Cost controls helped ICL post Rs 69 cr net profit in Q2
CHENNAI: Fixed pricing and cost-control measures adopted by India Cements have resulted in a substantially improved performance for the quarter ended September 30, 2020. ICL saw an increased EBIDTA of Rs 240 cr and profit before tax of Rs 110 cr despite the drop in volume during the quarter caused by the prolonged lockdowns on account of COVID-19.
ICL’s overall volume declined by 21% during the Q2 and nearly by 38% for the half-year ended Sept 30, 2020. The overall volume of clinker and cement was at 21.07 lakh tons as compared to 26.67 lakh tons in the same quarter of the previous year. “Volumes are still low as we lost 5 lakh tons but on a YoY basis, EBIDTA was better at 60 % while 50% on a sequential basis. We focused on the business of cements and rather than chasing volumes, we fixed the price and sold. From Q1 to Q2, sequentially, the net plant realisation (NPR) was good unlike our peers,” N Srinivasan, VC-MD, India Cements said on Friday, as he went on state that the cost control measures would be sustained.
With the improved selling prices, the NPR was up by 11% as compared with the previous year. Also, the variable cost of production was reduced by 6% (by Rs 130/- per ton) while the outgo on fixed overheads was also significantly reduced, Srinivasan sought to point out. ICL reported over 13-fold rise in its consolidated net profit at Rs 69.21 cr for the September quarter of the current fiscal.
He also took a barrage of questions that pertained to oft-cited concerns of de-growth, poor demand and monsoonal impact. “There are only seven states with limestone deposits in the country and we are in 2-3 such states (Andhra accounts for 30 pc of limestone, ICL has 4 plants). While EBIDTA for other players has reduced quarter on quarter, we have been making fundamental changes (we have 892 staff in the non-managerial grade),” he said, adding the cement behemoth’s “shine” over its peers is dependent on demand uptick. Also, margins of 22.3 per cent was much higher than seen in several years, Srinivasan said, adding despite sluggish demand, it had done well on the pricing front. To a comment, his response was “We are swimming well in rough seas.”
Except for an anomaly or two, ICL did not see itself as disadvantaged when compared to multi-locational companies, he said, on the ‘vintage’ plant status of ICL. Demand in Rajasthan is extremely good. Even in J&K, plans to set up a plant had taken a backseat with COVID-19 “changing the timetable.”
Demand continued to be steady in TN and the launch of massive programmes in AP besides the government announced projects are lending confidence to ICL. Infrastructure investment commitment had boosted demand in central and western parts of the country. In south too, the government is oriented towards infra, and with Maharashtra also overcoming subdued demand due to the pandemic and rains, ICL remains upbeat on demand pick-up.