Cement offtake down by 25 pc in Apr-Jun, pent up demand to drive sales in Q2: ICRA

In April this year, when the second wave was on the rise, the domestic production was down 35 per cent month-on-month in April 2021 and 4 per cent lower in comparison to the pre-pandemic April 2019, said rating agency ICRA on Monday. 

This time the rural areas have also been impacted in the second wave, unlike last year wherein it was limited to mostly in the urban areas. 

''The recovery in the rural regions is expected to be gradual,'' said ICRA. 

However, it also added that the overall pent-up demand is likely to drive the off-take once lockdowns are relaxed. 

According to ICRA AVP & Sector Head Anupama Reddy, the cement companies have undertaken price hikes by an average of 5 per cent Y-o-Y in April 2021. This hike is driven by the increase in the input costs, primarily power and fuel expenses and freight expenses over the last few months. ''While the cement prices are likely to largely sustain in the near term, the higher input costs, due to the increasing crude oil prices and under absorption of overheads are likely to result in a moderation of EBIDTA/MT to around Rs 1200/MT in Q1 FY2022, lower by 20 per cent Y-o-Y and 6-7 per cent Q-o-Q,'' she added. 

In FY2021, which ended on March 31, sales have already been "adversely impacted" resulting in the sharpest de-growth over the last decade. Domestic cement production was down 12 per cent to 294 million MT. 

''The major impact on production was felt in Q1 FY2021 with a production contraction by 38.3 per cent Y-o-Y owing to the adverse impact of the nation-wide lockdown with the construction activities coming to a halt, primarily in April 2020,'' it said. 

While in January-March quarter of FY2021 cement companies witnessed an increase in sales volumes by 23 per cent Y-o-Y to 73 million MT.