Published on 12/10/2018 10:53:59 AM | Source: Dion Global Solutions Ltd

India Ratings maintains stable outlook on cement sector

India Ratings and Research (Ind-Ra) Thursday maintained a stable outlook on the domestic cement sector for the remaining period of this fiscal. The agency said it expects that the overall demand conditions will remain stable for the Indian cement manufacturers, considering a gradual economic growth forecast across cement end-markets, with real estate and infrastructure helping sustain volumes. In a statement, Ind-Ra said it has "maintained a stable outlook on the Indian cement manufacturers for the remainder FY 2018-19, driven by a healthy growth forecast across end-markets such as affordable housing, roads and irrigation sector, which would help in sustaining strong volumes.

However, the growth in EBITDA (earnings before interest, tax, depreciation and amortization) could be partially offset by rising input costs". Over the last few quarters, cement prices have remained stagnant despite a constant increase in fuel prices, Ind-Ra noted. With modest capacity additions of 4.2 mtpa (million tonne per annum) in ongoing fiscal, the utilisation is expected to improve. It further said that with a minimum capacity addition in northern region and a stable demand, the utilisation will remain constant.

Capacity utilisation in central region is expected to increase over the medium term on account of receding impact of sand mining issues, election season in central region states and improving utilisation level of Jaypee Associates Ltd's assets. The utilisation in the western region is likely to be high on account of speeding up of DFCCIL projects, Mumbai metro rail project, and road and irrigation projects, due to the upcoming elections in Maharashtra in September 2019. In the east, the utilisation will move northward on account of boost in construction activity in Bihar due to sand availability, growth in individual home builders, affordable housing and infrastructure spends.