The company declared its first quarter results for the period ended 31st March 2008 and on a YoY basis, it has not been very good. Though the topline increased, the high costs of coal pulled down the overall bottomlines of the company.
YoY, net sales rose 15% at Rs.1654.85 crore. In Q1FY07, the company had a substantial component of other income which came in mainly via profit earned on sale of JV at Rs.240.75 crore while the total other income in Q1FY08 was Rs.40.56 crore. There was also a 31% surge in the operating expenses, of which cost of fuel alone rose 21%. Coal prices have risen from $66 a tonne to $130/ tonne in one year, while the sale price increased only by 3%. Net realization has come down to Rs 3,518 a tonne as against Rs 3,541 in the previous quarter.
The temporary shut down of five kilns for annual maintenance, leading to the company buying clinker at a higher price from the open markets further compounded the problems.To cut down costs on its coal, the company is now scouting around for coal mines in India. That is bound to take some time, once that happens, maybe things will ease for the company.
This immediately had a cascading effect on the EBIDTA, which slipped down 37% at Rs.550.68 crore. As is the trend, interest outgo is always down in the first quarter and thankfully, managed to keep the profit margins afloat. Yet, PBT fell 37% at Rs.483.17 crore and PAT fell down further by 45% at Rs.326.20 crore.
The company, for the year ended 31/12/07, had posted an exceptional gain of Rs.795.52 crore. Of this, when the company exercised its Put and Call option in an agrrement with Holderind Investments, in respect of its shareholding in Ambuja Cement India Pvt Ltd, an associate company, and sold 19.07 crore equity shares for a consideration of Rs.1,061.52 crore, it recognised a profit of Rs.470.16 crore. The put option for the balance 9.54 crore equity shares will be exercised on April 30, 2008 for a consideration of Rs.588.91 crore. So this means that even in the current year, there will be exceptional gains, which will help bolster the bottomlines again!
It has commissioned its grinding plant having capacity of 1 million ton, at Surat. Work has also started in the Q4FY07, on a new 1.5 million tonne grinding unit near Ahmedabad, and a bulk cement terminal at Cochin in Kerala. Feasibility studies are currently in progress for new capital projects totaling approximately Rs.3,000 crore, to be implemented over the next 3 to 5 years.
With inflation being the main cause of worry, it is not expected that cement prices will be “allowed” to rise much higher in the coming days. The ban on cement exports will also have an impact. Q2 might also be tough if the inflationary pressures do not ease. Things should start easing only from Q3.
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