‘Cement demand expected to remain on track albeit cost pressure’

CHENNAI: Cement demand is expected to remain on track with increased house building and construction activity in metros, rural, semi-urban and urban centres although cost pressure is expected to remain with higher cost of fuel, power tariff and logistics and the consequential impact on all other materials including packing, as per N Srinivasan, VC-MD, India Cements.

Addressing shareholders at the Company’s 76th AGM conducted on Wednesday, he said India is expected to remain a resilient and the fastest growing economy across the globe aided by the broad based recovery with a GDP growth of 7.2% to 7.4% in 2022-23 projected by RBI and global agencies.

This is despite the risks created by global headwinds triggered by the on-going Russian-Ukraine war apart from the domestic inflationary concerns, interest rate hikes, depreciating Rupee value against US Dollar and cost pressure.

At the same time, the Centre and southern states are expected to retain their thrust on giving push to housing projects and infrastructure development by implementing irrigation, road building, metro rail and other infra projects.

Regarding the performance of India Cements last year, he told members, the spiralling increase in the cost of input materials together with the loss of volume resulted in sub optimal performance of the company. Compared to players in other regions, the company’s performance has to be viewed

against the backdrop of lower capacity utilisation in the south, huge increase in the cost of imported coal/petcoke, intense competition, extended rains leading to floods and thus sluggish demand growth

It should also be noted that the company has plants of many vintages with varying operating operators.

Noting that the overall volume marginally improved to 90.70 lakh tonnes when compared to 89.02 lakh tonnes in the previous year, Srinivasan said during the year, the capacity utilisation also marginally improved to 58% from 57% in the previous year.

He attributed this to the second wave of COVID-19 which impacted its main markets - TN, Kerala, Karnataka and Maharashtra. It was further fuelled by substantial increase in the price of coal together with its shortage in availability in the market.

The operating margin came down as the uncompensated increase in variable cost alone was over Rs 400 per tonne or Rs 350 crore during the year. However, it continued its efforts on pruning the fixed cost with strict control on contract labour, administrative and marketing overheads, travel and other expenses. Despite its lower capacity utilisation, it met all its obligations to banks and financial institutions.

Total revenue, including other income increased to Rs 4,730 cr against Rs 4,460 cr. The substantial increase in expenditure on account of the significant cost push resulted in 42% drop in EBIDTA at Rs 478 cr compared to Rs 830 cr in the previous year.

The resultant profit before tax was lower at Rs 54 cr compared to Rs 323 cr in the previous year. After considering other comprehensive items, the total comprehensive income for the year was marginally higher at Rs 231 cr (Rs 222 cr).

He said, “after many years of considerable reduction in work force, the company is focused on improving the multi-tasking of its employees. Contemporary performance appraisal system for recognising the talents is being introduced along with focus on developing future leaders.”