Weighed down by slack demand, cement companies are all set to report weak financial numbers in the December quarter.

In contrast to the industry expectations, the demand has failed to recover after the monsoon season.

The lower government infrastructure spending and struggling private capex suppressed cement demand in the quarter under review.

The earnings season for the cement sector will start with UltraTech announcing its numbers on January 23.

Most cement companies attempted to hike prices in October and November but had to roll back due to weak demand. However, the price hike implemented in mid-December could not boost profit compared to last year.

Large cement companies led by UltraTech Cement and Ambuja Cements are expected to lead demand growth by 8 per cent year-on-year in the December quarter.

EBITDA may fall 18 per cent, largely due to weak realisations, which are expected to dip by 7 per cent y-on-y.

Parvez Qazi, a Research Analyst at Nuvama Research, said that amid intense competition, an earnings downgrade for the next fiscal year is on the cards, considering the volatile pricing environment and lower-than-expected volume growth in the last three quarters.

The fall in imported pet coke prices by 7 per cent and dip of 6 per cent in non-coking coal prices provided some relief on the cost side, he said.

Notwithstanding fresh capacity addition, volume growth remained subdued due to the festive season, slowdown in construction activity and labour shortage.

“We expect further consolidation in the space mostly in the southern region due to its fragmented nature. Softening fuel prices along with cost efficiency measures undertaken by various players are likely to provide some relief on the cost front thereby cushioning the impact of weak realisations to some extent,” said Qazi.

Ravleen Sethi, Director of CareEdge Ratings, said raw material prices have been highly volatile in the last two years. Although they tapered off in FY24, companies were already carrying high-cost inventory.

“Right now, coal and petcoke are somewhere in the $100 (a tonne) range. The cost has come down by 15-20 per cent year-on-year and this is helping cement players hold on EBITDA per tonne even as prices have fallen,” said Sethi.

Demand in this fiscal year has been impacted by many factors, including project delays due to the general election, flooding, heat waves, and a construction ban.

Earlier, experts had expected demand to grow at about 4-5 per cent this fiscal but revised it lower to 2-3 per cent after the weak demand in the December quarter. However, beyond FY25, the long-term growth horizon will be 1.2 times GDP growth.