Shree Cement Ltd plans to invest INR3 billion in the next fiscal year to boost its cement-making capacity as a booming local economy spurs a housing sector boom and increased government infrastructure spending, the Indian cement maker’s managing director said.
"We will increase our capacity by another 1.5Mt in the coming financial year," Hari Mohan Bangur told Dow Jones Newswires in a recent interview.
The capacity increase would bring Shree Cement’s production to 4.5Mt in the fiscal year beginning April 1, from 3.3Mt expected to be produced this fiscal year, added Bangur.
The capacity increase is expected to be completed by February or March of 2007 and will boost the company’s installed capacity to 6Mt, he said. "We will fund our capacity expansion through loans and internal accruals," said Bangur. Shree Cement, a mid-size cement maker, expects to increase its capacity to around 10Mt by 2010, said Bangur.
The company recently began production at its third cement facility in the western Indian state of Rajasthan. The facility is expected to produce 1.5Mt of cement a year.
Higher cement prices, which have increased by INR400 a ton since Dec. 31, are expected to boost net profit for the fiscal year ending March 31 to around INR500 million, Bangur said. Although higher than net profit of INR290.66 million on net sales of INR5.82 billion posted in the previous fiscal year, Shree Cement’s forecast for net profit is below analysts’ expectations. "I was expecting net profit of over INR1.1 billion," said an analyst with a domestic brokerage.
Bangur attributed the lower-than-expected net profit forecast to higher provisions for depreciation. The company also is looking to increase efficiency by controlling costs, partly by using railways to distribute its cement. The company now dispatches about 45 per cent of its total production by rail, compared with 95 per cent by road until November last year.