Cement

The sale of cement has increased by 4% during the current quarter compared to the corresponding previous period. During Q1 FY 2018, cement demand in Tamil Nadu witnessed significant slowdown due to effects of severe drought and shortage of river sand. However, the sales have grown in the eastern markets. The advantage of low cost pet coke inventory built-up earlier, has exhausted and the effect of subsequent purchase of pet coke at increased market price has reflected in the operating cost during the quarter. The company continues to strive for achieving better operating efficiencies through various cost reduction initiatives in the areas of power & fuel and logistics which have helped to stay competitive.

Interest cost has come down due to repayment of borrowings in the earlier periods. Besides the company's credit of A1+ for short term borrowings and AA+ for long term borrowings is helping the company to access cheaper sources of funds.

Wind Power

For the quarter ended 30^th June 2017, the wind farms have generated 935 lakh units compared to 706 lakh units during the corresponding quarter of the previous year. The income for the quarter ended 30^th June 2017 was Rs 25.93 crore as against Rs 19.96 crore for the corresponding quarter of the previous year. The wind season has started early in the current year. The evacuation by Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO) continues to be good.

Ramco Cements standalone total income from operation inclined 7% to Rs 1188.77 crore for the first quarter ended June 2017, helped by rise in cement sales volume and realisation. The cement sales volume (including exports) inclined 4.1% to 21.50 lakh tonne and cement sales realization grew 1.2% to Rs 5351 per tonne.

The Operating Margin (OPM) reduced by 220 bps to 24.4%. As per percentage to sales and net of stock adjustments, power & fuel cost increased 260 bps to 14.3%, freight & handling cost 100 bps to 17%, other cost 50 bps to 11.6%, and raw material cost 20 bps to 14.3% during the period.

As a result, the operating profit fell 2% to Rs 290.44 crore. The Other income sank 45% to Rs 5.24 crore. The interest cost fell 47% to Rs 15.45 crore. Depreciation cost rose 9% to Rs 72 crore. As a result the Profit before Tax (PBT) declined 1% to Rs 208.23 crore.

The net tax expenses for the quarter fell 4% to Rs 54.42 crore. Effective tax rate declined 80 bps to 25.2%. Thus, the Net profit was flat at Rs 155.81 crore.

For the financial year ended March 2017 (FY 2017), sales revenue was up 10% to Rs 4564.23 crore. With drop in OPM by 20 bps to 25.8%, the operating profit went up by 10% to Rs 1176.40 crore. Other income was down 52% to Rs 42.80 crore, thus, PBIDT jumped 5% at Rs 1219.20 crore. Further with drop in interest cost by 43% to Rs 103.52 crore, fall in depreciation allowance cost by 13% to Rs 265.53 crore, the PBT grew 26% to Rs 850.15 crore. With jump in taxation provision by 53% to Rs 200.86 crore, the Net profit increased by 20% to Rs 649.29 crore.

For the quarter ended June 2017, the Company has generated 159 lakh units, with a monetary value of Rs 6.38 crore, as against 110 lakh units generated during the corresponding quarter of the previous year, with a monetary value of Rs 4.41 crore.

The Company has made a smooth transition to GST on the very first day in all its locations. The Company had prepared well in advance for the GST regime by sensitising all stakeholders through continuous awareness programmes, besides making ready its information technology ecosystem. The company continue to witness smooth roll-out of GST across the value chain.

The Board of Directors approved buy-back of shares upto a maximum size of Rs 180 crore at price not exceeding Rs 720 per share and maximum of 25 lakh shares. The buy-back is being carried through Open Market purchases on the Stock Exchanges. The Company has so far purchased 24,86,915 shares at an average rate of Rs 672.66 per share at a cost of Rs 167.28 crore (including brokerage and other charges).

The aggregate capacity of the present satellite grinding units is 4 MTPA. The company proposed to expand its Vizag and Kolaghat Grinding Units and establish a new Grinding Unit in the state of Odisha. With this, the capacity of the satellite grinding units would increase from 4 MTPA to 7.1 MTPA, as detailed below:

• Expansion of Vizag Grinding Unit from 0.9 MTPA to 2MTPA.
• Expansion of Kolaghat Grinding Unit from 0.9 MTPA to 2 MTPA.
• New Grinding Unit in Odisha with a capacity of 0.9 MTPA.

These projects would be commissioned in a period of 18 months from date of obtaining necessary statutory clearances. The aggregate estimated cost of the expansion is Rs 1095 crore, which is proposed to be met mostly through internal accruals. In case of inadequacies in internal generation, the company may go in for borrowings.

The effects of demonetisation are now behind. The effects of GST, increased spending by the Central Government on infrastructure and affordable housing scheme are expected to propel the growth for the cement demand in the foreseeable future. In this context, the company is embarking upon increasing its capacity through satellite grinding plants as stated above. This will enable the company to further increase its presence in the State of Andhra Pradesh, Odisha, West Bengal.

The scrip is currently trading at Rs 685.95 (4^th Aug 2017) on the BSE.