Difficult quarter for the industry: Here is what to expect from Q1 results of cement majors

The cement sector is expected to see tepid revenue and profit growth for the quarter ended June 2024 due to weak demand and pricing pressure. Factors such as general elections, labour shortages, severe heat waves, and timely monsoons are likely to contribute to the weak cement demand. Competition for market share is also expected to keep margins under pressure during the quarter.

According to Sharekhan, sales volume growth in the sector is expected to be soft at 4.5% YoY, while weighted average EBITDA per tonne is expected to decline by 3.4% YoY. Operating profit is expected to register marginal 1% YoY growth, with net profit expected to decline by 11.3% YoY.

Centrum Broking anticipates a contraction in cement demand on a YoY basis by 3-4%, with different regions experiencing varying levels of demand. Despite weak operating margins, some companies like JK Lakshmi Cement are expected to see a rise in net profit.

During the April-June quarter, most cement companies delivered positive returns to investors. Some companies like Burnpur Cement, Panyam Cements & Mineral, and KCP saw significant gains, while others like Prism Johnson and Dalmia Bharat experienced declines.

Looking ahead, demand is expected to pick up post-H2FY25, led by public and private capex ahead of budget allocation for infrastructure and a resurgence in the rural sector. Cement prices may rise post-Q2FY2025 as demand revives during the second half of FY25.

Overall, there are expectations of further consolidation in the industry, which may result in delays in greenfield capacity additions and improve pricing discipline. Nirmal Bang Securities expects EBITDA per tonne of companies under their coverage to decelerate, with varying expectations for profit after tax for companies like ACC, Ambuja Cement, and Birla Corporation in Q1FY25.