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‘Infra push drove demand for cement’
After three years of nil/negative growth, the sector showed signs of recovery from the H2 of fiscal 2017-18.
This uptrend in demand cycle continued till Q3 of 2018-19. Even South, which was reeling under pressure, achieved a turnaround last year with buoyancy indemand, noted N Srinivasan, VC-MD, India Cements, at the 73rd AGM of the company here on Thursday.
According to official estimates, the cement industry (with an estimated total capacity of 430 Million Tonnes) registered a double digit growth of 13.31% in production at 337.32 MT in 2018-19 compared to 297.71 MT in the previous year. Average capacity utilisation also moved closer to 78% from 70% in 2017-18. The growth was estimated to be 19% in the South having the highest capacity of over 150 MT and it was largely driven by the demand from infra push by Andhra Pradesh, Telangana and Maharashtra Governments, he said, presenting an overview of the sector.
The utilisation level in the region improved to 70% from around 60% in the previous year while in other regions, it was in the range of 80 to 85% in 2018-19. However, the huge supply overhang in the south affected the price of cement which remained subdued during most part of the year and was much lower when compared with earlier levels, Srinivasan sought to point out.
During the year under review, the Company posted an improved performance despite the severe competition for market share in the South due to supply overhang and the substantial increase in the prices of petroleum products and fuel. Last year, “we faced the double effect of reduction in net plant realisation (NPR) due to the tremendous pressure in the selling price of cement in the first three quarters and nearly 9% increase in variable cost, caused by increase in power and fuelcharges,” he said.
Pro-active steps by the company led to substantial savings in logistics expenses with an overall reduction of around 5% in freight and handling expenses. It also continued its thrust on reducing fixed cost by closing down non-core verticals, cutting down manpower cost, advertisement and administrative expenses. “It was only in Q4 that the NPR went up aided by the improved selling price and volume. ,”Srinivasan said.
Total revenue, including other income improved to Rs 5,659 crore against Rs 5,360 crore. The reduction in NPR of cement coupled with cost increase dented the bottom line, which, however, was maintained at reasonable levels with higher volume and due to pro-active measures taken by the company. The resultant EBIDTA was Rs 669 crore against Rs 712 crore in the previous year. The profit after tax was Rs 64.14 crore against Rs 106.91 crore.