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A double whammy of lower realisation and elevated input costs weighed on the operating performance of The Ramco Cements Ltd in the December quarter. As a result, its Ebitda at ₹230 crore, fell 42% year-on-year, missing consensus estimate by 25%. Ebitda is short for earnings before interest, tax, depreciation and amortization.
Cement sales volumes rose 15% y-o-y to 3.01 million tonnes aided by capacity expansions, but given the dismal operating performance, this didn't offer much solace to investors.
"RCL’s key markets of Tamil Nadu and higher COVID cases in Kerala affected volume for the company in South India. To counter lower volume in South, the company increased its dispatches to East India, which is a considerably less remunerative market for the company. Weak realisations in both East as well as South markets resulted in a sharp fall in overall realisation," analysts at Nirmal Bang Institutional Equities Ltd said in a report. Consequently, its Ebitda/tonne at ₹768 is one of its lowest in the past nine quarters. According to the company's management, realisation/profits in the eastern markets are ₹1,000/tonne lower than the southern markets.
In a post-earnings conference call, the management said that 4QFY22 is seeing easing costs, increase in prices and demand revival and expects 4QFY22 and 1QFY23 to be good quarters. It further added that there is no high-cost power & fuel inventory left with the company and has opted for low-cost inventory in January 2022. The contracted inventory price for February 2022 is lower than the October-November 2021 price.
Analysts say, with cost pressures gradually easing for the company and the sector, the focus from hereon shifts to capacity expansions.
"TRCL’s near-term outlook looks challenging due to higher fuel costs, we expect the company to benefit from commissioning of new capacities. We expect TRCL to gain market share in its operating regions (southern/eastern India), led by capacity expansions," analysts at Motilal Oswal Financial Services Ltd said in a report. Clinker capacity grew 15% (to 11.4mtpa) in Jun’21 and will further increase by 23% (to 13.65mtpa) in Mar’22E. We expect 11% sales volume CAGR during FY22-24," added the Motilal report. CAGR is compounded annual growth rate.
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