“With further relaxation of lockdown measures, there are expectations of increased public spending on rural infrastructure, irrigation, road building and other projects. This, along with a pick-up in individual home building and construction, is expected to improve cement demand,” N Srinivasan, VC & MD of the company said while making the chairman’s address at the virtual AGM of the company.
India Cements expects better performance in the coming quarters, supported by improving conditions in its key markets such as Andhra Pradesh and Telangana, in addition to pent-up demand and rural sales.
Andhra Pradesh and Telangana, as well as Maharashtra, witnessed a steep decline in demand post general elections due to deferment of spending on major projects by the newly elected State governments during 2019-20, Srinivasan said.
He said that the cement industry had started recovering slowly from May 2020, given the pent-up demand and the improved rural demand. Further, during the first quarter of FY21, he said the Andhra Pradesh and Telangana governments restarted their infrastructure projects and housing for poor schemes which also provided a boost.
Cement price, which started improving from February 2019 went down after the first quarter of last year resulting in lower realisation adversely affecting the bottom line, he said.
“In March 2020 alone cement production fell by 25%. The overall capacity utilisation at the all India level dropped to 74% from 78% in 2018-19.”
In his address he said that the industry in the South reported a de-growth of around 8% last year reversing the turnaround reported in 2018-19 with a robust growth of 19%. The region with capacity overhang, reported a lower capacity utilization of around 60 to 62% only against 70% in the previous year, he added.
Apart from the general economic slowdown, the cement demand was affected post the general elections in May’19 due to stalling of the some of the existing projects for review, extended monsoons, low capital outgo on infrastructure and road projects.
Further, he said this was compounded by the stress in the financial sector and thereby low growth in real estate and housing sectors.
Also, India Cements saw a drop in volume of around 48% during Q1 in the South (excluding Maharashtra).Overall, including Maharashtra and the North, it saw a 52 per cent reduction in volume. However, as the lockdown was eased gradually, the demand started to come back, Srinivasan said.