Cement industry to grow at about 7% in FY17: report
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New Delhi: The cement industry is expected to grow at 6-7% in the current fiscal with government’s focus on infrastructure development being a key driver of demand, says HeidelbergCement India.
A subsidiary of HeidelbergCement Group, Germany, the company also said that while prospects of a normal monsoon augur well for the industry, oversupply may restrict the ability to pass on any input cost increases. Cement demand growth expectations for 2017-18 is 6-7%, HeidelbergCement India said in an investor presentation.
It cited prospects of normal monsoons, increased focus and outlay for agriculture, infrastructure as well as affordable housing and thrust on construction of cement concrete roads as demand boosters. Besides, the launch of smart cities and urban infrastructure development along with implementation of GST will also bring opportunities for growth for the sector.
However, the company said the industry could also face challenge of oversupply restricting “the ability to pass on any input cost increases”. Moreover, “delay in awarding infrastructure projects” by the government agencies and “further hardening of fuel and power costs” may also prove to be hurdles to growth.
It also listed non-availability of sand and aggregates impacting construction activities, as possible dampener of growth. According to the Cement Manufacturers Association (CMA), the industry had a decline of 1% last fiscal although the compounded annual growth rate of the industry of last five years was around 4%.
The industry has a total capacity of 435 million tonnes (MT) per annum, while it is utilising only 280 MT for meeting domestic demand and 5 MT for exports. For 2016-17 fiscal, HeidelbergCement’s total income stood at Rs2,025.54 crore, up 4.49%, compared to Rs1,938.36 crore in the previous year.