Expect cement prices, demand to recover in second half of FY20: Srinivasan

He expects increased spending on infrastructure projects by the Centre and acceleration in infrastructure projects and development schemes by the new government in Andhra Pradesh to spur the industry

N Srinivasan, vice chairman and managing director of India Cements Limited (ICL), said he was "cautiously optimistic" about the prospects of the Indian cement market, which has been facing supply overhang, and expects an uptick in demand and prices from the second half of the current financial year.

Increased spending on infrastructure projects by the Centre and acceleration in infrastructure projects and development schemes by the new government in Andhra Pradesh should spur demand, he said.

"The cement industry which grew over 13 2 per cent in the first quarter of last year had to be content with a marginal growth of only 1.2 per cent during the quarter ended June 2019. The Southern market, a key market for India Cements, is strong, and grew around 3 per cent on a larger base.," he said.

Prices improved from February 2019 and were stable during the next three months. However, in July and August, there was pressure due to heavy monsoon, particularly in the Southern region, he said.

"Now that the monsoon is getting over, and the new Andhra Pradesh Government and the government at the Centre are expected to kickstart development schemes, demand is expected to increase, which will lead to better prices," said Srinivasan, adding that he is 'cautiously optimistic’ on the outlook for the industry in the current year.

"The second half of the financial year would be better and the company expects to make up the deficit in consumption in the first half, during the second half of the year," he said.

Srinivasan said his company has been focusing on cost-cutting and operational efficacy.

"ICL has been taking steps to contain the cost of production and the variable cost has come down by nearly four per cent on a sequential quarter basis aided by the softening of fuel prices...Plant utilisation level has increased to above 75 per cent now, owing to measures taken regarding reducing logistics, fuel, manpower costs, power expenses, development of skill in the work force through training, among others."

Talking about the company's expansion plans, Srinivasan said India Cements plans to invest around Rs 1,300-1,400 crore in the near future, a chunk of which will be used for an integrated cement factory in Madhya Pradesh and a grinding unit at Uttar Pradesh, which will establish the company as a pan-India player.

Currently, India Cements has a total production capacity of 16 Million Tonnes from 10 plants in five states. "Total capacity will increase to nearly 20 million tonnes by 2021 once the two projects are implemented and capacity expanded in existing plants," Srinivasan said.

India Cements had reported a net profit at Rs 72 crore during the quarter ending June 30, 2019 against Rs.21 crore in the same quarter last year. Total income improved to Rs 1,472 crore from Rs 1,366 crore during the corresponding quarter last year. The company's earnings before interest, tax, depreciation and amortization (EBITDA) increased by more than 50 per cent during the quarter under review. Net plant realisation per tonne grew 11 per cent to Rs 3,650 during the quarter as compared to Rs 3,290 a tonne in the same quarter last fiscal.