Asbestos-based roofing players’ PBIT margins likely at 8-9% in FY25 and FY26, margins to slide in FY22-24 on Russia-Ukraine conflict, supply chain disruptions

financialexpress.com:

The asbestos-based roofing players are expected to record PBIT margins at around 8- 9 per cent in FY2025 and FY2026, an improvement of 100-200 bps, stated a report by ICRA. This, it added, will be backed by estimated steady growth in volumes and marginal improvement in realisations. The asbestos fibre prices increased at a CAGR of 9.6 per cent during the FY2018- FY2024 period compared to the modest rise in realisations at a CAGR of 3.1 per cent during the same period, thereby impacting the profitability of the companies.

Abhishek Lahoti, Assistant Vice President and Sector Head, Corporate Ratings, ICRA, said, “Though sales volumes increased at a CAGR of ~5.4 per cent during FY2018- FY2024, rise in raw material prices, intense competition and narrowing price differential compared to substitutes limited the ability to fully pass on the increase in prices to customers. This halved the PBIT margins to 7 per cent in FY2024 from 14 per cent in FY2022.”

In FY2023, fibre prices had increased by 25 per cent, amidst the Russia-Ukraine conflict. Russia is the largest exporter of Chrysotile asbestos in the world. Additionally, rupee depreciation and spiking freight costs due to logistical challenges had worsened the price increase.

Asbestos roofing is predominantly used in rural India due to its affordability, price competitiveness and durability, compared to the alternative options. In India, only the Chrysotile variety (also known as white asbestos) of fibre cement, which is considered safe, is used in roofing solutions. The fibre is mixed and bonded with cement and other raw materials, preventing the possibility of escaping into the atmosphere on normal usage. India has banned the mining of asbestos. While the country still