Cement Demand in India Expected to Grow by 5% in FY25
In India, cement demand is projected to increase by 5% in the fiscal year 2025, according to a report by Centrum. Despite challenges such as delayed government spending after the general election, excessive monsoon rains, and flooding, which have negatively impacted demand, the industry is optimistic about recovery.
Current Market Conditions
Year-on-year, cement demand has decreased by 5-6%, but recent capacity expansions are expected to result in a 2.7% growth. The report notes weak demand in the south, north, and central regions, with some areas experiencing over a 20% decline. However, a significant improvement is anticipated in the second half of FY25.
Price Trends
In the second quarter of FY25, cement prices fell by 1.5%, with the central region experiencing the highest decline at 4%. Eastern India, however, saw stable prices with a slight increase in September. Although prices have been dropping for several months, minor increases in August and September suggest upcoming price hikes driven by demand recovery.
Financial Impact
The report highlights a decline in earnings for cement companies due to reduced demand and price cuts. EBITDA is expected to decrease to Rs 704 per metric tonne, a drop of Rs 159 quarter-on-quarter and Rs 220 year-on-year. Nevertheless, a recovery in EBITDA is forecasted as demand consolidates in the south and utilization increases in the north.
Outlook for FY25
With demand revival and anticipated price hikes, cement companies are expected to achieve better earnings growth in the latter half of FY25.
Doubts Revealed
FY25 -: FY25 stands for Fiscal Year 2025. In India, a fiscal year starts on April 1st and ends on March 31st of the next year. So, FY25 means the period from April 1, 2024, to March 31, 2025.
Cement Demand -: Cement demand refers to how much cement people and companies want to buy and use. Cement is a key material used in building things like houses, roads, and bridges.
Capacity Expansion -: Capacity expansion means increasing the ability to produce more cement. This can happen when companies build new factories or improve existing ones to make more cement.
Q2 FY25 -: Q2 FY25 means the second quarter of Fiscal Year 2025. In India, this would be from July 1, 2024, to September 30, 2024.
Central Region -: The central region refers to the middle part of India. It includes states like Madhya Pradesh and Chhattisgarh, where changes in cement prices were most noticeable.
Reduced Earnings -: Reduced earnings mean that cement companies are making less money than before. This can happen if they sell less cement or if the prices are lower.
