X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Ramco Cem: Topline down, profits hammered - Views on News from Equitymaster
MidCapSelect
  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Ramco Cem: Topline down, profits hammered
Feb 13, 2014

The Ramco Cements Ltd (formerly known as Madras Cements Ltd) has announced its financial results for the third quarter of the financial year 2013-14 (3QFY14). The company's sales and net profits have reported a decline of 2.8% YoY and 69.4% YoY, respectively during the quarter. Here is our analysis of the results:

Performance summary
  • Net sales decline by 2.8% YoY during the quarter ended December 2013 (3QFY14) on account of sluggish cement demand.
  • Operating profits decline by 35.5% YoY owing to lower realisations and steep hike in costs.
  • Operating margins contract from 23.1% in 3QFY13 to 15.3% in 3QFY14.
  • Other income decreases by 24.3% YoY, while depreciation and interest expenses increase by 10.4% YoY 8.2% YoY respectively.
  • At the bottomline level, profit after tax plunges by 69.6% YoY during the quarter.
  • During the nine month period of the financial year 2013-14 (9MFY14), sales and profits decline by 4.5% YoY and 66.8% YoY respectively.

Financial performance snapshot
(Rs m) 3QFY13 3QFY14 Change 9MFY13 9MFY14 Change
Net sales 8,672 8,426 -2.8% 28,362 27,078 -4.5%
Expenditure 6,669 7,133 7.0% 20,195 22,643 12.1%
Operating profit (EBITDA) 2,004 1,293 -35.5% 8,167 4,435 -45.7%
EBITDA margin 23.1% 15.3% 7.8% 28.8% 16.4%  
Other income 362 274 -24.3% 567 742 30.8%
Depreciation 695 767 10.4% 2,225 2,290 2.9%
Interest 429 464 8.2% 1,479 1,386 -6.3%
Profit before tax 1,242 337 -72.9% 5,030 1,500 -70.2%
Tax 402 81 -79.8% 1,631 373 -77.2%
Effective tax rate 32.3% 24.1%   32.4% 24.8%  
Profit after tax 841 256 -69.6% 3,400 1,127 -66.8%
PAT margin 9.7% 3.0%   12.0% 4.2%  
Extraordinary gain/(loss) (5) -    (5) -  
Net Profit 836 256 -69.4% 3,395 1,127 -66.8%
Net profit margin 9.6% 3.0% 6.6% 12.0% 4.2%  
No of shares (m)       238.0 238.0  
Diluted EPS (Rs)*         7.4  
P/E (times)*         21.7  
*trailing twelve month earnings

What has driven performance in 3QFY14?
  • Ramco Cements reported 2.8% YoY decline in the topline during the quarter ended September 2013 (3QFY14). The company has not provided volume details for the quarter.

  • Against a declining topline, operating expenses increased by 7% YoY during the quarter. Barring power and fuel cost, all major cost heads witnessed inflationary pressures. Raw material costs and transportation & handling witnessed sharp increases. As a result, the company’s operating (EBITDA) margins declined by 7.8 percentage points from 23.1% in 3QFY13 to 15.3% in 3QFY14.

    Operating Cost break-up
    >(Rs m) 3QFY13 3QFY14 Change
    Raw Material Consumption 1,308 1,610  
    Change in Inventory (124) (29)  
    Total Raw Material Cost 1,184 1,581 33.5%
    % of net sales 14.1% 18.8%  
    Employee Cost 486 582 19.9%
    % of net sales 5.6% 6.9%  
    Power & Fuel 1,955 1,787 -8.6%
    % of net sales 22.5% 21.2%  
    Transportation & Handling 1,807 1,930 6.8%
    % of net sales 20.8% 22.9%  
    Other Expenditure 1,237 1,253 1.3%
    % of net sales 14.3% 14.9%  
    Total operating expenditure 6,669 7,133 7.0%
    % of net sales 76.9% 84.7%  

  • Other income decreased by 24.3% YoY during the quarter.

  • Depreciation charges and interest expenses increased by 10.4% YoY and 8.2% YoY respectively during the quarter.

  • Owing to poor topline performance and higher operating and non-operating expenditure, net profit declined by 69.4% YoY. Net profit margins contracted from 9.6% in 3QFY13 to 3% in 3QFY14.
What to expect?
In the nine month period of the current fiscal, the company topline has declined by 4.5% YoY owing to the weakness in the housing and infrastructure sector. Lower realisations coupled with higher costs have significantly dented the profitability during the same period.

Given the excess capacity scenario in South India and slowdown in demand, the outlook for the cement sector remains subdued over the medium term. However, given that cement is a critical building material, the long term prospects of the sector remain stable owing to the huge demand for housing and infrastructure in the country.

At the current prices of Rs 198 the stock is trading at 26.7 times its trailing twelve month earnings. We reiterate our 'Hold’ view on the company from a 2-year perspective.

To Read the Full Story, Subscribe or Sign In


Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

THE RAMCO CEMENTS SHARE PRICE


Feb 19, 2018 01:57 PM

TRACK THE RAMCO CEMENTS

  • Track your investment in THE RAMCO CEMENTS with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

MORE ON THE RAMCO CEMENTS

THE RAMCO CEMENTS - LAFARGE COMPARISON

COMPARE THE RAMCO CEMENTS WITH

MARKET STATS