India Cements has been facing “difficult trading conditions,” that has made the corporate biggie to look at diversifying markets such as Maharashtra and Telangana. The spurt in infrastructure activity in these regions have kept the cement major upbeat on its sales despite posting a net profit for the quarter ended Sept at Rs 23.67 cr compared to Rs 62.41 cr during the same period last year.Representative Image Chennai: “There is no one reason to attribute for the sluggishness. Is it due to demonetisation, GST or economic slowdown? But one thing is for sure, sand problems continue in our state,” N Srinivasan, VC-MD, India Cements, said on Thursday, bringing the various reasons for the decline in sales to the fore.
Tamil Nadu, which is the “bread and butter market”, has been contributing the highest, when it comes to profitability. But the absence of river sand, the high court ruling on importing it and the non-acceptance of ‘M Sand’ or manufactured sand across board in this market have impacted the business, he said, adding he was at his “wits’ end” trying to grapple these challenges.
However, Srinivasan struck a confident note as the pick up of bulk cement indicated good times for the company, that has seen cement volumes remaining same sequentially, on a quarter-on-quarter basis. India Cements has also found Kerala to be a better bet, as the M Sand absorption is high. Uttar Pradesh and other states too seemed to be taking to the M Sand consumption.
TN and Kerala, put together, which constituted 45 per cent of sales, is now hovering around 40 per cent with the loss mostly due to TN. The net plant realisation or the NPR for Q2 ended 30 September, 2017 was Rs 3,473 compared to the last year Q1 figure of Rs 3,604. The company’s total income for the quarter ended September 30, 2017 dipped to Rs 1,274.90 crore compared to Rs 1,314.44 crore in the corresponding quarter of the last fiscal.
Srinivasan said the “slight dilution” of NPR (the 4 per cent drop) combined with the price increase of pet coke had impacted the company, which is operating at 70 per cent capacity (68 per cent last year).
But with demand for bulker picking up on account of hectic road construction activity in places like Maharashtra and neighbouring Telangana (drip irrigation project) and Andhra (revival of Pollavaram project) and “good monsoon” in many states, India Cements is hopeful that demand will increase. That would enable the company to post a better performance next quarter, the cement baron said, highlighting the positive developments in the infrastructure segment.
The company’s expansion plans hinge on crossing the 85 per cent capacity utilisation mark and till such time it would look at all ways of augmenting capital. Its current debt position is at Rs 3,260 crore with bulk of it used for working capital. “During the next financial year, we do anticipate a big jump in capacity utilisation,” Srinivasan said, adding diversifying into markets beyond TN would aid this objective. The 12 per cent de-growth in TN has meant the company has shown double-digit negative for the first time.