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Ramco Cements Ltd has reported a 98 per cent drop in its net profit for Q2 FY23, to ₹11 crore, owing to cost increases and the company’s inability to pass on the costs to customers. This compares with ₹517-cr profit it reported in the year-ago period.
EBIDTA declined 52 per cent to ₹193 crore (₹402 crore), mainly due to a sharp increase in fuel prices and weak cement prices.
Since the overall fuel prices peaked this fiscal, the power & fuel cost per tonne of cement for Q2 sharply increased to ₹2,013 from ₹1,057 in the year-ago quarter. Its interest cost and depreciation also increased to ₹55 crore (₹29 crore) and ₹122 crore (₹99 crore), respectively.
The net revenue of the company grew 19 per cent to ₹1,793 crore (₹1,501 crore), aided by a 22 per cent increase in cement sales at 3.3 million tonnes (2.71 million tonnes).
Ramco Cements proposes to increase the grinding capacity of the Haridaspur plant, Odisha by 0.9 mtpa. Since other infrastructures are already in place, it will spend only ₹130 crore on the expansion, which will double its capacity to 1.8 mtpa.
As on September 30, 2022, the company’s net debt stood at ₹4,741 crore, of which ₹724 crore is a short-term loan. The average cost of interest-bearing borrowings increased to 6.42 per cent from 5.47 per cent in the year-ago period.
Outlook uncertain
The company said the business environment continues to be uncertain due to the rapidly changing economic environment given the prevailing stress in geopolitical situations across the globe. This has put a strain on the fuel cost. “Usually, the short-term visibility of the business prospects is clear, but this time it is the other way around. This situation may continue for a few more quarters considering the prevailing uncertainties. However, the long-term prospects continue to be promising,” it said.
The continuing consolidation in the cement industry coupled with the speedy addition of fresh capacities could lead to an increased appetite for market share amongst the players and may put pressure on margins in the foreseeable future especially due to uncertainty in fuel prices.
Though there was some respite in the spot CIF prices of pet coke Aug ‘22/ Sep ‘22, the spot prices again sharply increased in Oct ‘22. Any further surge in pet coke prices could affect the margins adversely in coming quarters. The continuing volatility in ‘fuel prices, faster rupee depreciation, and hardening interest rates are bothering factors, it warned.
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