I am pleased to share with you all the annual performance of your Company for thefiscal year 2019-20. The year was marked with new prospects unexpected challenges freshinsights and important lessons for future. Prism Johnson has been able to steer itselfamid turbulent economic challenges which were spread throughout the year. Crests andtroughs are a part of business and your Company has plans to ensure the progress andsustenance of all the three business divisions: Cement Ready-Mixed Concrete and Tiles.
Since the last quarter of the recently concluded fiscal the world has been dealingwith the pandemic outbreak of COVID-19. The accelerated spread of the virus has touchedthe human life without any exceptions and this has directly affected all businesses.
It is leading to an economic crisis much bigger than that of Global Financial Crisis of2008. Healthcare workers and civil servants around the globe with the combined efforts ofGovernments and non-Government Organizations are working tirelessly to ensure safety andhealth of people. We express our sincere thanks and gratitude to all the people who arethe frontline of this combat their selfless effort is making the belief in humanity evenstronger for the entire world.
Considering the situation at hand the time to total health and economic recovery mightbe long. It is expected that the disruptions to the Indian economy would also be felt.
During FY20 your Company continued to work hard towards catering demand fromunderserved areas expanding the consumer base and identify emerging trends which willshape business.
Government has announced slew of measures which might ensure slow and steadyimprovement. At Prism Johnson we continue to monitor the situation at ground level. Withthe mutual trust and motivation to fight the pandemic across the organization we havedisplayed the grit and unity amongst all of us. To further accelerate the testing ofCOVID-19 Prism Johnson has contributed a high-speed Corona Virus testing machine worth r65 Lakhs to the Government of Madhya Pradesh.
During FY20 your Company continued to work hard towards catering demand fromunderserved areas expanding the consumer base and identify emerging trends which willshape business. To achieve this we have a robust distribution network and continuedelivering improved and high- quality products. With technological advancements a wideretailer network and wide range of products we aim to ensure sustainable growth of allthree business divisions - Cement Ready- Mixed Concrete and Tiles.
Considering the challenges posed by the difficult economic scenario it is clear thatPrism Johnson performed satisfactorily to earn the trust of its customers andshareholders. In FY20 your Company also paid a dividend of Rs 1.00 per share (10% of FaceValue).
I will also briefly comment on the Company's performance across all three divisions.Cement volumes de- grew by 3% on account of lockdown in March. Else Cement volumes wouldhave grown as they were up marginally by 1% for the first 11 months. Overall Cement &Clinker Division clocked volume of 5.72mn tons a decline of 9% in volumes. Cement EBITDAper ton improved to Rs 889 in FY20 from Rs 834 in FY19 backed by higher realizations offsetting higher overall costs. Key other highlights are as under:
Cement Division utilization levels were at 82%
'Champion Plus' and 'Duratech' our premium products have performed wellcontributing ~22% of overall cement volumes in FY20.
Division has been declared as the Winner of Special Commendation for 'GoldenPeacock Environment Management Award' for the year 2019.
Variable cost of Cement Division is likely to come down in the foreseeablefuture on account of commissioning of WHRS & solar power fuel mix change and benignfuel cost.
The consolidated revenues of H & R Johnson (India) were nearly flat at Rs 1823Crores. The bathroom segment revenue continues to shine underlined by their growth of 9%.The Division has been able to sustain itself due to the hard work by your employees andthe continued reliance of the loyal customers on the brand. The initiatives undertakenover the last few years have resulted in better operating performance and futurestrategies will be laid to capitalize on our brand presence.
The EBITDA has grown marginally to Rs 70 Crores in comparison to Rs 60Crores in FY19 and margins increased to 3.8%.
The Division continues to invest in marketing and distribution activitiesand has added eight large format Experience Centres taking the total to 19 spread acrossIndia. These Centres provide a more personalized experience to the customers and give usan edge in the market.
To ensure brand outreach and market presence your Company held launchevents and numerous marketing campaigns of its tiles products.
Tiles export revenues (Consolidated) more than doubled to '119 Crores.
Engineered Marbles & Quartz export revenues jumped by ~50% to '117Crores.
A composite scheme of arrangement and amalgamation has been undertaken tosimplify the corporate structure.
The Ready-Mixed Concrete (India) Division has performed slightly below expectationsthis year and reported a decline in volumes by 14%. This was largely due to prolongedmonsoon liquidity tightness and slowdown in the real estate sector. The NGT ban onconstruction and volatility in cement prices also proved crucial to the industry. Howeverlabour shortage and self distancing norms due to COVID-19 pandemic could turn into anopportunity for Ready-Mixed Concrete manufacturers by replacing site mix which is labourintensive. The Division's EBITDA was at Rs 23 Crores. Strategies are being made to improvemarket presence improving utilization levels and increase in value added products in theIndividual Housing Segment.
After four years of reduction standalone debt (net) has increased by ~ Rs 90 Crores to~ '1475 Crores mainly due to capex in WHRS and significant blockage of working capitaldue to sudden lockdown. It is likely that the COVID-19 will have a significant impact onIndian economy resulting in sudden change in the business environment. We are looking atCOVID-19 as an opportunity to emerge as a leaner and stronger organization once businessesstart to normalize.
Measures for cost efficiency/ stability
HRJ Division's variable cost is likely to come down due to lower gas cost
All the three Divisions have identified several significant fixed costsaving initiatives. A good part of this cost savings would be sustainable
To review inefficient and unprofitable manufacturing assets and undertakeappropriate measures
Capex are being scaled down in all the three divisions resulting in bettercash flows
Over the years the Company has been proactively managing its liquidityprofile. During FY20 too the Company had created liquidity buffer to take care of itsfinancial obligations during H1FY21. Given the current challenges the Company continuesto explore its strategy of pre-payment / refinancing so as to fulfill financialobligations till the end of FY22.
We believe that the rural and Individual Housing Segment demand to normalizeand pick up better than Urban demand. Hence Cement demand is likely to come at normalizelevel much sooner than Tile and Ready- Mixed Concrete demand which is likely to seedemand revival by year end
Prism Johnson is committed towards achievement and maintenance of high standards ofEnvironment Health and Safety issues at all plants and offices. The Company activelylooks for opportunity to replace fossil fuels with green / renewable energy. During FY21the Company is likely to commission WHRS in a phased manner and 30 MW of solar power. Thisapart Company continues to focus on increasing usage of alternate fuels and usage ofbio-diesel. With the objective of giving back to the society several initiatives wereconducted during the quarter at pan India level. The Company also places great importanceon CSR and our commitment to the sustainable model of development.
Board of Directors of the Company had approved divestment of its 51% stake in RahejaQBE General Insurance Company Limited ('RQBE') to QORQL Private Limited a technologyCompany with majority shareholding of Vijay Shekhar Sharma and remaining held by Paytmfor an aggregate consideration of '289.68 Crores subject to receipt of approval by theshareholders of the Company and all other requisite approvals ('Divestment'). Thedivestment would further accelerate Company's on-going efforts to de-leverage Balancesheet and improve financial ratios.
As we enter the new financial year I am filled with cautious optimism at the sametime fully aware of short term challenges. The country's young generation backed byprogressive initiatives of the government will pave the way for progress in bothindustrial and social avenues. At Prism Johnson we will continue to work hard and takeyour Company to new levels of success. I would like to express my gratitude to our valuedshareholders the customers employees and everyone associated with our growth.