India Cements reports low demand in 2Q15

South India's largest cement maker by volume, The India Cements Ltd,  on Wednesday said its profits for the quarter ended June 2015 were INR4010m (US$617.2m) from a loss of INR2960m (US$25.5m) in the comparable quarter last year. Cement producers in south India have previously found profits hard to come by with excess capacity and falling demand.

"It's a quarter where price stabilisation happened and a slightly better quarter, but poor demand," said MD of ICL, N Srinivasan. He said hat there was a fall in demand in south India while it remained flat in other markets. Total cement sales in the quarter was 208.1Mt as compared to 239.1Mt, a YoY drop of 13 per cent.

Clinker exports were lower on account of unremunerative prices at 1.8Mt from 16.6Mt earlier. The company operated its cement plants at 58 per cent of its rated capacity due to poor demand as against 67 per cent last year. On a sequential basis, capacity utilisation was 57 per cent.

"India Cement 1QFY16 results were better than expected on profitability front. The net sale during the quarter declined by 13 per cent YoY to INR10.71bn (US$0.164bn) and was below our estimate of INR115.3bn (US$1.775bn). However operating profits grew by 19.9 per cent YoY to INR1950m (US$30m) and was better than estimate of INR1760m (US$20m),” said Shrenik Gujrathi, analyst at Angel Broking, in a note. Net plant realisation improved to INR3930/t from INR3312/t while earnings before interest depreciation and taxes were INR1990m (US$30.6m) from INR1660m (US$25.5m). The EBITDA improvement was largely due to 18 per cent YoY decline in operating cost.

"We are hopeful that cement demand will improve due to planned infrastructure activities in Andhra Pradesh and Telengana. We are now sure that we have turned the corner in cement business," Mr Srinivasan said.