‘Pent-up demand to drive sales in Q2’
The second wave of COVID-19 has adversely impacted the domestic cement sales in the April-June quarter, reducing 25% on a quarter-on-quarter basis but pent-up demand is expected to push up volumes starting in the July-September quarter, as per a report. In April, when the second wave was on the rise, domestic production was down 35% month-on-month in April and 4% lower in comparison with the pre-pandemic April 2019, said ratings agency ICRA.
Unlike last year, rural areas have also been impacted in the second wave. “The recovery in the rural regions is expected to be gradual,” it said. However, it added that pent-up demand is likely to drive offtake once lockdowns are relaxed.
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Covid second wave to result in 25% reduced cement offtake in Q1FY22: ICRA
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IndiaAnupama-reddyஇந்தியாஅனுபமா-சிவப்புApril 06, 2021
Demand rebound driven by rural housing, infrastructure
The domestic cement demand is expected to be highest in a decade and estimated to surpass 340 million tonnes in FY2022, driven by sustained rural housing demand and significant pick-up in the infrastructure activity.
On the supply side, the capacity additions are also expected to increase by 22-25 million tonnes per annum in FY2022.
As per an ICRA note, while the cement prices are expected to largely sustain at the recently increased levels supported by the improved demand, the higher input costs are likely to exert pressure on operating margins in FY2022. Though this is likely to result in some moderation in debt coverage metrics, they are likely to remain at healthy levels.
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