India Cements posts Q1 financials: Surging from negative EBIDTA to positive terrain

The India Cements Limited showcased resilience in its Q1 financial results ending June 2023. Following three-quarters of a downturn with negative EBIDTA, the firm announced a positive EBIDTA for this quarter, despite an environment of reduced cement selling prices due to a supply overhang.

Industry Trends & Competition

According to data released by DIPP, the current fiscal quarter saw a robust 12.2% demand increase for cement across India, with the southern region also observing a double-digit rise. However, this surge didn’t uplift cement selling prices. As coal prices softened and variable costs decreased, the industry chose to prioritize capacity utilization. This, combined with the pursuit of a larger market share, led to a slight dip in the net plant realization for many players.

Company Performance & Financial Metrics

The India Cements reported cement sales of 26.57 lakh tons this quarter, a decline from the 27.85 lakhs tons in the preceding quarter. Such a downturn is attributed to the company’s liquidity challenges, resulting from reduced margins and incurred losses. Despite these challenges, the company noted a drop of Rs. 168 per ton in variable costs compared to the last quarter of the previous year. Additionally, fuel costs have decreased to around Rs. 2.38 per Kcal this quarter from a high of Rs. 2.95 per Kcal. Despite these cost reductions, the EBIDTA dropped to Rs. 12 crores for the quarter compared to Rs. 39 crores the previous year, largely due to a reduction in selling price and volume losses.

Future Outlook & Strategic Measures

To enhance competitiveness, the company plans to commission a new Cement Mill at Sankar Nagar in the second fiscal quarter. Additionally, expert firms like FLS, Krupp Industries, and Boston Consulting Group have been roped in to optimize plant operations and efficiency. Furthermore, non-core assets’ monetization is in the pipeline to bolster liquidity, ensuring enhanced operational performance and covering essential capital expenses.