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Cement Industry: Growth Ahead, Profitability Squeezed
1 Apr
Summary
- Cement industry expects 7-8% growth this fiscal year.
- Profitability faces pressure from rising input costs.
- Demand remains strong from housing and infrastructure sectors.
The cement industry in India is poised for a significant growth of 7-8% in the current fiscal year. This expansion is primarily driven by robust and ongoing demand from the housing and infrastructure development sectors.
Despite this positive outlook on volume, the industry's profitability is expected to face considerable pressure. Key factors contributing to this include escalating input costs for essential materials and fuel, exacerbated by geopolitical tensions impacting global fuel and freight prices.
In the fiscal year 2025-26, cement volumes had already seen a healthy increase of 9.2% year-on-year up to February. The preceding fiscal year also witnessed strong profit expansion, with operating profits per metric tonne rising by 11-17%.
However, the operating environment is anticipated to moderate in fiscal year 2027. Forecasts suggest a 6-11% decrease in operating profits per metric tonne. Although some price increases might occur, they are expected to be limited to 2-4% due to market constraints.
Nonetheless, credit metrics are projected to remain resilient. This stability will be supported by the strong demand conditions, even with increased debt for capacity expansions and moderated margins.
