India: Orient Cement reports on 'challenging' second quarter

Orient Cement reported a 35.4 per cent YoY decline in 2QFY16 net profit to US$4.32m due to lower income and higher expenses and finance costs.

Net sales for the three months to the end of September 2015 fell to US$54.7m in the quarter compared to US$59.2m in the same period of the previous years. The company's total expenditure rose to US$51m from US$49m in the same period of 2014.

Deepak Khetrapal, managing director and CEO of Orient Cement said: "The quarter ended September 30 has been a particularly challenging one. Though we have done well on everything that was manageable, low cement prices across Maharashtra have led to a realisation per ton drop of 10 per cent over same quarter last year.

"We have also absorbed the impact of the newly levied District Mineral Foundation, which has been notified during the quarter. Our expenditure includes this cost even for the period January to June, 2015, which is in fact a prior period charge. Amidst these external developments, all our operating efficiencies and costs continue to get better, a result of our operating practices."

Mr Khetrapal added that the company expects cemnt demand to pick up in the second half of FY16.  Various projects for roads, 'Swachh Bharat' initiatives (a national campaign by the Government of India, covering 4041 statutory towns, to clean the streets, roads and infrastructure of the country) and new AP capital at Amravathi should lead to better demand while lower interest rates should encourage private investment.

The highlight of the quarter was the start of commercial production at the company's 3Mta greenfield plant at Gulbarga, Karnataka, effective 26 September 2015. The impact of higher volumes from the new plant is expected to be visible in the coming quarters.