India Cements net down 60%

Company hopes its Rs 1,150 crore investment in integration process will reflect at EBIDTA soon

India Cements Ltd has posted a 60% drop in net profit during the quarter ended March 31, 2013 at Rs 26.28 crore as compared to Rs 64.92 crore during the same quarter a year ago. Total income increased by 7.2% at Rs 1,199.04 crore in the fourth quarter from Rs 1,118.48 crore.

N Srinivasan, vice chairman, India Cements attributed the drop in profit to market pressure, hike in freight and handling expenses caused by the diesel price increase could not be passed on fully during the period under review resulting in a lower net sales realisation leading to the reduction in EBIDTA.

The company also said interest charges for the quarter was maintained as that of previous year at Rs 64 crore while depreciation charges were higher at Rs 72 crore as compared to Rs 65 crore due to higher capitalisation including thermal power plant. The resultant net profit was lower at Rs 40 crore as compared to Rs 94 crore in the same quarter of the previous year.

Srinivasan noted in Andhra Pradesh the company faces 12 days power holiday in a month and in the remaining days four hours power cut. "Despite having extra captive power in Tamil Nadu, we could not export to Andhra Pradesh due to restrictions posted by Tamil Nadu Pollution Control Board (TNPCB)," said Srinivasan. He noted the power cost has gone up by seven% per unit during the fourth quarter.

Commenting about cement prices, he said prices in Andhra Pradesh, one of the key markets for the company, has come down drastically in the last six months. For instance in Andhra Pradesh the price of cement has come down to Rs 190-195 from Rs 265-270 in the last five months.

During the second half of the year, the thermal power plant at Sankar Nagar stabilised at better levels of efficiency which helped in mitigating the impact on the difference in the cost of purchased power in Andhra Pradesh. The 50 MW thermal power plant at Vishnupuram in Andhra Pradesh is under commissioning and is expected to take few months to stabilise operations.

India Cements is one of the cement companies in the country which has got complete integration, with captive coal, power and transportation (ships). The company has invested around Rs 1,150 crore in the integration process in the last few years. The investments includes Rs 900 crore in captive power, Rs 100 crore in coal and Rs 150 crore in two ships. "Going forward impact of this (the integration) will be seen in the EBITA. For instance having captive coal mine will result in around $5-10 per tonne. From the two power plants, the company expects around Rs 70 crore benefit from both the power plants," said Srinivasan. The first shipment of coal from India Cement’s mine in Indonesia has already taken place and the cargo will arrive into India by last week of this month. Overall the company has 180 MW of captive power in Tamil Nadu and Andhra Pradesh and another 20 MW in Rajasthan.

Commenting on net plant realisatoin, he said, it has come down by 6.5% to Rs 3,248 a tonne during the fourth quarter from Rs 3,466, a year ago.

The taxation expenses for the quarter was at Rs 14 crores as compared to Rs.29 crores in the previous year with the resultant net profit after tax at Rs.26 crores against Rs.65 crores in the 4th quarter of the previous year.

V Srinivasan ( Research Analyst- Cement, Angel Broking ) on India Cement results India Cements posted weak set of numbers for fourth quarter 2013. Net sales rose by 8.1% yoy to Rs 1,199 crore. OPM fell by 412 bp yoy to 14.7% on account of weak cement prices and increase in input costs. Bottom-line fell by 61% yoy to Rs 26 crore.