There could also be some uptick in demand from the second half, it said adding, election results would impact overall growth in construction activities. The rating agency has, however, maintained its "stable to negative" outlook for the sector for the next fiscal. The slowdown in construction and allied activities would led to shrink the capacity utilisation of the cement companies further between 70 percent and 75 percent in FY'14 and FY'15 compared to 76 per cent recorded in the previous fiscal.
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Capacity utilisation would be the highest in the eastern region at 80-85 percent followed by Western region at 70-80 percent and would be the lowest in souther India at 56-58 percent. As such overall capacity addition is likely to moderate as incremental demand will be lower than incremental supply. Capacity additions would grow at a CAGR of six percent till FY'16 while demand may pick up by over 4 percent in the same period. Southern India will continue to face a demand-supply imbalance.
Analysing 18 cement companies, it said these do not have the pricing power to pass on these cost increases to customers due to the sluggish demand despite a substantial increase in the overall cost structure in FY'13.
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