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India Cements: Saved by Shri Vishnu - Views on News from Equitymaster
 
 
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  • Jul 1, 2002

    India Cements: Saved by Shri Vishnu

    India Cements, one of the largest cement producers in the south, has announced disappointing results for FY02. The company reported a 19% fall in its topline, while its net profit fell by a considerable 102%. The bottomline was rescued from a further slide by an extraordinary income of Rs 1.2 bn by way of profits from the sale of its stake in Shri Vishnu Cements to Zuari Cement Limited.

    (Rs m) FY01 FY02 Change
    Net Sales 12,570 10,191 -18.9%
    Other Income 95 58 -38.9%
    Expenditure 9,421 8,584 -8.9%
    Operating Profit (EBDIT) 3,149 1,607 -49.0%
    Operating Profit Margin (%) 25.0% 15.8%  
    Interest 1,902 2,054 8.0%
    Depreciation 830 875 5.4%
    Profit before Tax 512 -1,264 -347.2%
    Extraordinary items   1,189  
    Tax (30) 68 -325.3%
    Profit after Tax/(Loss) 482 (8) -101.6%
    Net profit margin (%) 3.8% -0.1%  
    No. of Shares 140.0 140.0  
    Diluted Earnings per share* 3.4 -0.1  
    P/E Ratio      
    (* annualised)      

    India Cements, one of the largest cement producers in the south, has announced disappointing results for FY02. The company reported a 19% fall in its topline, while its net profit fell by a considerable 102%. The bottomline was rescued from a further slide by an extraordinary income of Rs 1.2 bn by way of profits from the sale of its stake in Shri Vishnu Cements to Zuari Cement Limited.

    The company has been severly affected by the poor growth in cement demand in the southern region where the company has 95% exposure. Cement demand in the southern region grew by a modest 6% compared to a national demand growth of 10%. The topline has eroded considerably due to poor sales volumes coupled with depressed realisations. The realisations had dipped 8% in the first nine months of FY02 on a YoY basis.

    The sale of Shri Vishnu Cements has saved the company from falling into a deep red. Excluding this one time extraordinary income, the net loss stands at a huge Rs 1.2 bn. The stake in Shri Vishnu Cements has been sold to Zuari Cement, a joint venture between Zuari Industries and multinational cement company Italcementi.

    On the operational front the company has reduced its total expenditure by 9%. The company managed to reduce its consumption of power and coal per tonne of cement produced. In the first nine months, the company reported that it had reduced its power consumption from 97 Kwh/tn to 92 Kwh/tn YoY, while its coal consumption has fallen to 141 Kgs/tn from 145 Kgs/tn YoY. The company could also have saved on lower raw material consumption on account of lower production volumes.

    The company's high exposure in the south is likely to hinder its prospects for the future. India Cements is already facing the heat from cement majors like Gujarat Ambuja nad ACC who have set up large capacities to tap the southern markets. The oversupply in the southern region is likely to continue in the medium term depressing prices, consequently putting further pressure on the company's topline. Any exercise to decrease the company's exposure in the south by exploring new markets will be a positive, though it must be kept in mind that any such move will involve considerable logistics and transportation costs as the company has no production facilities outside south India.

     

     

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