India Cements back in black

Better selling prices, cost control aid turnaround

The India Cements Ltd. (ICL) is back in the black after posting two consecutive quarters of losses with a net profit of ₹17 crore for the first quarter ended June 2020 on improved selling prices, controlled distribution costs and introduction of a cash-and-carry policy.

“We were recovering from the slowdown were and then attacked by COVID-19,” said N. Srinivasan, vice-chairman and managing director, ICL. “We have not gone in for layoffs or salary cuts as they (employees) are not responsible for COVID-19. We decided to look at the business of cement instead of mere volumes.”

Stating that the pandemic was something unusual, he said ICL, along with industry majors, increased cement prices and introduced the ‘cash-and-carry’ model. It took proactive steps in containing expenditure through reduction of fixed cost along with effecting improvement in the operating parameters.

All these measures, enabled ICL to bring down fixed cost to ₹130 crore from ₹190 crore in the year-earlier period, leading to substantial savings and achieving break even at 33% of its operations.

The operation and dispatches started on a small scale after relaxation of the lockdown rules from the second half of April. ICL used the accumulated stocks initially before starting production from kiln from the third week of May. The overall volume of clinker and cement was 14.28 lakh tonnes against 30.42 lakh tonnes in the same quarter last year, he said. For the first quarter, net profit contracted 76.51% to ₹16.96 crore from a year earlier. Loss in Q4 of FY20 stood at ₹111 crore, while the loss in Q3 was ₹5.37 crore.

“Cement prices, that touched lows in the March quarter, increased sharply in April. These prices… [are] expected to sustain during this quarter. These prices, along with the cash-and-carry policy have improved our profitability and liquidity,” he said.

Given the current pandemic and the plight of the construction industry, the firm’s first quarter performance may be considered ‘good’, he said. However, it was difficult to predict future demand, he added.

“The current COVID-19 situation and the re-introduction of lockdowns by some States to contain its spread is a cause for concern. It is expected that the economic revival could be delayed till the time the pandemic situation is brought under control,” he said.

Source: Read Full Article