India Cements net profit plunges 77% in Q1

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July 28, 2020 1:45 AM

The company, which has its main markets in these states, had a drop in volume of around 48% during the quarter under review in south (excluding Maharashtra) and an overall 52% reduction in volume including Maharashtra and North.

The main markets of the company have been subject to intense lockdowns during the quarter.

India Cements on Monday reported a 76.5% drop in its net profit to Rs 16.96 crore for the first quarter of FY21 against Rs 72.21 crore in the corresponding quarter of the last fiscal. The South-based cement major, however, made profit this quarter compared with previous last quarter, when it reported a net loss of Rs 111 crore.

The company attributed the good working results to being able to cut fixed costs coupled with the increased cement prices. The cash & carry policy (no credit) of the company has also helped in improving profitability in these trying times.

Total income of the company was lower at Rs 760.32 crore in Q1 against Rs 1,472 crore in the year-ago period. It reported an Ebitda of Rs 159 crore despite the steep drop in volume caused by the Covid-19 pandemic.

India Cements vice-chairman & MD N Srinivasan told select mediapersons through a virtual press meet on Monday that the variable cost of production was kept under control and there was significant reduction in the outgo on fixed overheads on account of lockdowns. With improved selling prices and control on distribution costs, the plant realisation increased by 16% during the quarter.

“By first quarter results, it is just like reaching at the crossroads. We have dealt with the Covid pandemic, we have neither asked any employees to go home for a thing they are not responsible, nor cut any wages. At this time, we are not looking at the volume of cement, but at the business of cement. The cash & carry policy of no credit being given to channel partners has provided us enough liquidity and along with the increased prices, we have been able to manage the first quarter,” he said.

Emphasising that whatever performance the company could achieve was because of its prudent management, Srinivasan said the breakeven in Q1 was possible at 33% with around 35% capacity utilisation.

The main markets of the company have been subject to intense lockdowns during the quarter. The construction industry, which registered a steep decline in growth in April 2020, has started recovering slowly from May 2020, given the pent-up demand and improved rural demand. The cement industry in the southern states had also registered a negative growth of around 45% during the first quarter in cement production. Maharashtra and Tamil Nadu are among the worst affected states with higher number of virus counts and continuous lockdowns impairing the industrial activity.

The company, which has its main markets in these states, had a drop in volume of around 48% during the quarter under review in south (excluding Maharashtra) and an overall 52% reduction in volume including Maharashtra and North. Cement prices, which touched low levels in the March quarter, increased sharply in April and these prices are expected to sustain during this quarter.

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