Cement companies' profitability to touch 20% in FY21

Cement companies are expected to report healthy operating profitability of about 20 per cent next fiscal on an expected recovery in demand driven by the infrastructure and affordable housing sectors, stable realisations, and benign input prices, according to CRISIL. This fiscal, operating profitability is expected to touch a seven-year high of about 21 per cent, which translates to a 350-400 basis points (bps) on-year surge. Hetal Gandhi, director, CRISIL Research said, “Next fiscal, we anticipate volume growth recovering to 5-6% from 0.5-1% estimated for this fiscal. Demand growth in the infrastructure and affordable housing sectors on a lower base should support volume growth. These two sectors together contribute almost 35-40% of cement demand in India.” According to CRISIL, cement prices are expected to remain stable in fiscal 2021 after high volatility seen this fiscal. The expectedrecovery in demand and high utilisation of clinker capacities at 78% -- because new capacity additions are skewed towards split grinding units – would restrict any steep decline in cement realisations.