Steep rise in coal, fuel costs hit India Cements; reports Rs 138-cr Q2 loss | The Financial Express

Steep rise in coal, fuel costs hit India Cements; reports Rs 138-cr Q2 loss

India Cements said the higher cost could not be compensated by way of price increase due to a huge supply overhang in the market.

Steep rise in coal, fuel costs hit India Cements; reports Rs 138-cr Q2 loss
The JV will invest Rs 65 crore in Kheda district near Ahmedabad for manufacturing of  new age building materials. (Image: Representational)

Hit hard by a surge in prices of input materials resulting in higher cost, India Cements on Monday reported a net loss of Rs 137.58 crore for the second quarter of FY23 compared with a net profit of Rs 21.97 crore in the corresponding quarter of last fiscal. The total income stood at Rs 1,258.52 crore against Rs 1,193.35 crore, registering a growth of 5.4%.

India Cements said the higher cost could not be compensated by way of price increase due to a huge supply overhang in the market. This was compounded by the loss of volume as some of the markets were not commercially viable due to high cost of production. All these factors adversely affected profitability.

Addressing select mediapersons, N Srinivasan, vice-chairman and MD, India Cements, said: “The coal prices shot up from $60 per tonne to $300 per tonne in the last quarter. The company was not able to pass it on. We hope to increase the prices now, cut costs and improve efficiencies.”

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The overall volume of clinker and cement for the company was at 2.25 million tonne for the second quarter compared with 2.36 million tonne.

With a lower capacity utilisation of around 60% only along with uncompensated cost increase, the impact on the bottom line was severe.

According to Srinivasan, while all India peers were able to increase their sales volumes and the selling price to partially offset the cost increase, the industry in the south had to bear the brunt of a severe cost push without any improvement in selling price.

India Cements has stopped power generation at its captive plant, owing to the hike in coal prices that made the practice economically unviable.

The cost per kcal of fuel went up from around Rs 1.60 per kcal in the same quarter of the previous year to as high as Rs 3.26 per kcal and the average rate of power moved up by more than Rs 2 per unit resulting in increase in cost of production by more than Rs 1,300 per tonne during the quarter resulting in a negative Ebidta of Rs 87 crore compared with Rs 137 crore, the company said.

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India Cements recently divested its stake in Springway Mining Pvt Ltd to JSW Cement and the company will be receiving Rs 603 crore. “Our liquidity problems for now are solved by this sale and the funds will be utilised towards repayment of the debt. Some part will go to maintenance of our plant, and the rest will be kept as buffer resources,” Srinivasan said.

The company’s total debt stood at about Rs 2,300 crore.

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First published on: 08-11-2022 at 01:30 IST