Cement firms have a ball in FY04

Cement companies posted a healthy bottomline growth during the financial year 2003-04 on higher sales, improved price realisation and lower interest costs.

A study of the 16 cement firms, which form a significant concentration in the industry, shows that aggregate net profit of 13 standalone firms rose seven-fold to Rs 392.44 crore during the financial year ended on March 31, 2004, from Rs 55.64 crore in the preceding fiscal.

The other three companies, which are part of the diversified groups Grasim Industries, Kesoram Industries and the Birla Corporation, saw a two to five per cent rise in margins at the operating level.

Overall sales turnover of the 16 firms rose by 11 per cent in the financial year to March 2004.

In terms of volume, too, sales looked up, as despatches increased by 5.5 per cent to 117 million tonne from 111 million tonne. The surge in the sales was due to higher capacity utilisation.

Listed firms such as Grasim Industries, ACC, Gujarat Ambuja Cement, India Cement, Mysore Cement, Chettinad Cement, Madras Cement and Kesoram Industries posted a double-digit sales growth in terms of value.

These players outperformed the industry capacity utilisation average: while their capacity utilisation rose by two-five percentage points, while the industry average remained unchanged.

Price realisation of the firms studied stood at 4.5 per cent. Southern cement firms fared better than their opposite numbers in the northern and western regions. Southern firms' price realisation stood between seven per cent and 11 per cent, while those of northern and western firms hoavered between 4.5 per cent and 5.5 per cent.

Savings through interest costs, at Rs 210 crore, comprised half of the absolute rise in operating profits. Cost controls at these firms, through improved efficiency, use of captive power, and market realignment efforts, jacked up their profitability.

Firm-wise, Grasim Industries posted highest sales in terms of volume. The company posted a 7.17 per cent growth in sales volume at 11.96 million tonne, on an increase of 6.85 per cent in production at 11.85 million tonne. Its operating margins improved by two percentage points to 20 per cent.

ACC, another major, posted its second-biggest net profit in its history on account of 14.26 per cent rise in sales turnover. The company's sales turnover rose to Rs 2,935.58 crore from Rs 2,569.30 crore. Its operating margins were up by two percentage points to 9.23 per cent.

The company's net profit skyrocketed by 92.74 per cent to Rs 200.24 crore. This was possible through higher sales realisation, at 4.52 per cent, and improved operating efficiencies and working capital management.