India Cements Ltd has managed to generate a net profit in a quarter that was marred by Covid-19 lockdown challenges and demand related pressures. This was achieved despite working at just 35 per cent of its capacity.
Helped by better efficiency in operation that included stringent cost-control measures and increase in cement prices, the company posted a profit after tax of ₹17 crore for the period ended June 30, amid 48 per cent fall in revenue at ₹757 crore.
The company reported a PAT of ₹72 crore in the year-ago quarter when the capacity utilisation was about 80 per cent and revenue was ₹1,469 crore.
Drop in volume
The drop in volume alone had accounted for a contribution loss of more than ₹216 crores during Q1. However, with the improved realisation and reduction in overall expenditure, the EBIDTA was at ₹159 crores compared to ₹245 crore in the previous year.
Its net plant realisation was higher at ₹4,235 per tonne during the quarter compared to ₹3,654 a year ago.
N Srinivasan, Vice-Chairman & Managing Director of India Cements, said the performance of the company could be considered to be good given the market situation. The EBIDTA margin during the quarter was highest in the last several years.
He said the shift to cash-and-carry model instead of credit improved the liquidity position of the company during the quarter and the company could meet its obligations by repaying some debt. “Also significant reduction in fixed cost from the level of about ₹190 crore per quarter to ₹130 crore in Q1 and cut in marketing expenses also helped,” he added.
Cost cuts
The company's efforts to cut costs and increase prices reduced the break even level of capacity utilisation from 62 per cent in Q1 of FY20 to just 33 per cent in Q1 of FY21.
The company neither cut the salary of the staff nor laid off any worker during the period though deployment of contract staff was not there due to the current situation.
On the demand outlook, Srinivasan said, States like Andhra Pradesh were showing positive signs with improving cement sales driven by government-related projects and it would only get better.
“Going forward, we will be on a sound footing due to control on costs. I am leaner now and if demand improves, we will do much better,” he added.