” Ambuja Cements, while showing a commendable 9% year-on-year increase in sales volume to 14.2 million tonnes, reported a 15% decrease in EBITDA, indicating that despite higher output, profit margins are being squeezed by falling prices. The Adani Group-owned firm did experience higher capacity utilisation, which helped mitigate some losses. Dalmia Bharat’s volume growth of 8.4% to 6.7 million tonnes was offset by a 2% drop in revenues, reflecting the ongoing pressure from declining cement prices.
The management attributed the lower prices to weak demand, particularly in southern and eastern markets, where prices have decreased by 10-12% year-on-year. The situation for Birla Corporation appears similarly bleak, with sales volume down 5% and EBITDA per tonne falling sharply from ₹683 to ₹461 year-on-year. This stark contrast highlights the ongoing challenges in a traditionally weak monsoon quarter. Despite the current headwinds, cement manufacturers are cautiously optimistic about the latter half of FY25. Many anticipate a rebound in demand driven by increased government spending on infrastructure projects and a resurgence in housing requirements, which could improve sales realisation. The outlook for the cement industry remains mixed. While margins are under pressure now, the potential for recovery as market conditions stabilise provides a glimmer of hope. As stakeholders monitor these developments, the emphasis on sustainable practices and cost management will likely play a crucial role in navigating these turbulent times.
