Cement makers expect margin relief as falling oil prices set to lower petcoke, coal costs

New Delhi [India], November 12 (ANI): Cement companies are expected to see a significant improvement in profitability in the second half of FY27 as falling global oil prices are likely to bring down the cost of key fuels such as petcoke and coal, while higher cement prices are expected to support earnings, according to a report by Systematix Group.
The report said the cement sector remained resilient in the second quarter of FY27, with volumes across the companies covered by the brokerage growing 7.2 per cent year-on-year.
Both higher sales volumes and improved realisations contributed to top-line growth during the quarter.
The report expects the impact of lower oil prices to gradually reflect in fuel costs, although the transmission is likely to happen with a delay.
"As oil prices fell sharply in recent weeks, we expect petcoke and coal prices to follow suit with a delay," the report said.
Fuel and packaging costs remain a near-term concern for cement manufacturers, with the report expecting these expenses to weigh on profitability in the third quarter of FY27.
However, moderation in energy costs, along with improved selling prices, could provide relief in the following quarters.
Cement prices improved towards the end of the second quarter, while price hikes implemented during September and October are expected to support realisations in the second half of FY27.
The report also mentioned that demand conditions are expected to remain supportive.
According to the report, infrastructure spending, housing demand and a recovery in construction activity after the monsoon are likely to drive cement consumption in the coming months.
Regionally, demand in the eastern market remained subdued due to prolonged monsoon conditions and flooding. However, northern, southern and western markets witnessed stronger demand.
The report remained positive on the sector, citing resilient demand growth of 8-9 per cent, improving pricing discipline and the expected moderation in fuel costs.
"We remain constructive on the cement sector owing to resilient 8–9% demand growth, improving pricing discipline and moderation in fuel costs, which should support a sharp earnings recovery in H2FY27," the report said. (ANI)