Birla Corporation Ltd registered a 49 per cent drop in consolidate net profit at ₹86 crore for the quarter ended September 30, compared with ₹167 crore in the same period last year, due to demand decline and surge in expenses.
Revenue from operations, on a consolidated basis, however, went up by nearly three per cent at ₹1,698 crore (₹1,654 crore).
“Demand for cement was majorly impacted by the extended and heavy monsoon and shortage of sand in States such as Uttar Pradesh and Bihar which are important markets for the company. To sustain healthy market share and capacity utilisation, which was maintained at 84 per cent in the September quarter, the company had to channel its products outside its core markets, which, in turn, impacted realisations and profitability,” the company said in a press statement.
The cement division’s realisation per tonne for the quarter was at ₹4,847 compared to ₹4,862 last year, down by around 0.3 per cent. However, for the first six months of the financial year, realisation per tonne was at ₹4,890, which was slightly ahead of last year.
Cement demand contracted by almost by a third on a year-on-year basis in the east particularly in Bihar and West Bengal. Despite this, the company managed to marginally raise its cement sales by volume to 3.27 million tonnes (mt).
Fuel, packaging costs
The company was faced with a sharp increase in fuel, raw material and packaging costs during the quarter owing to significant increase in commodity prices. Due to increase in fuel prices, total distribution cost in the quarter rose by over five per cent over the same period last year. However, due to effective cost control and efficiency improvement, the impact of cost escalation on the company’s business was less than the overall industry, it said.
Prices of pet coke and coal, both domestic and imported, went up sharply during the quarter. Linkage coal from subsidiaries of Coal India Ltd was also in short supply, forcing the company to buy coal from the open market at substantially higher prices.
Packaging cost went up owing to increase in polypropylene prices. Birla Corporation has been consistently scaling up sales of its premium offerings, but in the September quarter it had an unfavourable impact on profitability because these products are packed in laminated polypropylene bags.
Sale of premium cement
The company managed to grow its share of sales of premium cement by volume through the more profitable trade channel to 53 per cent in the September quarter compared with 48 per cent last year.
Performance during the quarter was also impacted by an extended shutdown at the company’s New Chanderia Cement Works (NCCW) at Chittorgarh to complete an expansion project, which got commissioned during the quarter.
Post monsoon, demand for cement has started to improve and the company has raised prices to partially pass on the increase in input costs.
“Taking advantage of an improved demand scenario, geographical mix of sales is being optimized again. Together, these measures are expected to improve net realisation in the second-half of the financial year,” it said.
The 3.9-mt greenfield project at Mukutban, Maharashtra, is on track to get commissioned in the fourth quarter of the current year. This will add significantly to the company’s sales by volume and profitability in the next financial year. Also, the commissioning of the Mukutban plant would help improve the profitability of the Butibori unit from the fourth quarter of the current financial year.
The company’s scrip closed at ₹1589.25, down 1.22 per cent on the BSE on Wednesday.