Cement sales can go down by up to 30% in current fiscal
New Delhi: Cement sales in the country can go down by up to 30 percent in the current fiscal. In a survey conducted by CIRISIL, as many as 93 percent of the respondent said that they expect the cement sales to go down by 10-30 percent in fiscal 2020-2021
The survey was conducted with more than 100 dealers of cement makers in tier I and II cities in 13 states.
If the lockdown is extended by the government beyond May 2020 then the sales can be even lower.
As many as 80 percent of the cement dealers expect that individual home builders are going to postpone any new construction because of the poor business outlook leading to income loss and labour shortage.
About 60 percent of the cement dealers are holding very low stock inventories of only few days. Even then there are concerns among them of stock spoilage. The cement dealers said they are hopeful of selling off all their stock if they offer discounts as soon as the current lockdown by the government ends. They will offer discounts so as to lessen the spoilage and have some sort of volumes sales.
There are also payment delay chances by the dealers as they are mostly small and unorganized. They are going expected to delay payments due to liquidity crunch and poor demand scenario. They are also plagued with stock spoilage concerns.
The delay in payment by the cement dealers is going to stretch the receivables cycle in the industry and negatively affect cash flows of the dealers.
The stretched working capital cycle in the industry can last at least till September quarter. The risk of dealers defaulting on payment dues to the cement makers will accentuate the financial pain in the industry.
The collateral free loans for the MSME sector announced by the central government recently will come as big relief. It will support cement dealers get working capital debt. About 90 percent of the dealers surveyed were expecting that the cement makers will give them higher margins and also liquidity support in the present times of hardship.