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The company has conducted a conference call on 29 May 2017 to discuss the financial performance for the fourth quarter ended March 2017 and FY 2017 and way forward. The call was addressed by senior management team of the company.
Key Points from the concall discussion:
- Industry scenario: The Cement Industry continued to reel under pressure due to lack of demand with practically nil growth in the consumption during the year, following a very meagre growth in the previous year. While, the industry has created a capacity of over 375 million tonne/annum, according to DIPP, the production during the year was only 280 million tonne, with an effective capacity utilisation of around 74-75%. As per the publication by DIPP, the industry had witnessed a negative growth of 1.2% during the year under review. While, the cement plants in the North, West and Central regions of the country were able to clock a capacity utilisation of over 80%, the industry in the South, had a lower capacity utilisation. It is to be noted that the industry had a growth of over 5% in the first half of the year, while there was a negative growth in the second half, caused partially by the demonetisation exercise. With remonetisation having taken place, this trend is expected to reverse. South has shown a growth of 7% in production during the year, despite a flat growth in the 4th quarter, driven primarily by the increase in the consumption in A.P., Telangana and Karnataka. The deficit rainfall during the South-West Monsoon during the year and near drought-like situation in the Southern states, together with restrictions on the availability of sand, also had taken its toll on the cement consumption in South, particularly in Tamil Nadu.
- The Company has turned out an impressive performance despite the temporary slowdown of economic activities caused by the demonetisation measures taken by the government. This move led to a cash crunch situation resulting in deferment of private consumption for a short while which impacted the growth for cement in the last quarter. However, with the re-monetisation measures undertaken by RBI and restoration of liquidity with new currency notes, the economic activity has started picking up and the overall economic growth is estimated to rebound to 7.6% to 7.7% in the coming year.
- The Company reported a 32% drop in net profit to Rs 34.28 crore in the fourth quarter ended March 2017 in spite of a 16% jump in total income to Rs 1,524.29 crore for the quarter ended March 2017. For the fiscal FY17, the company reported a 33% jump in net profit to Rs 173.35 crore on a total income of Rs 5,794.03 crore (Rs 4,833.53 crore).
- Following the merger of Trinethra Cement and Trishul Concrete Products with India Cements, the capacity is about 16 mt a year from 8 integrated plants and two grinding units with a capacity utilisation of 70% (compared with 63% in the previous year) due to several varietyof factors ranging from higher exports to focussed foray into speciality cements. During FY 2017, exports were up at 4.80 lakh tonne lt compared with 3.25 lakh tonne in the previous year
- The Company overall sales including clinker and cement export was 110.39 lakh tonnes for the FY 2017 registering a growth of 10% over that of previous year.
- With tight market situation prevailing and practically nil growth in the market, the sales realisation per tonne of cement was affected with a drop in NPR by 5% for the combined entity during the year under review.
- The Company kept operating cost under control and achieved an EBIDTA of Rs.869 crores for the year with softening of the international price of coal and pet coke, particularly during the first half of the Fy 2017 and with the improved blending ratio.
- The company had restructured its term-debt to the tune of Rs 1,100 crore. This helped the company bring down the cost of debt and get better rating. It had reduced its stand-alone debt by Rs 234 crore to Rs 2,921 crore during FY 2017 from Rs 3,155 crore. On a consolidated base, the debt had reduced by Rs 196 crore.
- The Company plans to expand its product portfolio and markets to insulate from regional market fluctuations. The company plans to expand it's products across the West, Centre and East and not restricted just to the southern markets. Of the 375-million-tonne of cement production capacity available with the industry, about 150 million tonnes is concentrated in the South against a demand of about 80-90 million tonnes.
- The Company plans to start making special cements such oil well cement and in the current year is ready with cement for railway sleepers.
- The Company expects re-monetisation process to release the pent-up and deferred demand. With the forecast of normal rains in the Monsoons and increased domestic consumption and higher capacity utilisation, the private Investment cycle is expected to rebound during the year. As in previous years, Union Budget for 2017-18 has its thrust on raising public investment, infrastructure and affordable housing which has been accorded infrastructure status. This along with the projected favourable economic environment is expected to increase the demand for cement and result in higher capacity utilisation.
- The Company expects with several legislations being put in place to promote recovery and growth like Housing for all by 2022, Smart-cities, broadening the financial inclusion and with the passage of GST, it is expected that the overall cement demand in the country is likely to grow in the near term.
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