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Birla Corp slides after Q2 PAT declines 49% YoY to Rs 86 cr

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Birla Corporation fell 3.85% to Rs 1528 after the company's consolidated net profit declined 48.66% to Rs 85.55 crore on 2.64% rise in net sales to Rs 1697.84 crore in Q2 September 2021 over Q2 September 2020.

The company said that profitability was impaired by severe operational headwinds in all key markets and a surge in expenses.

On a consolidated basis, profit before tax fell 49.51% year-on-year to Rs 119.18 crore. EBITDA fell 30.54% to Rs 281 crore during the period under review. Total expenses rose 10.60% to Rs 1591.92 crore.

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 are important markets for the company. To sustain healthy market share and capacity utilization, which was maintained at 84% in the September quarter, the company had to channel its products outside its core markets, which, in turn, impacted realizations and profitability.

The cement division's realization per ton for the September quarter was at Rs 4,847 compared with Rs 4,862 last year, down 0.3% year-on-year, but for the first six months of the financial year, realization per ton at Rs 4,890 was slightly ahead of last year.

Cement demand contracted by almost a third year-on-year in the east -- in Bihar and West Bengal. Despite this, the company said it managed to marginally raise its cement sales by volume to 3.27 million tons (mt).

Birla Corporation said it was faced with a sharp increase in fuel. raw material and packaging costs during the quarter owing to significant increase in commodity prices. Due to increase in fuel prices, total distribution cost in the September quarter rose 5.4% over the same period last year while sequentially, the company managed to reduce it marginally. However, due to effective cost control and efficiency improvement, the impact of cost escalation on the company's business was less than the overall industry.

Prices of pet coke and coal, both domestic and imported, went up sharply during the quarter. Linkage coal from subsidiaries of Coal India was also in short supply, forcing the company to buy coal from the open market at substantially higher prices. Packaging cost went up owing to increase in polypropylene prices.

The company managed to grow its share of sales of premium cement by volume through the more profitable trade channel to 53% in the September quarter compared with 48% last year.

Birla Corporation said it has taken steps to boost production of coal at its captive mine, Sial Ghogri. in the second-half of the financial year. As a long term strategy, the company is expediting the development of two other captive coal mines, Vikram and Brahampuri, which were secured through auction in 2019. Efforts are also being made to increase the use of alternative fuel. which not only reduces dependence on coal but also helps with industrial waste absorption.

In its outlook, the company said that post monsoon, demand for cement has started to improve. The company has raised prices to partially pass on the increase in input costs. Taking advantage of an improved demand scenario, geographical mix of sales is being optimized again. Together. these measures are expected to improve net realization in the second-half of the financial year.

The jute division, which has been consistently improving its profitability, turned its highest ever quarterly cash profit of Rs 18 crore for the September quarter compared with Rs 8.3 crore in the same period last year-a growth of 117%. The division's profitability was boosted by rationalization in raw jute procurement and sustained focus on production of value-added goods and exports.

However, availability of raw jute has dried up from October and the division may have to scale back production during the rest of the financial year for raw material shortage as restrictions have been imposed on holding stocks of raw jute.

Birla Corporation, the flagship Company of the MP Birla Group, has interest in cement and jute.

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(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

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First Published: Thu, November 11 2021. 14:39 IST