While the cement industry
had grown in the north, west and east, it had de-grown by 8% and 12% respectively in the south for the 9 months period and in the third quarter.
The main contributing factor being the stalling of the major projects in Andhra Pradesh, Telengana combined with deferment of infra spending in these states and further fuelled by the slowdown of the economy.
With huge capacity overhang and with a low demand scenario, the price of cement was under continuous pressure and steadily reduced from the month of August 2019 especially in Andhra Pradesh, Telengana and Maharashtra squeezing the margins of the players situated in these states.
The performance of the company has to be viewed with this back ground of low demand since four of its units are situated in the states of Telengana and Andhra Pradesh where the decline in growth was more pronounced and hence the performance of the company was affected more than that of peers.
N Srinivasan, vice chairman of the company said that the single factor that affected the margin during the quarter was the reduction in Net plant realisation by more than Rs.150 per tonne of cement on a sequential quarter basis which impacted the EBIDTA by more than Rs.42 crores. However, there was relief in the form of reduction in variable cost of production which mitigated to a certain extent the impact of such drop in EBIDTA.
Net plant realisation has dropped to Rs 3342 per tonne in the third quarter compared to Rs 3308 in the same quarter of last year. It was Rs 3501 per tonne in the second quarter of this year and Rs 3654 in the first quarter
”The overall demand in south is picking up with AP and Telengana contributing. The expectation is that the worst is over and the cement industry
will see a robust growth going forward”.
Cement price increase has also taken effect in all the five regions and the hike has been absorbed. India Cements
is well geared with operational efficiency with head room in all the plants to meet the demand. It can also move more cement to markets beyond south depending on the price and availability of railway wagons.
The capacity utilisation of the company during the quarter was 69 per cent against 76 per cent in the same quarter of the previous year.
On the new cement plants in Madhya Pradesh, he said due to the slow down in the economy, the company has a bit slowed down on the investment plan,but it has been acquiring land for limestone mining.