India Cements has reported a steep decline of over 80 per cent in its net profit for the year 2010-11 at INR68.1 crore (US$15m) as against INR354.34 crore registered in the previous year, due to sluggish market scenario in the south.
The firm’s gross turnover was lower by five per cent at INR 4,011.34 crore during the just concluded fiscal year, as against INR4,221.69 crore reported in the previous year. Given the negative growth in South India for cement, the company’s capacity utilisation was just 71 per cent, which led to lower production of cement.
“Despite a negative growth in the region, we still managed to keep our head above water. The capacity overhang is so high in the south and coinciding with slackening demand, the sluggish market scenario will remain the same over the next year or so,” N Srinivasan, VC and MD, India Cements said.
According to officials, Andhra Pradesh, where cement demand was growing at over 20 per cent, is now indicating a 17-18 per cent decline. Growth is a mere four per cent in Tamil Nadu and Karnataka, thereby pushing down the realisation per tonne of cement.
“In the first two months of the current quarter, the volume offtake is lower than the 4Q of last year, but prices are higher. If demand improves, we expect the capacity utilisation too will improve. Otherwise, it will hover around the current level of around 70 per cent,” Srinivasan said. While price realisation and capacity utilisation are under pressure, on the cost front, cement manufacturers are also having to contend with higher imported coal costs, as well as the price of fly ash and power costs, thereby impacting profitability.