Cement production declined 12 percent to 82 million tonnes in April-June 2021-22 compared to the previous quarter. As COVID-induced lockdowns in various states impacted demand, a report by Icra said. However, year on year, the output was 54 percent higher. Helped by a lower base on account of nationwide lockdown in April 2020, the rating agency said.

“The production in 4M FY2022 (April-July) is lower by 2 percent compared to pre-COVID levels (4M FY2020),” it said.

Though Icra expects total production in the country to go up by 12 percent in the current fiscal year. This can be supported by factors like pent-up demand, rural housing demand and pick-up in infrastructure activity.

Commenting on the Q1 performance of cement companies, Icra Assistant Vice President & Sector Head, Corporate Ratings Anupama Reddy said: “The sales volumes of Icra’s sample witnessed a decline of 20 percent Q-o-Q due to impact of the second wave of Covid-19 pandemic, however, higher by 44 percent Y-o-Y”.

The net sales realizations witnessed an improvement by 4 percent Y-o-Y. 5 percent Q-o-Q on the back of the price hikes taken by cement companies in June quarter 2021-22.

These price hikes are majorly driven by the increase in input costs, primarily power & fuel and freight expenses over the last few months.

“While the industry witnessed cost side pressures. The companies report the highest ever OPBIDTA/MT at Rs 1,372/MT in Q1 FY2022, surpassing the previous peak of Rs 1,306/MT achieved in Q1 FY2021, majorly supported by the higher net sales realizations and the cost optimisation measures undertaken,” Reddy added.

The raw material costs increased due to higher additive prices. Such as fly ash and inward freight costs due to an increase in diesel prices. The increase in the power and fuel cost/MT was due to the rise in coal and pet coke prices.

The coal prices increased by 154 percent Y-o-Y. The pet coke prices by 98 percent Y-o-Y in the June quarter.

The impact of the elevated fuel prices is moderated to an extent with the improving share of green power and efficiencies by cement companies, it said.

“The reliance on debt for new capacity additions in FY2022 is likely to be lower owing to the healthy cash generation and strong liquidity of the cement companies. The debt coverage metrics are expected to remain strong in FY2022,” Reddy added.

Cement production falls 12% in Q1 FY22