India Cements pins hopes on exports, new markets

Looking to double exports by next year, during the 7-month-period this year, exports had crossed 2.82 lakh tonnes (clinker plus cement). Last year, India Cements’ export were 3.24 lakh tonnes, of which, clinker constituted 2 lakh tonnes. In value terms, last year exports were Rs 100 cr while the first six months had generated an export revenue of Rs 70 cr. “We expect to close the year with exports between Rs 170 cr and Rs 200 cr,” India Cements MD N Srinivasan said, adding branded white cement ‘Coromandel’ which was recently launched had found traction in the Sri Lanka market.  Observing that this is the weakest quarter given the unpredictability of monsoon, South with a monthly offtake of 50 lakh tonnes saw a 7 to 8 per cent growth compared to two years of nil or negative growth. Increased use of pet coke of 90 per cent compared to 20 per cent a year ago, reducing variable and power costs were all factors for its profitability. “We have reduced debt to the extent of Rs 80 to 100 cr,” he said. The cement major’s Q2 net profit stood at Rs 62.41 cr compared to last year’s Q2 figure of 38.50 cr. For the six months ending September 30, 2016, net profit rose to Rs 106.39 cr (from Rs 76.30 cr in the same period last year) on a net sales of Rs 2,510 cr (from Rs 2,447 cr).

Demand remains constant 

Despite a drop in realisation, substantial cost reduction and improved operating performance drove the net up of the company. Srinivasan said that cement demand had not changed irrespective of real estate price fluctuations. TN and Kerala were the primary markets, contributing 85 per cent sales through trade (stockists and dealers) and individual house buyers. Rest of the sales comes through builders, government, projects and institution, he informed, adding that the cement component of real estate is only 15 per cent. 

Focusing on other non-traditional markets such as Orissa, Bihar, Jharkhand, UP, Gujarat, Madhya Pradesh besides Maharashtra had led to better sales performance. However, the net plant realisation or NPR per tonne had come down to Rs 3,570 from last year’s figure of Rs 3,878. This was balanced by exports doing “very well” with a monthly offtake of 30,000 tonnes. For the quarter, exports touched 85,000 tonnes including a clinker component of 67,000 tonnes. 

Compared to last year’s Q2 figure of 1.02 lakh tonnes, this year exports were 1.52 lakh tonnes. “Realisation from exports may not be high. We plan to increase exports,” he said, noting that clinker offtake was from Kakinada plant while Krishnapatnam facility was used for cement. On competition and profitability, Srinivasan said, “we compare well with most peers but still have to catch up with two of the three major players operating in this market,” Srinivasan said. Asked about new products, he said, the company plans to manufacture a range of specialised cements such as oil-well cement (used for off-shoring drilling of oils by ONGC) and sleeper cement for the railways.  Some questions pertaining to financials and business plans were answered by TS Raghupathy, Special Advisor, India Cements, V M Mohan, Executive President, Corporate Finance and N Venkateswaran, Joint President, Operations, who were present during the press conference.

The India Cements MD said the demonetisation impact had not yet been felt by the company.  “It’s still too early. Till today, sales are normal. If at all, consumption can be postponed but buyers will not abandon half-finished homes. All I can say, is so far, we have not been impacted. It’s business as usual for us. Secondly, once the liquidity is restored in the system and more new currency notes come into circulation, it will ease the situation and help trade to do business without hardship. We have to wait to see how things unfold in the coming months,” Srinivasan said, when asked about the revenue guidance for the upcoming third quarter and the effect of demonetisation. Unorganised sector will be affected more than the organised players given the absence of documents and reliance on cash dealings.  TS Raghupathy, Special Advisor, India Cements, chipped in to say, “In fact, Kerala, a cash-rich market and which is high on literacy parameter, has been accepting cheques and even swipe cards,” while highlighting that the company had not yet faced any challenges due to demonetisation.