India Cements net profit dips, but south market continues to be strong

India Cements net profit took a 79.46 per cent hit, sliding to Rs 3.13 crore for the third quarter ended December 31, 2018 against Rs 15.24 crore in December 2017. This comes on the back of a difficult quarter that led to cost escalation of Rs 200 per tonne apart from other factors. 

“There was a slight increase in realisation but we sequentially lost on price though volumes were 8 per cent more than last year,” India Cements Vice-Chairman and MD N Srinivasan said here on Monday, explaining the reasons for the performance of the company. With prices coming under challenge, the cement major pulled back from many new markets, even as it stayed focused on its stronghold – south. 

“We saw a 20 per cent growth in south, but outside of this region, it was negative. Our capacity utilisation is at 76 per cent unlike the earlier levels of 70 per cent a year ago,” he said, admitting that it had not reached the level of full capacity as earlier predicted.

Since last week, prices had started to go up sharply leading the cement company to gain momentum. Demand is picking up and generally post January, the best season is till October, Srinivasan said, noting that a busy season, good pricing and utilisation had given it enough reasons to express optimism.

On the price front, a bag of cement had gone up by Rs 30 to Rs 35. However, Net Plant Realisation or NPR had seen only a marginal jump – Rs 3,300 a tonnes, this year compared to Rs 3,290 last year. 

“This drop in net plant realisation was compounded by the steep increase in the prices of fuel and petroleum products together with the depreciation of rupee against Dollar,” he sought to point out. 

Srinivasan said the company saw its volume go up by 15 per cent on a year-on-year basis and it expects its bottom line to be better with focus on operational efficiency and efforts for pan-India presence by diversifying markets in the north.

Also, south continues to be a demand driver and the onset of price increase expected to kick in by March, will mean demand further expected to shoot up by 10 to 15 per cent. “In 2020-21, you will be searching for cement,” said Srinivasan.

“The worst is over. We are not seeing any dark clouds on the horizon,” he said, stating that Kerala, TN were essentially private sector driven, thanks to housing and home building demand. Rural income is also translating to growth. Karnataka had announced several big projects but it was Telangana that drove demand due to the thrust to infra sector by the government. In AP, it is still housing for the weaker sections that is attracting cement firms.