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India Cements sees signs of demand picking up steadily, spurred by infrastructure projects. The Chennai-headquartered company is now confident of hitting full capacity utilisation and achieving better profitability by the end of this fiscal.
“Normally, June quarter capacity utilisation will be lower than the March quarter. But our capacity utilisation in this June quarter was higher by a percentage point than Q4 of the previous fiscal. It is the sign of slow, but sure increasing demand. I am already at 80 per cent capacity utilisation (up from 67 per cent in the year-ago quarter). Going forward, it will continue to increase,” said N Srinivasan, Vice-Chairman and Managing Director.
Three factors drove cement sales for the company. First, all the effects of demonetisation and GST are behind it, and it is back to business as usual. Secondly, the sand mining issue in Tamil Nadu, the biggest cement consumer in the South, has been addressed. And, thirdly, the significant infrastructure activity in Andhra Pradesh, Telangana and Maharashtra is generating a huge demand for cement.
On price, he said it will start moving north in the coming quarters in view of the growing demand and companies running at higher capacity levels.
Q1 net slips
The company reported a drop in its net profit at ₹21 crore for the quarter ended June 30, 2018, compared with ₹26 crore in the same period previous year.
The company sold about 31 lakh tonnes of cement in Q1 of this fiscal against 27 lakh tonnes a year ago. But lower prices per bag resulted in a drop in the revenue, which stood at ₹1,361 crore (₹1,462 crore).
Cost reduction measures
With 9 per cent lower net plant realisation at ₹3,279 per tonne, the company has taken a hit on the bottomline for this June quarter. But its prudent and efficient cost management measures have paid some dividends with the company containing the expenses. Its operating profit stood at ₹162 crore (₹191 crore).
“We have managed operating expenses much better. The freight and handling charges have gone up year-on-year and quarter-on-quarter for every other company. But for us, it has come down. Because, we have sold more cement in the South, where the market grew by 20 per cent, while we grew by 27 per cent,” said Srinivasan, outlining various measures taken to cut costs in the coming quarters.
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