Cera to invest Rs 200 crore in sanitaryware, faucetware expansion

Expansion plans includes a greenfield sanitaryware plant and a brownfield faucetware unit

Ahmedabad-based Cera Sanitaryware Limited is set to expand its sanitaryware and faucetware manufacturing capacity in two phases for a capital expenditure (capex) of nearly Rs 200 crore.

The Board of Directors on Tuesday approved the capex of around Rs 197 crore for the company's expansion plans including a greenfield sanitaryware plant and a brownfield faucetware unit. Currently, Cera Sanitaryware Ltd. has a sanitaryware capacity of 2.5 million pieces per annum (mppa) and faucetware capacity of 3 mmpa. The company informed exchanges that the existing capacity utilisation is close to 90-100 per cent.

The expansion plan includes a greenfield plant with an initial capacity of 1.2 mmpa in the first phase which can be further expanded to another 1.2 mmpa in second phase, thereby aggregating to 2.4 mmpa. On the other hand, additional capacity of faucetware in phase one will be 1.2 mmpa which further expandable to total 2.4 mmpa in second phase.

In the first phase, while the greenfield expansion of sanitaryware will cost Rs 128 crore and take 24 to 30 months to complete, the brownfield faucetware expansion at Rs 69 crore will take 12 months. Cera Sanitaryware Ltd will be funding the expansion entirely through internal accruals.

Talking about the rationale behind the expansion, the company informed exchanges that it is looking to not only increase share of high end stock keeping units (SKUs) but also to meet quantity requirements for an expanding market over the medium term. The company is also looking to mitigate the risk of production disruption at a single location even as it looks to achieve optimum cost of production by reducing overheads.

The company reported a 15 per cent rise in its consolidated net profit attributable to owners at Rs 52.59 crore on a year-on-year (YoY) basis for the fourth quarter ended March 31, 2022, as against Rs 45.76 crore for the same period last year. For the full financial year, the same grew by 50 per cent to Rs 151.09 crore in FY'22 as against Rs 100.77 crore in FY'21.

Cera Sanitaryware's total consolidated income, however, fell by seven per cent to Rs 413.75 crore in Q4 of FY'22 as against Rs 442.72 crore in Q4 of FY'21. For the full financial year though, total consolidated income grew by 17.6 per cent to stand at Rs 1469.47 crore in FY'22 as compared to Rs 1249.48 crore in FY'21.

Commenting on the performance, chairman and managing director Vikram Somany said that the same was reflective of the renewed growth trajectory for Cera Sanitaryware Ltd.

"Initiatives undertaken in recent months and quarters towards debottlenecking and enhancing shop floor productivity combined with process efficiencies to raise raw-material-to-end-product yields, have resulted in substantially improved EBITDA, cash profit and profit after tax for the company.  We look forward to embarking on a newer growth dynamic and monetizing opportunities thrown up by increasingly buoyant consumer demand," said Somany.

Somany added that new product offerings, overall customer ownership experience and customer warranties were enabling gravitation of newer customers towards Cera’s sanitaryware, faucetware and tiles offerings, even as the capacity expansion of both the faucetware and sanitaryware businesses will create headroom for sustained growth in the years ahead.

Meanwhile, the company's board recommended final dividend of Rs 20 (400 per cent) per fully paid-up equity share of Rs five each and a special dividend of Rs 15 (300 per cent) per fully paid-up· equity share of Rs five each for the year ended March 31, 2022, subject to members' approval in the annual general meeting.