India Cements reports pre-tax profit of Rs 4.42 crore over reduced costs

India Cements has posted a profit before tax of Rs 4.42 crore during the quarter ended September as compared to a loss of Rs 3.88 crore during same quarter a year ago. The total income declined 11.14 per cent to Rs 1275.44 crore as against Rs 1435.39 crore during same period a year ago.

The performance was impacted by the fall in sales due to subdued demand in Andhra Pradesh and Telangana. The company reduced the cost of power, materials and improved realisation, which helped marginal improvement in operating performance.

N Srinivasan,vice- chairman and MD, India Cements said that during the quarter ended September, the company lost three lakh tonnes (one  lakh tonnes per month) in sales in Andhra Pradesh and Telangana due to fall in demand for cement. The effect of falling sales was severe since the Company has four plants in the two states. However, Tamil Nadu and Kerala made up for losses with moderate demand. He added that the second half of the financial year is expected to be better.

The cement industry has witnessed negative growths of 5 per cent in August and 2 per cent in September 2019 compared to the same period a year ago. While there was some growth in cement production in north, west and central region, southern states had de-grown by more than 10 per cent during the second quarter of the current financial year. The steep fall in demand in Andhra Pradesh and Telangana accounted for a major portion of the demand short fall in the south. Many of the major projects in these states are expected to be revive after a review by the state governments in the near term.

With a heavy supply overhang in the south, the cement prices which witnessed improvement in the month of February 2019 were under pressure now affecting the bottom line players concentrated in the region.

The capacity utilisation of the company during the September quarter was 68 per cent as against 77 per cent in the same quarter a year ago. For India Cements, the overall cement and clinker volume was at 2.6 million tonne for the quarter as compared to the 3.7 million tonne during the same period a year ago.

Despite a lower volume, the variable cost was kept under control and it was lower by three per cent as compared to previous year with an improvement in net plant realisation by four per cent.

With a normal monsoon predicted , the demand is expected to pick up allowing for a reasonable increase in cement prices in the near term, said the company. The housing and construction activity and the increased public spending on infrastructure projects are other factors which may aid ramp up demand. There are hopes of recovery and revival in consumption in the second half of financial year. A series of measures announced by the Centre apart from the cut in Repo rate by RBI and lending rates by banks may ease the liquidity crunch and credit flow.

The decline in fuel prices and cost reduction through various methods, is expected to help it going forward.