India Cements reported a positive EBIDTA in the first quarter of this fiscal, after registering negative EBIDTA for three quarters in a row. However, the company has reported a net loss of ₹75 crore for the June 2023 quarter, as against a net profit of ₹76 crore in the year-ago quarter, due mainly to a reduction in selling price and loss of volume.

While the selling price of cement was lower in the first quarter due to severe competition on account of a supply overhang, there was some reduction in variable cost on account of the softening of fuel prices.

The reduction was ₹168 per tonne in variable cost, when compared with the year-ago quarter. The reduction in variable cost has resulted in a positive EBIDTA of ₹12 crore for the quarter (as against EBIDTA of ₹39 crore in Q1FY23 and negative EBIDTA of ₹140 crore in Q4FY23).

But, the reduction in variable cost was offset by a drop in realisation, resulting in lower margins. The net plant realisation stood at ₹3,965 per tonne in Q1 of this fiscal, when compared with ₹4,112 per tonne in Q1 of FY23 and ₹3,949 per tonne in Q4 FY23.

“The demand scenario has improved, but there were challenges due to poor selling prices,” said N Srinivasan, Vice-Chairman & Managing Director, India Cements Ltd.

The company’s cement sales in Q1 of this fiscal were lower at 26.57 lakh tonnes, when compared with 27.85 lakh tonnes in the previous quarter. The low sales were only due to the liquidity crunch faced by the company consequent to lower margins and losses.

Srinivasan said the company has taken steps to address the variable cost pressures. The new cement mill at Sankar Nagar, replacing old inefficient cement mills, is likely to be commissioned by this quarter.

While it has engaged the services of FLS and Krupp Industries to conduct a detailed study of the operating parameters of plants for refurbishment/ modernisation, it has now roped in Boston Consulting Group to study operations at three of its plants in Andhra Pradesh and suggest measures to improve efficiency in them.

As the demand scenario is expected to improve further in the South, driven by increased infrastructure projects in the region, the company seeks to raise funds by monetising some lands in Andhra Pradesh and Tamil Nadu to tide over the liquidity issues.

Currently, the company requires ₹150 crore for working capital and another ₹250 crore for capex. As on June 30, 2023, the company’s net debt was ₹3,090 crore.

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