Hit hard by the 4% drop in net plant realisation coupled with a sharp 8% increase in variable costs, including fuel, India Cements has reported a 95% drop in its net profit for the quarter ended September 30, 2018 to Rs 1.43 crore as compared to Rs 23.67 crore in the same quarter last fiscal.
The company has announced on Friday its major expansion plans, involving Rs 1,000 crore investment for its greenfield plant at Damu in Madhya Pradesh to have an initial installed capacity of 2.5 million tonne per annum. The company hopes to achieve full capacity utilisation in the April-June quarter of next fiscal.
Despite an 11% increase in cement sales during the quarter to 30.77 lakh tonne, the company’s bottomline eroded sharply by Rs 38 crore due to a 4% drop in net plant realisation as well 8% increase in variable costs, said N Srinivasan, vice-chairman and managing director, India Cements. “We have managed to do well amidst a bad season. Though the capacity utilisation has gone up from 67% in Q2 of last fiscal to 77% in this quarter, the prices across the country were poor. Despite there was a 23% growth in the south, the capacity overhand continued to put pressure on the prices,” Srinivasan said at a press conference here on Friday.
“The prices of petroleum products along with that of the imported coal and petcoke have gone up sharply and we had to absorb all the costs during the quarter. With the tight control on fixed costs, particularly reduction in manpower costs, freight and handling expenses, the company could achieve an EBITDA of Rs 159 crore as compared to `188 crore in Q2 of last fiscal, a drop of 18%, he pointed out.
With the 11% increase in cement production, the turnover for the quarter grew sharply to Rs 1,390.84 crore as compared to Rs 1,274.90 crore in the same quarter last fiscal.
“We are bullish on the growth prospects, effective January-March/April-June quarter 2019. We are confident that we will achieve 100% capacity utilisation in the next 2 quarters and we also foresee, given the heavy spending on infra by both central and state governments, particularly states such as Maharashtra, Andhra Pradesh, Telengana and some central regions of the country, the next four years will see demand for cement on a higher trajectory and the prices will be much better,” Srinivasan said.
“Given the projections, coupled with the increased capacity utilisation across its plants, the company has decided to put up a new plant at Damu in Madhya Pradesh with an initial installed capacity of 2.5 million tonne with an estimated investment of `1000 crore,” he said, adding, “the company has already applied for necessary approvals, including environmental ones and hope to begin work on the project by last quarter of 2019 and will commence production by early 2021.”
Similarly, the company will also look at expanding capacities at its existing plants across the country with additional investments. “Most of these investments will be met through internal accruals except a small borrowing,” Srinivasan pointed out.
“We see an all-round demand pick up for the commodity in due course of time. Even demand has picked up in Kerala post floods. We are putting up a plant at Damu where there is not much competition. We will supply to entire MP as well eastern and western UP markets from our proposed MP plant,” he added.
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Source: Financial Express