The economy may be in dire straits but the cement industry is climbing out of its rut in a rather agreeable fashion. Thanks to perhaps staying strong on pricing, and not competing amongst themselves. While dispatches during FY24 grew by a little over 1 percent—where the demise of domestic dispatches was all too visible, down 5 percent—revenues expanded 11 percent for the industry.
The top-lines have undoubtedly pull eyed up by prices by and large going up throughout the year. For the purpose of this analysis, financial statements of only 10 companies are used here (see illustration). The other factor is the growth in exports that have upheld total sales. Exports grew 56 percent during FY24, and went up from 10 percent to 16 percent of total dispatches.
At the same time, investing in energy efficiency projects, and cutting down on costs by leveraging more accessible and affordable sources of coal have also enabled companies to keep their production costs in check. Together with robust and stable prices, margins combined grew to 29 percent from FY23’s 26 percent.
But what really drew these companies to profitability and growth was other income that contributed to 25 percent of the before-tax earnings. This was 16 percent for the combined group last year. As a result, despite overheads and finance costs growing ever so slightly from 5 percent to 6 percent of revenue, net margins for the group rose to 14 percent in FY24, versus 19 percent last year. Finally, earnings grew 66 percent for the 10 companies after a lower incidence tax this year.
Even though demand was not on their side, everything else seemed to be falling into place. The industry remains fortunate and well-prepared to sever through the worst of economic storms and come out shining, albeit experiencing a few bumps on the way. All’s well on the way to FY25 even if demand pressures persist.
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