Having initiated measures to reduce the variable cost and improve the liquidity position, Chennai-headquartered India Cements is hopeful of significantly improving its operating performance soon.
N Srinivasan, vice-chairman & MD, India Cements, told shareholders at the company’s annual general meeting on Thursday that despite good demand, the performance was severely dented due to a significant increase in input costs during last year. The setback in performance was also due to other factors like its operating of old plants, supply overhang, severe competition and subdued price realisation.
As a prudent measure, the company sold its investments in Madhya Pradesh, which infused liquidity and improved the capacity utilisation to around 72% in Q4FY23 against 60% in the previous nine months.
The company is pursuing its plan to monetise some of the non-core assets for improving liquidity and operating performance as well as meeting the minimum capital expenditure.
“Though cyclical in nature, the industry has immense potential for growth with the focus on infrastructure development by the Centre and states coupled with the growing demand for housing,” he said.
The company has engaged FLSmith and ThyssenKrup Industries to conduct a detailed study on the operating parameters of some of its plants for refurbishment / modernisation to bring them in line with that of state-of-the-art modern plants. It has also engaged Boston Consulting Group to study the operations at three of its plants in Andhra Pradesh and Telangana, and suggest measures for improving efficiency in their operations.
The company’s new cement mill at Sankar Nagar in Tamil Nadu, replacing the old mills, is expected to be commissioned by second quarter of the current fiscal. The waste heat recovery system at Chilamkur in Andhra Pradesh is being taken up for completion in the current year and both these projects are expected to bring in substantial relief in variable cost in the two plants, Srinivasan said.
According to him, India Cements was the first one to set up a waste heat recovery plant in the cement industry in 2004 at Vishnupuram, now part of Telangana. It is also exploring opportunities for producing green energy from solar power and for using alternative fuels. On the marketing front, he said the company is focused on increasing retail sales. Last year, sales were up as the company benefited from being a sponsor of CSK and the good performance of the team.
In Q1FY24, India Cements reported a standalone loss of Rs 75.27 crore compared to Rs 76.09 crore net profit a year ago, owing to reduction in selling price and loss of volume. However, the company could narrow the losses sequentially where it had recorded losses to the tune of Rs 218 crore in the quarter ended March of FY23. India Cements’ total income for Q1FY24 stood at Rs 1,399.91 crore against Rs 1,454.27 crore, posting a drop of 3.7%.