Home >Markets >Mark To Market >Low ROE new normal for cement industry

The cement industry continues to be dragged down by subdued demand, low utilization levels and weak prices.

This has impacted the sector’s return on equity (ROE). An analysis by domestic brokerage firm India Infoline Ltd (IIFL) showed that in FY19, the sector’s ROE was at 7.8%. This was an outcome of stiff competition for market share in an environment of subdued demand. The sector’s ROE has been heading lower since FY08, when it stood at more than 30%. Back then, utilizations were at their peak of around 90%. Currently, the industry’s utilization level is estimated to be 70%.

Graphic by Satish Kumar/Mint
View Full Image
Graphic by Satish Kumar/Mint

It should be noted that cement producers took steep price hikes in April this year in anticipation of improved demand. However, price increases failed to sustain as the prolonged monsoon kept a lid on demand.

According to analysts at IIFL, there is risk of ROE declining in FY21 owing to the likely stabilization of new capacities, resulting in resumption of fight for market share.

Cement demand remains tepid across India. Demand is mainly impacted by the sluggish housing sector growth and slowdown in execution of government’s infrastructure projects.

Subscribe to newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.

Click here to read the Mint ePaperLivemint.com is now on Telegram. Join Livemint channel in your Telegram and stay updated

My Reads Logout