India Cements nets Rs 71 crore profit in Q2

Aided by a tight leash on fixed and variable costs, and improved price realisation, India Cements on Friday reported a net profit of Rs 71.43 crore for the second quarter of FY21 as compared to Rs 8.72 crore in the corresponding quarter last fiscal, registering a growth of 719%.

The company’s total income, however, stood lower at Rs 1, 075 crore as against Rs 1, 249 crore.

On the back of improved realisation and with the reduction in overall expenditure, the company’s EBIDTA rose substantially to Rs 240 crore as compared to Rs 150 crore in the previous year, an increase of 60%. Quarter on quarter as well, EBIDTA improved by 51%.

Though there was a 21% drop in volume, improved prices along with the company’s cash and carry policy helped improve profitability and liquidity in the troubled times, said N Srinivasan, vice chairman and MD, India Cements. “We did not chase the prices. Instead, we fixed prices and supplied to the people who required them,” he said.

The company has also taken proactive steps in containing the fixed cost on contract labour, and administrative and marketing overheads, together with improvement in operating parameters. The overall volume of the company came down by 21% in the second quarter and nearly 38% in the half year ended September.

In the wake of a decline in demand, the overall volume of clinker and cement was at 21.07 lakh tonne as compared to 26.67 lakh tonne in the same quarter of the previous year. The variable cost of production was down by 6% (by Rs 130 per tonne) while the outgo on fixed overheads was also significantly reduced. With the improved selling prices, the net plant realisation was up by 11% compared to the previous year.

On the outlook, Srinivasan said, a sluggish performance by the cement industry in the last quarter of last year was further affected by Covid-19 from March.

The impact on the cement industry has not been consistent throughout India. While north, central and eastern India saw a substantial growth in demand leading to impressive performance by companies located in that region, western India was impacted by the pandemic and Gujarat and Maharashtra bore the brunt of the attack, said Srinivasan.

“Now, after a good monsoon and with people having learnt to cope with Covid-19 and with decreased Covid-19 activity, we see a revival in western India also, which can lead to improved demand in the two quarters to come,” he said.

The company’s capacity utilisation in the first quarter was at 35%, and it improved to 53% in the second quarter. For the half of the fiscal, it was at 43%.