India Cements’ sluggish growth in TN offset by promise of other markets

The reasons for tepid growth of the company could be attributed to last year’s economic slowdown and the sluggish growth in the main market TN. Sand mining issues, absence of government projects and the hangover of demonetisation and GST compounded the scenario, said N Srinivasan, VC-MD, India Cements. With a lower net plant realisation and increase in variable costs, the EBITDA was at Rs 722 crore for the financial year ending March 31, 2018 against Rs 869 crore recorded in previous year. 

However, Srinivasan remained upbeat about the “pent-up demand in TN,” which is expected to be revived while Maharashtra, Telangana, Karnataka and Andhra Pradesh had reported good growth on the back of infra demand – in terms of roads, dams, housing projects pulling up the figures for the second half of the year to 6 per cent.

Last quarter, the company’s capacity utilisation was at 79 per cent though softening of prices did impact the performance, he said attributing the huge increase in power and fuel costs among the reasons for the decrease in EBITDA. The overall volume for the year under review was 11.17 million tonnes, Srinivasan said adding it was marginally higher than 11.04 million tonnes clocked last fiscal. During the fourth quarter, sales volume of the company rose by 8 pc to 30.90 lakh tonnes.

Anticipating a pick-up in demand and better capacity utilisation this year, he said prices (per bag of cement) are expected to go up from the first quarter (January) of next year. This is based on the demand-supply scenario, he sought to point out.

Rakesh Singh, Executive President, India Cements, said growth from Telangana and Andhra was 35 per cent and the company had grown over 15 to 18 per cent in the year on a whole.  While TN and Kerala are slated to report better growth, the Maharashtra market had shown double-digit uptick. Also, leveraging the Chennai Super Kings brand campaign during the start of the ongoing Indian Premier League (T-20 Cricket) had resulted in a 20 per cent surge in cement sales, he added.

According to Srinivasan, from now on, every successive quarter the company would start seeing improvements – in terms of higher capacity utilisation and better pricing realisation. Investments were set to increase during the elections with infra projects being the growth drivers. The company sees its import of 70,000 tonnes of coal per month from its Indonesian plant as a cost security strategy. If the higher utilisation of capacity is sustainable, it would pursue inorganic growth opportunities. But, it would wait for two quarters from now to analyse results and decide on this, Srinivasan said.