Large producers, including UltraTech Cement, ACC Ltd and Ambuja Cements, subsidiaries of LafargeHolcim Ltd, and Shree Cement, reported higher year-on-year volume in Q2FY21. This was boosted by healthy demand from rural India and the affordable housing segment as well as a steady renovation component that offset weak new build activity in urban housing, infrastructure and commercial construction.
The pent up demand also kept selling prices firm during May and June, with the initial easing of pandemic-related lockdowns coinciding with a rush to complete construction ahead of the monsoon.
Lower energy and fuel costs - which together account for nearly 60 per cent of total cement production
costs - and fixed cost savings helped increase the per tonne margins from a year ago and cushioned the overall decline in operating profit from weaker volume, it added.
Prices declined in the seasonally weak Q2FY20, but remained firm on a yoy basis. This reflected continuing stabilisation in demand and a disciplined approach to pricing following increased industry consolidation over the past few years.
Overall, most large companies posted higher per tonne and overall operating profitability, despite higher energy and fuel costs from Q1FY21. This resulted in broadly stable or improved operating profit generation in H1 FY21 from a year ago.
India's cement demand
in FY22 is expected to rise by high single digits from a low base in FY21. This would be in line with the country's broader economic stabilisation and an increase in infrastructure and commercial construction projects. Deferred new capacity additions from 2020 should also support profitability.
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