India Cements is accelerating its efforts to reduce production costs via the modernisation of its factories and improve liquidity through the sale of some portion of its lands.
The Chennai-headquartered cement maker has been battling with high production costs, as most of its factories are vintage units. When there is an erosion of margins for the industry in general, with the steep increase in coal prices, the impact is higher for India Cements when compared to its peers as its factories are very old.
On the other hand, cement companies in the south, including India Cements, have been hit by a huge capacity overhang in the region.
“The company is seriously pursuing its plan to monetise some of the non-core assets for improving liquidity and operating performance as well as meeting some of the minimum capital expenditure,” said N Srinivasan, Vice-Chairman and Managing Director of India Cements, at the company’s 77th annual general meeting.
The company has now taken up programmes to address the rise in costs by refurbishing its units. It has now engaged global consulting firm Boston Consulting Group to study the operations at three of its plants in Andhra Pradesh and Telangana, and recommend measures to improve efficiency in their operations.
The company has 8 cement factories spread across Tamil Nadu, Andhra Pradesh, Telangana, Rajasthan, and Maharashtra.
It has already engaged FLSmith and ThyssenKrupp Industries to undertake a detailed study on the operating parameters of some of its other units for refurbishment/modernisation to bring them on par with that of state-of-the-art modern cement factories.
The new cement mill, replacing the old cement mill, at Sankar Nagar is expected to be commissioned during this quarter. Also, the waste heat recovery system at Chilamkur in Andhra Pradesh is expected to be completed in the current year. These projects are expected to help cut variable costs going forward.
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While every cement maker in the country has set up (or setting up) WHRS capacity to reduce power costs, India Cements is a pioneer in this and was the first one to set up a WHRS unit at Vishnupuram (now in Telangana) way back in 2004.
Meanwhile, India Cements will be selling about 74 acres of land at villages Kantakapalle and Chinnipalem, Mandal Kothavalasa, District Vizianagram, Andhra Pradesh, to Ultratech for ₹70 crore (excluding taxes, stamp duty and registration charges). It has been planning to raise funds to meet working capital, repayment of some debt, and Capex in the near term.
The company reported a positive EBIDTA in the first quarter of this fiscal, after posting negative EBIDTA for three consecutive quarters.
“We are focused on lifting the fortunes of our core business, cement. The Company has copious limestone deposits and has a wealth of experience in cement manufacturing. Though cyclical in nature, the industry has immense potential for growth,” said Srinivasan.