Cement volumes to expand by 7-8% YoY in FY25, despite Q1 moderation: ICRA

Cement production: In its outlook on the cement industry, ICRA has asserted that it expects cement volumes to rise by a healthy 7-8 per cent year-on-year (YoY) in FY2025, driven by sustained healthy demand from the infrastructure and housing sectors. 
As per ICRA, it assesses the growth in Q1 FY2025 to have been muted at 2-3 per cent YoY due to a slowdown in construction activity because of the General Elections. 
Nevertheless, the government’s focus on infrastructure projects, sanction of additional houses under the Pradhan Mantri Awas Yojana (PMAY), and the industrial capex is expected to meaningfully improve cement volume offtake in H2 FY2025.

Reflecting on the trends in the cement industry, Anupama Reddy, Vice President and Co-Group Head, Corporate Ratings, ICRA, said: “The operating income for ICRA’s sample set1 is expected to witness an expansion of 7-8 per cent YoY in FY2025, primarily driven by volumetric growth,” 

“While the cement prices are projected to largely sustain at previous year levels, some softening of cost-side pressures – primarily power and fuel costs along with increasing focus on green power, is likely to result in an improvement in OPBITDA/MT2by 1-3 per cent YoY to Rs. 975- 1,000/MT,” Reddy further added. 

Green power 

In terms of alternative energy, ICRA estimates the green power to account for 40-42 per cent of the total power mix by March 2025, compared to around 35 per cent as of March 2023, for the cement companies in ICRA’s sample set. 

“The major cement players in the country aim to reduce their emissions by 15-17 per cent over the next 8-10 years by increasing the share of blended cement, which uses less clinker and consequently less fuel, boosting the share of green power consumption through a mix of solar, wind and waste heat recovery system (WHRS) capacities,” added the ICRA outlook. 

ICRA estimates the capacity addition in the cement industry at 63-70 million MT during FY2025-FY2026, of which around 33-35 million MT will be added in FY2025 (FY2024: 32 million MT), supported by healthy demand prospects. The eastern and southern regions are forecast to lead the expansion. The capacity utilisation is expected to rise to 71 per cent in FY2025 from 70 per cent in FY2024, backed by higher cement volumes;

however, the utilisation remains moderate, on an expanded base. Although the debt dependence is projected to remain high to fund the ongoing capex programme, ICRA expects the credit profile of cement producers to remain stable, driven by healthy growth in operating income, anticipated improvement in operating margins, comfortable leverage and coverage metrics,” Reddy added.