Lower Input Costs, Scale Benefits To Drive Cement Sector Profitability, Says Crisil

Lower raw material costs and increased capacity utilisation will drive profitability for cement companies in FY24, according to Crisil's Hetal Gandhi.

Power and fuel costs are expected to decline 14-15%, while utilisation levels will increase from 69% in FY23 to 70-72% by end of FY24, Gandhi, director of research at Crisil Market Intelligence and Analytics, told BQ Prime's Sajeet Manghat.

The eastern region of India is expected to add the most capacity of 10-12 metric tonne per annum in FY24. But this may cause utilisation levels to drop from 70% in FY23, she said.

According to her, northern and southern India are expected to add 6-8 mtpa in capacity in FY24. There could be improvement in utilisation levels in the south, from 55% in FY23 to 61-62%; while the north is likely to see it rise beyond the 80% level reported in fiscal 2023.

A 15-18% drop in coal prices, which is expected due to supply chain uncertainties and lack of recovery in China coupled with lower petcoke prices, is expected to reduce power and fuel costs from Rs 1,600 per tonne to Rs 1,450 per tonne, Gandhi said.