South-based India Cements reported a net profit of INR1.37bn on the back of a 3.6% rise in net sales to INR9.89bn.

The prices declined significantly in most of the south markets that were hit by floods during the quarter, and impacted the profitability of the company pulling down its net realisation to INR3025 as against
INR3063 a year ago, analysts said.

"Cement prices (at the company level) in Andhra Pradesh are currently at INR155 per (50kg) bag as against INR210 in April," said Vice-Chairman and Managing Director N. Srinivasan.

India cements derives 20% of its total revenue from Andhra Pradesh.

The prices in Tamil Nadu, the region accounting for 40% of India Cements’ revenue, also corrected INR15-20/50kg in the trade segment and around INR25 in institutional segment.

 The company managed to sell 2.8Mt cement and clinker in Jul-Sep, up 15% from a year ago. These despatches included cement sales of 2.5Mt.

However, falling prices offset the benefit of higher sales volume.

Operating margin slipped to 30.5% from 31.3% a year ago.

The company managed to control the rise in its total cost to 10% from a year ago, owing to INR60/t ease in variable cost.

In Jul-Sep, India Cements’ variable cost stood at INR1,572 /t, Srinivasan said.

The performance also received support from shipping and its franchisee of India Premier League. IPL franchisee’s operating profit for the quarter stood at INR54m.

However, India Cements’ depreciation for the quarter was up 15% at 571.8Mt, while interest cost also rose 51% to INR374m.

Expansion outlook
India Cements has planned INR10bn capex for the next 18 months, Srinivasan said.

The expansion, which is under way, will raise the capacity to 14.5Mt by 2010-11 (Apr-Mar). Expansion at Chilamkur, Andhra Pradesh, will be by July, Srinivasan said.

"Currently our blended capacity is over 13Mt and by once expansion at Chilamkur is completed we will be able to produce 14Mt," he said.

At Chilamkur, the company is expanding its capacity to 4500tpd from 3600tpd.

Work at the company’s 1.5Mt Rajasthan plant is moving as per schedule and will be operational July taking the capacity to 15.5Mt.

India Cements’ plan to add 100 MW captive power capacity is on, and orders for its first unit in Tamil Nadu are already placed, Srinivasan said.

This unit is expected to be operational by Mar 2011, while for unit II, the orders are likely to be placed soon, he said.

The company has also earmarked US$20m to acquire an Indonesian coal mine with 3Mt reserves.

India Cements will raise debt worth INR3bn through its subsidiary India Zinc and another INR3bn through equity or other instruments, Srinivasan said.

He expects the company will be able to sell 11Mt cement and clinker in 2009-10 and close to 13Mt in 2010-11 on the back of expanded and ramped up capacity.