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Cost-control steps aid India Cements tide over slump
After a good third quarter, India Cements reported a net profit of Rs 34.28 crore for the fourth quarter, resulting in a 32 per cent dip (Rs 50.49 crore).
Cash crunch in the market and a host of reasons including Jayalalithaa’s demise, jallikattu and holidays have impacted the cement company’s sales, said Vice-Chairman-MD, N Srinivasan, here on Monday.
“We lost about 15 to 18 days of sales during the month of January and in March, the prices went down quite sharply,” he said, adding that the company had survived the effect of both – stress on sales price in March and January.
Cost-control measures and the use of surplus money to settle debts had helped the company to maintain its overall growth. In two years, its debt had come down by Rs 500 crore, Srinivasan said, as he went on to highlight the reasons for going in for re-structuring of long-term debt thereby ensuring a better cash flow management.
“We have not increased borrowings,” he said, adding the company anticipates this year’s demand to be better, thereby translating to better capacity utilisation. This year, India Cements had a 70 per cent capacity utilisation, compared to 63 per cent in the previous year.
After overcoming a lot of challenges, India Cements managed to successfully merge two of its subsidiaries namely Trinetra Cement having a cement plant in Rajasthan and Trishul Concrete Products making ready mix concrete mix cement.
With this merger, all cement assets have come under India Cements, which is now having at its command an annual production capacity of 16 million tonnes from 8 integrated cement plants (including the Banswara plant of Trinetra cement in Rajasthan) besides two grinding units in Chennai and Parli in Maharashtra.
As part of its efforts to confine itself to core business, India Cements plans to exit the infrastructure division, once it completes its existing contractual obligations. It has already got out of the non-banking finance business, surrendering ICCL’s licence and scaled down its shipping operations (from 5 ships, the company owns only one ship in Poompuhar).
Srinivasan said exports have shown 134 per cent rise with clinker (2.03 lakh tonne) and cement (2.80 lakh tonne) demand picking up compared to the previous year figure of 3.85 lakh tonne. Its strategy to concentrate on special cement such as oil well cement and sleeper cement have also paid off with the tendering process for sleeper cement set to open up in June. He also said post-merger, Trinetra Cement plant was operating at close to full capacity.
The South region had shown 7 per cent growth in production for the company, which has found Andhra Pradesh and Telangana to be “pick-up” markets.
TN and Kerala had been “practically not growing,” he said, highlighting Pollavaram, Amravati, public works department projects and housing for economically weaker sections among the factors for anticipating a decent growth this year too. “This year too, in Andhra, Telangana and Karnataka, we expect to do well,” he said.
The cement industry had a capacity overhang, Srinivasan said, adding that those competing on prices would no longer benefit. “Bringing in efficiencies, smarter distribution, lesser distribution cost and improving service engagements” alone would determine the growth of cement players, he opined.
Optimistic about capacity utilisation improving within three years, he said the NPR or the net plant realisation for Q4 was Rs 3,430 a tonne (Rs 3,500). Improved liquidity, pricing and refinancing Rs 1,100 crore over a 12-year tenure (mostly back-end at 10.6 per cent interest) has made the company upbeat about improving its rating, which is currently at A-. Srinivasan also said the special cement foray had yielded better margins, thrice that of normal cement.