The cement industry is gearing up for a notable rebound, with projections indicating a 5-6% year-over-year volume growth in Q4FY25, according to a recent analysis by Nomura. This anticipated growth is largely attributed to heightened demand and strategic channel stocking efforts. Notably, Ultratech and Ambuja are expected to lead the charge with impressive volume increases of 14% year-over-year, aided by recent acquisitions.
Cement Prices Experience a Positive Shift
Recent data from cement dealers indicates that trade prices have risen by ₹7 per bag quarter-on-quarter, reaching ₹344 per bag in Q4FY25. This overall increase reflects a 2% sequential rise, primarily driven by the East and North regions, which saw price hikes of ₹16 and ₹13 per bag, respectively.
- Key Highlights:
- Ultratech and Ambuja: Anticipated 14% growth in volume.
- Trade Prices: Increased by ₹7 per bag, with regional variations.
Cost Dynamics and Future Outlook
While the industry may benefit from reduced fixed costs, rising pet coke prices are expected to exert pressure on profit margins. Nomura anticipates that the full effects of elevated pet coke prices will become apparent starting Q1FY26. Despite these challenges, analysts estimate a 3% year-over-year decline in operating costs per ton for the cement sector under their review. They project that Q4FY25 EBITDA per ton will improve by an average of ₹200, with Shree Cement leading the pack at ₹1,350 per ton.
Seasonal Demand Boosts Volume Growth
The cement sector experienced a resurgence in demand during Q4FY25, benefiting from both trade and non-trade segments. Nomura notes that channel stocking has played a significant role in this growth, predicting an overall 5-6% volume increase industry-wide. For the companies under their analysis, an average 10% year-over-year growth is expected, supported by recent expansions in capacity. Clinker utilization rates for the top manufacturers are projected to reach 95%, up from 86% in Q3FY24.
- Volume Growth Expectations:
- 5-6% YoY increase across the industry.
- 10% YoY growth for companies under coverage.
Pricing Trends Show Encouraging Signs
Average trade prices in Q4FY25 saw a 2% quarter-on-quarter increase, indicating a positive trend despite the focus on volume. The East and North regions have notably driven price hikes, with increases of ₹16 and ₹13 per bag, respectively. Recent dealer insights reveal that prices have continued to rise, with a further ₹5 increase per bag month-on-month in April 2025.
- Price Insights:
- 2.5-3% QoQ increase in pan-India prices.
- Price hikes of ₹10-50 per bag announced in early April.
Anticipating Rising Fuel Costs in Q1FY26
As Q4FY25 concludes, the industry faces an impending increase in fuel costs. Imported pet coke prices surged by 14% quarter-on-quarter, while thermal coal prices saw a slight decline of 8%. Given the usual lag of 60-90 days for these costs to fully impact financial statements, Nomura predicts that the effects will be felt predominantly in Q1FY26. However, they also note that the industry has likely already started to benefit from lower imported fuel costs in Q4FY25.
Industry Leaders Projected to Maintain Strong Margins
Analysts at JM Financial forecast that Shree Cement will showcase the highest margins in the sector at around ₹1,415 per ton, bolstered by regional price improvements. JK Cement is also expected to perform well with margins above ₹1,220 per ton due to improved volumes. Meanwhile, despite challenges, UltraTech is projected to maintain margins exceeding ₹1,100 per ton, and Ambuja is likely to see notable profitability growth.
In summary, the cement industry is on a promising path toward recovery, with favorable pricing trends and increased demand setting the stage for a robust Q4FY25 performance. As companies navigate rising costs and market challenges, their ability to adapt and leverage growth opportunities will be crucial moving forward.
