Weak construction demand to hit cement industry: Icra

New Delhi: Rating agency Icra has revised down its volume growth forecast for the cement industry to 4-5 per cent at 445-450 million tonne for the current fiscal on account of sluggish construction activity.

In July this year, Icra had forecast a year-on-year volume growth of 7-8 per cent, expecting a better pick-up in demand in the second half. However, Icra has now revised its projection "on account of slower-than-expected ramp-up in construction activity across the housing and infrastructure sectors, post the General Elections," a statement said. Besides, on a YoY basis, the operating profit margins declined by 375 basis points to 12 per cent in Q2 FY2025 and by 192 bps to 14 per cent in H1 FY2025 as prices remained under pressure due to muted demand and oversupply.

In the first half of FY25 all-India cement volumes witnessed a muted rise of 2 per cent YoY to 212 million tonne on account of the slowdown in construction activity in Q1 during the elections, followed by the ample monsoon rainfall in Q2.

"The likely improvement in farm cash flows, backed by healthy monsoons, an upbeat kharif output and elevated replenishment levels of reservoirs supporting the rabi crop sowings, are expected to boost the rural consumption in H2, which should aid the cement demand for the rural housing segment," it said.

Moreover, sustained healthy demand for urban housing should support the pick-up in cement volumes from the housing segment.