Business News | Cement Makers' Margins to Fall Rs 50-75/tonne This Fiscal Amid West Asia Conflict: Crisil
Get latest articles and stories on Business at LatestLY. Operating margins of Indian cement manufacturers are expected to decline by Rs 50-75 per tonne this fiscal to Rs 925-950 per tonne due to higher input costs triggered by the ongoing conflict in West Asia, though steady domestic demand and strong balance sheets are likely to keep credit profiles stable, Crisil said on Wednesday.
New Delhi [India], July 22 (ANI): Operating margins of Indian cement manufacturers are expected to decline by Rs 50-75 per tonne this fiscal to Rs 925-950 per tonne due to higher input costs triggered by the ongoing conflict in West Asia, though steady domestic demand and strong balance sheets are likely to keep credit profiles stable, Crisil said on Wednesday.
According to a Crisil analysis of 18 cement companies accounting for nearly 90 per cent of India's domestic cement capacity, operating margins had improved sharply to around Rs 1,000 per tonne in fiscal 2026 on the back of higher realisations.
The momentum in cement prices has continued into the first quarter of the current fiscal, with prices expected to rise 1-3 per cent during the year after adjusting for the reduction in Goods and Services Tax (GST) rates.
"The West Asia conflict is expected to shave Rs 50-75 per tonne off cement makers' profitability this fiscal. This will be driven mainly by higher power and fuel costs, which account for about 30% of total costs, as petcoke and imported coal prices have surged amid the geopolitical uncertainties," said Anand Kulkarni, Director, Crisil Ratings.
He added that freight costs, which account for around a quarter of total costs, are also expected to remain elevated due to higher diesel prices. The impact on profitability is likely to be more pronounced in the first half of the fiscal year before easing commodity prices help moderate cost pressures later in the year.
Crisil said the increasing adoption of green energy by cement manufacturers is expected to partly cushion the impact of higher energy costs. Green energy currently accounts for 35-40 per cent of the sector's total electricity consumption.
Despite the expected moderation in profitability, operating cash flows are likely to remain resilient, supported by 6-7 per cent growth in cement demand this fiscal.
"Steady 6-7% demand growth this fiscal" is expected to be driven primarily by infrastructure spending, with infrastructure accounting for about one-third of total cement consumption. Nearly 18 per cent higher budgetary allocation for core ministries is expected to support project execution and cement demand.
This is likely to offset weaker rural housing demand amid pressure on agricultural incomes due to a possible below-average monsoon. Urban housing demand is expected to improve, supported by favourable home-loan rates and a strong pipeline of Pradhan Mantri Awas Yojana-Urban projects.
Meanwhile, ongoing capacity additions will keep capital expenditure elevated. Net debt to EBITDA may rise to 1.2-1.4 times this fiscal from around 1.0 time last fiscal, but is expected to remain healthy, supporting stable credit profiles across the sector. (ANI)
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