Cement sales growth in Q3 subdued at 3-4%, say industry executives

Industry executives attributed the impact on demand to a host of factors, including floods in South India, construction bans in the National Capital Region, and fiscal challenges in Bihar, Jharkhand

Demand growth from cement in the October-December 2023 period was subdued, registering a 3-4 per cent growth, said executives from top cement manufacturers.

Industry executives attributed the impact on demand to a host of factors, including floods in South India, construction bans in the National Capital Region, and fiscal challenges in the states of Bihar, Jharkhand, and West Bengal. Many added that while the last quarter was subdued, January showed signs of improvement.

For the December-ended quarter of 2023-24 (FY24), India’s top two cement makers registered modest growth in cement sales. UltraTech Cement reported a 5 per cent rise in cement volumes, while ACC-Ambuja Cements consolidated said volumes grew by 3 per cent.

Atul Daga, chief financial officer for UltraTech Cement, said there is a possibility of a slowdown in demand in the first half of the next financial year. Daga was addressing analysts in a post-earnings call in January. He estimated industry growth for the third quarter (Q3) of FY24 to be in the range of 3-4 per cent. This is lower than the 11-12 per cent growth the sector saw in the preceding quarter.

The softness in demand has sent Dalmia Bharat, another top-4 cement producer, back to the drawing board with its capex plans. “Given that we saw a slight weakness in the volumes, we have delayed the expansion plan by a quarter. We are looking at how we are seeing the next few years’ initiatives playing out. But I think our long-term story is intact,” said Rajiv Bansal, president and chief transformation officer for Dalmia Bharat on a call with analysts.

Analysts with Kotak Institutional Equities also noted Ambuja Cements’ consolidated volume (which includes ACC) growth at 2.9 per cent year-on-year suggests that market share loss is continuing. However, senior executives from Adani Cement in a call with analysts also noted industry growth was about 3.5 per cent in Q3FY24.

Dalmia Cement reported an 8 per cent rise in sales volume for Q3FY24; however, it also noted to analysts that growth, excluding a tolling arrangement with a yet-to-be-acquired cement asset, would be 2-3 per cent.

Shree Cement emerged as an outlier, with an 11 per cent rise in sales volumes for the quarter gone by. North India was its best-performing region in Q3FY24. The top four players combined operate more than 50 per cent of India’s cement capacity.

Among regional players, India Cements for South India reported a 9 per cent drop in volumes, which the company attributed to a liquidity crunch. JK Cement, with a presence in North and Central India, reported a 13.3 per cent growth in volumes, also helped by the commissioning of new capacities.

Sagar Cements, with a presence in South India, has also revised its volume guidance downwards for FY24 and 2024-25 (FY25).

“Management is targeting 7 million tonnes (mt) volume for FY25 (earlier 7.5 mt), assuming demand might taper down due to general elections,” wrote analysts with Emkay, adding the company’s management also revised its volume guidance downwards to 5.6 mt for FY24 from earlier 6.2 mt.