New Delhi, March 23 (FN Agency) Cement production is expected to increase by 18-20 per cent in FY 2022 and surpass pre-Covid levels (FY2020) by around 6 per cent, rating agency ICRA said on Wednesday. However, high input costs will result in a decline in operating margins by 440-480 bps in FY2022, it said. The agency said the all-India cement production registered a growth of 25 per cent at 290 million MT in 10M FY2022 compared to 10M FY2021. It was higher by 4 per cent when compared to pre-Covid levels of 10M FY2020. The demand picked up in December 2021-January 2022, higher by 14 per cent Y-o-Y during this period following a decline of 3 per cent Y-o-Y in November 2021 due to unseasonal rains and festivities.
”For the full year, FY 2022, ICRA expects 18-20 per cent volumetric growth to around 355 million MT which is expected to surpass pre-Covid levels by 6 per cent, driven by continued strong rural housing demand and pick-up in infrastructure activity,” it said. Anupama Reddy, Assistant Vice President and Sector Head, Corporate Ratings, ICRA, said, “Despite the increase in the net sales realisations by 5 per cent, the OPBIDTA/MT declined by 10 per cent Y-o-Y in 9M FY2022 to Rs 1124/MT primarily due to increase in input prices – the raw material, power and fuel and freight expenses which are higher by 12 per cent, 31 per cent and 5 per cent Y-o-Y respectively. ”For the full year, the continued elevated costs would push down the OPBIDTA/MT by 16-18 per cent to Rs 1030-1050/MT in FY2022. The operating margins are expected to decline by 440-480 bps Y-o-Y in FY2022 to around 19.8 per cent-20.2 per cent. While the leverage (TD/ OPBIDTA) is improving from 1.5x in FY2021 to 1.3x in FY 2022 due to decline in total debt on account of scheduled repayments, the DSCR is likely to witness moderation from 2.1x in FY2021 to 1.8x in FY2022,” she said.