RERA, sand scarcity, GST behind India Cements Q2 woes

India Cements, the largest cement maker in South India, said its results for the September quarter were hit by GST, sand scarcity in Tamil Nadu and the impact of tougher regulation on the real estate sector.

The company reported today a 62% decline in its standalone net profit to Rs 23.67 crore for the September quarter of the current fiscal.

Total income fell 3% to Rs 1,274.90 crore despite the consolidation of a couple of its subsidiaries this time.

“The performance of the company can be considered to be satisfactory given the backdrop of very tough market conditions, severe competition and increase in input cost,” said the company.

“While the economy is yet to get over the impact of the roll out of GST from July 17, the regulatory conditions of RERA together with the latent effect of the demonetisation had its toll on the Construction and reality sector,” it added.

The higher input cost and lower NPR had resulted in a lower EBIDTA of Rs.188 crores for the quarter. Interest and other charges were at Rs. 89 crores for the quarter and depreciation at Rs.66 crores resulting in a profit before tax of just Rs.36 crores for the quarter.

It said a severe shortage of river sand in Tamil Nadu also contributed to poor demand.

“With a huge capacity over hang, the cement industry in south continued to reel under pressure with a lower capacity Utilisation,” India Cements said.

“With the backdrop of negative growth of 3% in the market, the selling prices of cement in the south during the quarter was also subject to fluctuation resulting in the NPR going down by 4%.”


It said the reports of normal rainfall during the south west monsoon together with the forecast of good rainfall during the north east monsoon is likely to lead to a the revival of the rural economy.

“The recently announced mega road building programme to construct 34,800 km of highways is also expected to stimulate the economy and give a fillip to cement consumption in the coming years. It is also hoped that the situation of shortage of river sand availability in Tamil Nadu will Sooner or later ease out paving way for growth in the Construction industry,” it said.

The company said part of the increase in fuel costs was due to the use of coke derived from petroleum, instead of coal.

“The usage of petcoke was maintained at 81% for the half year in the overall fuel mix but the price of Petcoke had gone up steeply resulting in increased power and fuel cost,” it said.

The overall volume during the quarter including exports was 27.01 lakh tons.

This year’s numbers include those of the merged entities of Trinetra Cement Ltd. and Trishul Concrete Products Ltd and are not strictly comparable to last year’s numbers, especially on the revenue side.