Birla Corporation records 48.5% drop in Q2 net profit to Rs 86 crore

Lower demand in core markets, surge in expenses cited as reasons for muted show

Birla Corporation has recorded a 48.5 per cent drop in net profit to Rs 86 crore in the quarter ended September 30 on the back of lower demand in core markets coupled with a surge in expenses. The company’s net profit was at Rs 167 crore in the year-ago period.

Revenues were higher by 2.1 per cent to Rs 1,711 crore. The company said that 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 were important markets for the company.

Further, to sustain market share and capacity utilization – which was at 84 per cent in the September quarter – the company channeled its products outside its core markets, which impacted realizations and profitability.

The cement division’s realization per tonne for the September quarter was at Rs 4,847 compared to Rs 4,862 last year, down 0.3 per cent year-on-year; for the first six months of the financial year, however, realization per tonne at Rs 4,890 was slightly ahead of last year.

Shortage of sand impacted the construction industry in Bihar and eastern Uttar Pradesh, where the company has one of the highest market shares. However, the company said that the local administration had now started to address the crisis and it was expected that normalcy would return in the December quarter.

Heavy rainfall and flooding in states such as Uttar Pradesh, Bihar and Maharashtra, also impacted adversely. Cement demand contracted by almost a third year-on-year in the east—in Bihar and West Bengal, the company said. However, cement sales by volume was at 3.27 million tonne (mt) compared to 3.26 mt a year back.

The company also faced a sharp increase in fuel, raw material and packaging costs during the quarter owing to a significant increase in commodity prices.