India Ratings maintains stable negative outlook for cement sec

India Ratings has maintained a stable negative outlook for cement sector for FY15 mainly on the back of slowdown in the construction and infrastructure segments.
Cement demand growth is expected to remain sluggish at around 5-6 per cent for FY15, given the slowdown in the construction and infrastructure sectors, the rating agency said in a statement.
"The growth will be supported by an expected increase in demand from the rural sector and Tier 2 and 3 cities. There could also be some uptick in demand from the second half of FY15 as the Centre has made a budgetary provision of Rs one billion on infrastructure projects spends during the year. Also, election results will impact overall growth in construction activities," India Ratings said.

Giving its views on the impact of the performance of cement sector on the players, the agency said it expects limited downside risks for integrated players who are also among the top 2-3 players in their respective regions.
"They are likely to maintain a stable outlook on their long-term issuer rating for FY15. The median EBITDA margin of this group is unlikely to fall more than 50-100bps y-o-y in FY15. However, non-integrated players placed on the cost curve may continue to face pressure on their credit profile and thus a negative outlook," it said.
The firm expects the credit profile of non-integrated players to further deteriorate due to limited pricing power and rising costs.

"The EBITDA margins of non-integrated players and integrated players fell to 11 per cent and 18.5 per cent respectively in the first half of FY14 from 18 per cent and 22.7 per cent, respectively, year-ago," it said.