• Sales for the third quarter was lower by 11% to Rs 783.50 crore for the quarter impacted by 23% yoy lower despatches for the quarter to 20.4 lakh tones. Higher realization on year on year basis seems to have moderated the impact of strong slide in despatches to some extent. Third quarter of an April-March fiscal year is an empirically a weak quarter due to active monsoon season in south east peninsular India, where it has strong presence.
• On the back of slack demand, the production of clinker for the quarter stood lower by 22.1% to 16.88 lakh tones and cement grinding was lower by 21.4% to 20.96 lakh tones.
• The company which operated its plant at lower capacity in the wake of slack demand has managed to reduce the variable cost (as % to sales net of stocks) even though the fixed cost has been higher/flat as proportion to sales, net of stocks. While the material cost, transportation charges are lower by 130 bps each to 13.1% and 18.7% respectively, the power & fuel cost was nearly flat at 28.6% with rising coal prices negating the lower fuel consumption in volume in line with lower production. However the fixed cost i.e. staff cost was higher by 100 bps to 7.7% and that of other expenses was up by 40 bps to 16.1%. This has resulted in overall 170 bps expansion in operating margin, which inturn resulted in flat operating profit negating the impact of lower sales.
• Other income was higher at Rs 3.83 crore compared to nil in the corresponding previous period. Spurred thus the PBIDT was up by 3% to Rs 132.61 crore. However impacted by higher interest cost (up 36% to Rs 40.65 crore) and higher depreciation (up 8% to Rs 61.69 crore) the PBT before forex gain was lower by 26% to Rs 30.27 crore.
• With forex income stand at Rs 1.80 crore down by 85% the PBT before EO was lower by 39% to Rs 32.07 crore. EO for the quarter as well as corresponding previous period was nil. Taxation was lower by 41% to Rs 10.60 crore in absolute terms and the tax rate was lower at 33.1% compared to 34.1% in corresponding previous period. Thus the net profit was lower by 38% to Rs 21.47 crore.

Nine month performance

The clinker production for the 9 months ended Dec 2010 was at 58.57 lakh tonnes (64.50 lakh tonnes) while cement grinding was marginally lower at 75.08 lakh tonnes (76.08 lakh tonnes). The sale of cement was at 74 lakh tonnes as compared to 75.50 lakh tonnes in April-December 2009. Clinker sale was at 0.15 lakh tonnes only as compared to 4.62 lakh tonnes in the same period of the previous year.

Sales for the period was lower by 11% to Rs 2509.13 crore and the operating profit was lower by 64% to Rs 261.25 crore as OPM crash to 10.4% compared to 25.6% in the corresponding previous period. The net profit was down by 96% to Rs 12.82 crore as degrowth was escalated by higher interest cost and depreciation.

Upgradation / Expansion plans

The capacity upgrade at Chilamakur has started yielding results after initial teething troubles while the cement plant in Banswara, Rajasthan put up by the subsidiary Indo Zinc Ltd has started commercial production from January 2011. Work is in the advanced stage of completion at the power plant in Tamil Nadu and preliminary work for an identical plant in Andhra Pradesh has also started. The mining operations in the coal mining rights acquired in Indonesia are also being actively pursued to ensure uninterrupted supply of coal for the company's requirements.

Outlook

The experts have assessed and also predicted a growth of 8 to 9% in the GDP during the current year. Since cement consumption is one of the primary drivers of the economy and which is also linked to growth of the same, it can be reasonably expected that growth in cement consumption is likely to be higher in the future. Given the capacity overhang that exists it can only expect gradual improvement in capacity utilization over the next year. While the current prices are stable, the continuity of this depends on the demand growth and the utilization levels of the industry.

The stock was hovering around Rs 89.75.