India Cements posts Rs 5.37 cr standalone loss in Q3 on poor demand

India Cements has reported a loss of Rs 5.37 crore in the third quarter ending December 31, 2019 on a standalone basis against a net profit of Rs 3.13 crore in the same period last year.

Total income stood at Rs 1,194 crore against Rs 1,248 crore. The gross profit (EBIDTA) was Rs 132 crore compared to Rs 139 crore in the same period last year. The overall cost dropped to Rs 1,204 crore from Rs 1,317 crore one year ago, said the company's management.

The slowdown of the economy together with the poor demand for cement in the south had resulted in continuous price pressure. The performance of the company during the third  quarter was impacted by the above factors resulting in a marginal loss after a gap of 19 quarters.

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.

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