India Cements has reported a significant rise in net profit at ₹71 crore for the quarter ended September 30, 2020, compared with ₹9 crore registered in the year-ago period, amid a decline in cement sales.
Sustained cost control measures, both in fixed and variable costs, and better cement prices helped the company post a strong bottomline during the September 2020 quarter.
Its revenue in the September 2020 quarter stood at ₹1,070 crore against ₹1,246 crore in the year-ago quarter on the back of fall in volume of clinker and cement to 21.07 lakh tonnes, compared to 26.67 lakh tonnes.
But improved selling prices led to 11 per cent higher net plant realisation (NPR). Thus, helped by the improved realisation and the reduction in overall expenditure, earnings before interest, depreciation, taxes and amortisation (EBIDTA) zoomed to ₹240 crore, up from ₹150 crore in the year-ago period. The EBIDTA margin too improved to 22.3 per cent, restoring it back to levels seen years ago.
The rise in prices of cement, which started improving from the month of April this year, sustained during the September quarter, with only marginal aberrations in some of the southern states. These improved prices, along with the cash-and-carry policy of the company, helped improve the profitability and liquidity in these tough times.
“Instead of chasing volumes, we fixed the price and tried to sell whatever we could. While we lost about five lakh tonnes of cement, compared with Q2 of the previous year, our EBITDA was up 60 per cent year-on-year and 50 per cent on sequential basis,” said N Srinivasan, Vice Chairman & Managing Director of India Cements.
He said the company’s cost control measures would continue going forward, and any improvement in cement sales would only improve the bottomline.
On the demand side, while North, Central and Eastern India saw a substantial growth in demand, which led to an impressive performance by companies located in that region, Western India was impacted by Covid. Gujarat and Maharashtra bore the brunt. But, a revival is anticipated in Western India in the coming quarters due to good monsoon and falling number of Covid-19 cases and its impact.
South India, which has been facing a substantial capacity overhang, has also been showing positive signals. But the recovery is likely to be gradual.