Chennai: India Cements Ltd has turned out a reasonable performance given the tough market conditions in the south arising out of regional imbalances in capacity.
Spurred by infrastructure projects, The Chennai-headquartered company is now confident of hitting full capacity utilisation and achieving better profitability by the fourth quarter of this fiscal.
Despite the drop in selling prices of cement, the company could achieve this through increased volume coupled with stringent control on fixed cost and selling expenses, a statement from the company said.
Vice Chairman and Managing Director, N Srinivasan said, “Normally, June quarter capacity utilisation will be lower than the March quarter. But, our capacity utilisation in this June quarter is higher by a percentage point than Q4 of previous fiscal. It is the sign of slow, but sure increasing demand. I am already at 80 per cent capacity utilisation (up from 67 per cent in the year-ago quarter). Going forward it will continue to increase.”
Factors contributing growth
Three factors drove cement sales for the company. First was all the effects of demonetisation and GST are behind and it is back to business as usual.
Next, the sand mining issue in Tamil Nadu, the biggest consumer of cement in south India, has been addressed.
Finally, there has been significant infrastructure activities in Andhra Pradesh, Telangana and Maharashtra which have generated huge demand for cement.
Performance in numbers
The operating performance of the company during the quarter had substantially improved with a capacity utilisation of 80 per cent as compared to 67 per cent in the same quarter of the previous year.
The overall volume of the company for the quarter under review was 30.75 lakh tons up by 16 per cent as compared to 26.56 lakh tons in the same quarter of the previous year.
The company has reported a drop in its net profit at Rs 21 crore for the quarter ended 30 June 2018 when compared with Rs 26 crore in the previous year.
The steep drop in NPR by nearly 9 per cent when compared to same quarter of the previous year meant a bottom line impact of nearly Rs.104 crores for the quarter.
Future outlook
“We have managed operating expenses much better. The freight and handling charges have gone up year-on-year and quarter-on-quarter for every other company. But for us, it has come down. Because, we have sold more cement in South, where the market grew by 20 per cent, while we grew by 27 per cent,” said Srinivasan while outlining various measures taken up to cut the costs in the coming quarters.
“In addition the good showing of the current monsoon will further improve rural demand. With the Government’s focus on big-ticket infrastructure projects and housing and the expected higher public spending ahead of General Elections next year, on the whole, we can expect good capacity utilisation levels and better prices during the second half of this financial year,” he said.