Sand shortage erodes Q1 earnings of India Cements

The company reported a net profit of Rs 26 cr for the first quarter ending June 30, 2017 on a total income of Rs 1,466.75 crore.

The Q1 results were released post the merger of the two Companies, Trinetra Cement Ltd and Trishul Concrete Products with India Cements.  In the same first quarter of 2016-17, net profit was Rs 43.98 cr while the total income was Rs 1,205 cr prior to the merger of two companies. In the first quarter of this year, overall sales including export of clinker and cement was 26.56 lakh tonnes. The company tried to make up for the loss in sales in TN by tapping other markets. 

As per the Department of Industrial Policy & Promotion (DIPP), the cement industry which witnessed a negative growth of 1.2 pc in the previous fiscal, has shown a flat growth during the first two months of the current fiscal. The industry in the south has registered a negative growth of 5 to 6 pc during the first quarter of the year. It continued to reel owing to lower capacity utilisation while cement plants in the other parts of the country clocked a capacity utilisation of over 80 pc. 

Tight market conditions and input cost pressures coupled with the latent effect of demonetisation on the construction and realty sector affected the demand for cement in the first quarter. N Srinivasan, Vice-Chairman & MD, India Cements said, “In the last six years, the cement industry has been hit by low growth. Plants in the south are currently forced to operate at 68 per cent compared to 80 per cent in the north. Despite all the constraints, we have managed the situation. Operating at the current capacity, we have achieved a profit margin of 15 per cent, while being able to repay our loans and interest.” 

The cement baron said that economic activity must be revived to create demand for cement and achieve better capacity utilisation. The company is looking for a stimulus to propel its growth. He goes on to tell us, “TN is an important market for India Cements and we used to sell 2.5 lakh tonnes per month. We suffered immensely during the first quarter and lost two lakh tonnes of sales due to acute shortage of river sand and concerns in trade channels over the rollout of GST from July 1, 2017.” 

He adds, “I believe the worst is behind us. We are seeing reversal of negative growth in the demand for cement. We expect the following quarters to be much better. There are signs of revival in demand in TN with the state government addressing the river sand shortage. We also see encouraging growth in other markets such as Maharashtra and Karnataka. They are implementing several concrete road projects while AP and Telangana are implementing projects on big lift irrigation, river dams and housing.” 

Elaborating on the export business of the company, Srinivasan said, “We are steadily exporting 30,000 tonnes of cement per month. We have started supplying oil-well cement and waiting to commence the sale of railway sleeper cement.”