India Cement cracks down on fixed costs

India Cements reported a net profit of INR152.4m in the quarter ended 31 December 2017, which represents a 35.6 per cent decrease QoQ from INR236.7m, according to the Business Standard. In 3QFY16-17 net profit reached INR353.4m.

India Cements was able to contain the loss by controlling fixed costs. The company closed down the infrastructure division and partially shut down its shipping division. Changes were also made to its accounting policy.

Total overheads fell to INR770m from INR1.06bn over the period and are expected to stabilise at around INR850m going forward. “The company will continue to rationalise manpower costs and take policy decisions as may be necessary to reduce overall staff costs,” said the company. The power cost has also seen a decline since India Cements’ Indonesian coal mine has started producing and the company started importing coal for its facilities in India. This had helped the company save around ~60 per tonne, said N Srinivasan, vice-chairman and managing director of India Cements.

The company attributes the performance on low demand in its Tamil Nadu stronghold. Furthermore, fuel prices increased as the use of petcoke came under the spotlight. Cement prices, which were stable in the 1QFY17-18, fluctuated and resulted in top-line erosion by more than INR250/t in the quarter, said the company.

India Cements’ capacity utilisation is around 70 per cent, driven primarily by demand in the north of the country. However, the company is expecting capacity utilisation to rise in southern India over the next two years.