According to IMS Research, the industry has shifted toward cost optimisation in the absence of strong growth prospects and rising energy costs. Companies plan to improve their power mix by shifting toward cheaper options (coal), thus depicting sharp earnings in the results ahead.
Analysts assumed that domestic demand for cement has been weak in the past three years (average YoY growth of -7.2 per cent) and is anticipated to recover gradually (by two per cent YoY in FY25). However, industry profit margins will likely remain strong due to declining interest rates and sustained pricing discipline.
Meanwhile, the Punjab provincial government will likely ramp up infrastructure spending to restore its past political standing. The recently announced ‘Apni Chhat Apna Ghar’ (own shelter, own house) housing scheme is a testament to that expectation.
The industry focuses on cost optimisation
With the industry operating at only a 50 per cent utilisation rate by the end of FY24 and a less-than-promising demand outlook, the focus has shifted from capacity expansion to building cost efficiencies (such as investing in renewable energy sources). Rising prices of national grid power and gas are key driving factors. For instance, the industry will cumulatively commission about 80MW of renewable energy (solar and wind) during FY25.
