Birla Corporation Limited has in the quarter ended 30 September registered a 2% growth in revenue-Rs 1,711 crore against Rs 1,675 crore in the same period last year-but profitability was impaired by severe operational headwinds in all key markets and a surge in expenses.
Demand for cement was majorly impacted by the extended and heavy monsoon and shortage of sand in States such as Uttar Pradesh and Bihar which are important markets for the Company. To sustain healthy market share and capacity utilization, which was maintained at 84% in the September quarter, the Company had to channel its products outside its core markets, which, in turn, impacted realizations and profitability.
The Cement Division’s realization per ton for the September quarter was at Rs 4,847 compared to Rs 4,862 last year, down 0.3% year-on-year, but for the first six months of the financial year, realization per ton at Rs 4,890 was slightly ahead of last year.
Shortage of sand severely impacted the construction industry not only in Bihar, but in eastern Uttar Pradesh as wel-a region where the Company has one of the highest market shares. The local administration has now started to address the crisis and it is expected that normalcy would return in the December quarter.
Unusually heavy rainfall, and flooding in some regions, in States such as Uttar Pradesh, Bihar and Maharashtra, made matters worse. Cement demand contracted by almost a third year-on- year in the east—in Bihar and West Bengal. Despite this, the Company managed to marginally raise its cement sales by volume to 3.27 million tons (mt).
Birla Corporation Limited was faced with a sharp increase in fuel, raw material and packaging costs during the quarter owing to significant increase in commodity prices. Due to increase in fuel prices, total distribution cost in the September quarter rose 5.4% over the same period last year while sequentially, the Company managed to reduce it marginally. However, due to effective cost control and efficiency improvement, the impact of cost escalation on the Company’s business was less than the overall industry.
Prices of pet coke and coal, both domestic and imported, went up sharply during the quarter. Linkage coal from subsidiaries of Coal India Limited was also in short supply, forcing the Company to buy coal from the open market at substantially higher prices.