Dragged down by a surge in power and fuel cost, Birla Corporation Ltd reported a consolidated net loss of ₹50 crore for the quarter ended December 31, 2022, as against a net profit of ₹60 crore same period last year.
Consolidated revenue from operations during Q3 grew by 15 per cent at ₹2,016 crore as compared to ₹1,750 crore same period last year.
The Mukutban unit, a part of the company’s subsidiary, RCCPL, started commercial operations in the current financial year. Consolidated cement sales by volume for the quarter were up 11 per cent year-on-year at 3.72 million tonnes.
The production cost of cement for the December quarter was 12 per cent higher than the same period last year owing primarily to power and fuel resulting in lower cash profit on a comparable basis, which was down 32 per cent from last year at ₹115 crore, the company said in a press statement.
Total expenses were up by nearly 24 per cent at ₹2,088 crore (₹1,689 crore).
“Although progress with the Mukutban project has been ahead of plans and its adverse impact on the bottom line has been contained at a level substantially lower than the original budget, extra-ordinary cost pressure on the cement industry has pulled down overall financial performance,” it said.
To mitigate the cost pressure, the company has optimised its fuel consumption mix, the full benefits of which are to be realised only in the March quarter. Fuel prices have started to climb down and pet coke prices have fallen by about 13 per cent from the end of September and domestic coal prices have corrected by about 20 per cent during the same period. Combined with the change in consumption mix, fuel cost during the December quarter has gone down by nearly three per cent sequentially.
Further correction is expected in fuel prices, which, in turn, will help improve the company’s profitability. For further rationalisation of costs, it is looking to scale up the coal production from its own mines. The company’s subsidiary, RCCPL, received the necessary clearances in January to raise production at its Sial Ghoghri mine from 3,00,000 tons per annum to 3,75,000 tons per annum. The production at the Bikram coal mine is expected to start in Q2FY24.
Even as the company invested to penetrate new markets, it managed to improve realisation per ton for the December quarter to ₹5,155 from ₹4,899 a year ago. It is pushing to further increase realisation in the March quarter and, coupled with cost rationalisation initiatives, which have already been taken, it expects its overall profitability to improve significantly in the quarters ahead.
With production being scaled up at Mukutban and the expanded capacity at Chanderia having been commissioned, Birla Corporation is expecting good growth coming in from the western region in the next few quarters, driven by investments in infrastructure. Capacity utilisation in Q3 was lower at 74 per cent on account of the Mukutban unit, which is in the process of being scaled up.
The company has been making substantial investments in renewable power, and the share of renewables in total power consumption has increased to close to 23 per cent in Q3 from around 21 per cent in Q2, thanks to full utilisation of solar power capacities installed at Kundanganj and Chanderia in the quarter till September 30. The benefits of the waste heat recovery system at Mukutban will be realised after the March quarter. It will substantially raise the use of renewable power by the company and rationalize power cost, it said.