At last, the fiscal year that would go down in history as one of the gloomiest years for the economy and a particularly challenging year for the industry has come to an end. For cement manufacturers, despite a demand that remained subdued for much of the period, profitability did not. In 9MFY24, combined post-tax earnings grew 17 percent even as total volumes grew only 3 percent. This was possible despite a higher effective tax—36 percent vs last year’s 30 percent—as well as greater overheads and finance costs during the period.

With prices moving favorably up, after counting for the FED hikes, it is clear that cement companies will continue to perform well financially. In the full year, volumes are up by 1.6 percent in total; propelled mainly by exports (up 56%), as domestic offtake declined (down 5%). A serious recovery in demand was never expected which made it easier to not dwell on domestic demand, but focus on racking up sales to export markets and keeping prices looking up, with most companies toeing the industry line as much as possible. This is why despite a shortage of demand, and significantly reduced capacity utilization, companies were under no pressure to compete on sales or be in a hurry to enter price wars. Without any meaningful decline in prices throughout the year, the price per ton sold likely remained impressive for most cement companies. Based on the combined financials of 16 cement companies, revenue per ton sold in 9M rose 10 percent, which maintained a decent distance from cost per ton sold which rose 6 percent for the industry. Margins—as a result—were higher this year.

What does the coming year bring but less hope? Though business sentiments appear to have improved, the government’s expectations of signing on a new IMF loan may tighten the noose on expenditure and bring a fresh bout of inflation pushed by much higher taxes and upward revisions in energy prices. This will keep spending of all manners at bay. Cement manufacturers have made necessary investments in energy efficiency, created linkages in export-ready markets expanded volumes sent abroad to cover their fixed costs, and ensured they have a place in the local markets they operate—they won’t make windfall profits, but they will keep their cement kilns burning. One thing is for sure, they may be under demand pressure, but they are never underprepared.