Icra Ratings said in a report on Thursday that cement production will grow by 12 percent in FY22 due to strong pick-up in infrastructure activities and strong rural demand from mid-December. After the fall in November due to turbulent monsoon, we will now see a sharp rise in cement production.
This growth in production will also be supported by last year's low base effect. It is worth noting that in this period last year, due to the corona epidemic, the production level of cement was very low.
In the second quarter of FY 2022, there has been a growth of 22 percent in All India Cement production on a year-on-year basis, while there has been a growth of 10 percent from the pre-covid level of the second quarter of FY 2020. The cement production housing segment has benefited from rising demand and booming infrastructure.
Icra has further said in this report that in the 7 months of FY 2022, cement production has been 5 percent higher than the pre-Covid level, although the margins of cement companies may be under pressure due to increase in input cast.
In this report of Icra, it has been said that in the first half of FY 2022, input costs like raw material, fuel, freight have seen an increase of 16 percent, 26 percent and 7 percent respectively. Similarly, coal prices have increased by 103 per cent year-on-year and pet coke by 81 per cent. The impact of all this will be seen in the form of pressure on the margins of cement companies.
The report also said that despite some recent cost relief, they are likely to remain elevated in the near term. Due to which there will be pressure on the operating margins of cement companies. In the financial year 2022, the margins of cement companies may see a fall of 200-230 basis points. Similarly, there may be an increase in capacity addition as compared to last year.